THIRD DIVISION

[G.R. No. 116123. March 13, 1997]

SERGIO F. NAGUIAT, doing business under the name and style SERGIO F. NAGUIAT ENT., INC., &
CLARK FIELD TAXI, INC., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
(THIRD DIVISION), NATIONAL ORGANIZATION OF WORKINGMEN and its members,
LEONARDO T. GALANG, et al., respondents.

DECISION
PANGANIBAN, J.:

Are private respondent-employees of petitioner Clark Field Taxi, Inc., who were separated from service due to
the closure of Clark Air Base, entitled to separation pay and, if so, in what amount? Are officers of corporations ipso
facto liable jointly and severally with the companies they represent for the payment of separation pay?
These questions are answered by the Court in resolving this petition for certiorari under Rule 65 of the Rules
of Court assailing the Resolutions of the National Labor Relations Commission (Third Division) [1] promulgated on
February 28, 1994,[2] and May 31, 1994.[3] The February 28, 1994 Resolution affirmed with modifications the
decision[4] of Labor Arbiter Ariel C. Santos in NLRC Case No. RAB-III-12-2477-91. The second Resolution denied
the motion for reconsideration of herein petitioners.
The NLRC modified the decision of the labor arbiter by granting separation pay to herein individual
respondents in the increased amount of US$120.00 for every year of service or its peso equivalent, and holding
Sergio F. Naguiat Enterprises, Inc., Sergio F. Naguiat and Antolin T. Naguiat, jointly and severally liable with Clark
Field Taxi, Inc. ("CFTI").

The Facts

The following facts are derived from the records of the case:

Petitioner CFTI held a concessionaire's contract with the Army Air Force Exchange Services ("AAFES") for the
operation of taxi services within Clark Air Base. Sergio F. Naguiat was CFTI's president, while Antolin T. Naguiat
was its vice-president. Like Sergio F. Naguiat Enterprises, Incorporated ("Naguiat Enterprises"), a trading firm, it
was a family-owned corporation.

Individual respondents were previously employed by CFTI as taxicab drivers. During their employment, they were
required to pay a daily "boundary fee" in the amount of US$26.50 for those working from 1:00 a.m. to 12:00 noon,
and US$27.00 for those working from 12:00 noon to 12:00 midnight. All incidental expenses for the maintenance of
the vehicles they were driving were accounted against them, including gasoline expenses.

The drivers worked at least three to four times a week, depending on the availability of taxicabs. They earned not
less than US$15.00 daily. In excess of that amount, however, they were required to make cash deposits to the
company, which they could later withdraw every fifteen days.

Due to the phase-out of the US military bases in the Philippines, from which Clark Air Base was not spared, the
AAFES was dissolved, and the services of individual respondents were officially terminated on November 26, 1991.

1
The AAFES Taxi Drivers Association ("drivers' union"), through its local president, Eduardo Castillo, and CFTI
held negotiations as regards separation benefits that should be awarded in favor of the drivers.They arrived at an
agreement that the separated drivers will be given P500.00 for every year of service as severance pay. Most of the
drivers accepted said amount in December 1991 and January 1992.However, individual respondents herein refused
to accept theirs.

Instead, after disaffiliating themselves from the drivers' union, individual respondents, through the National
Organization of Workingmen ("NOWM"), a labor organization which they subsequently joined, filed a
complaint[5] against "Sergio F. Naguiat doing business under the name and style Sergio F. Naguiat Enterprises, Inc.,
Army-Air Force Exchange Services (AAFES) with Mark Hooper as Area Service Manager, Pacific Region, and
AAFES Taxi Drivers Association with Eduardo Castillo as President," for payment of separation pay due to
termination/phase-out. Said complaint was later amended[6] to include additional taxi drivers who were similarly
situated as complainants, and CFTI with Antolin T. Naguiat as vice president and general manager, as party
respondent.

In their complaint, herein private respondents alleged that they were regular employees of Naguiat Enterprises,
although their individual applications for employment were approved by CFTI. They claimed to have been assigned
to Naguiat Enterprises after having been hired by CFTI, and that the former thence managed, controlled and
supervised their employment. They averred further that they were entitled to separation pay based on their latest
daily earnings of US$15.00 for working sixteen (16) days a month.
In their position paper submitted to the labor arbiter, herein petitioners claimed that the cessation of business of
CFTI on November 26, 1991, was due to "great financial losses and lost business opportunity" resulting from the
phase-out of Clark Air Base brought about by the Mt. Pinatubo eruption and the expiration of the RP-US military
bases agreement. They admitted that CFTI had agreed with the drivers' union, through its President Eduardo Castillo
who claimed to have had blanket authority to negotiate with CFTI in behalf of union members, to grant its taxi
driver-employees separation pay equivalent to P500.00 for every year of service.
The labor arbiter, finding the individual complainants to be regular workers of CFTI, ordered the latter to pay
them P1,200.00 for every year of service "for humanitarian consideration," setting aside the earlier agreement
between CFTI and the drivers' union of P500.00 for every year of service. The labor arbiter rejected the allegation of
CFTI that it was forced to close business due to "great financial losses and lost business opportunity" since, at the
time it ceased operations, CFTI was profitably earning and the cessation of its business was due to the untimely
closure of Clark Air Base. In not awarding separation pay in accordance with the Labor Code, the labor-arbiter
explained:
"To allow respondents exemption from its (sic) obligation to pay separation pay would be inhuman to
complainants but to impose a monetary obligation to an employer whose profitable business was abruptly
shot (sic) down by force majeure would be unfair and unjust to say the least." [7]
and thus, simply awarded an amount for "humanitarian consideration."
Herein individual private respondents appealed to the NLRC. In its Resolution, the NLRC modified the
decision of the labor arbiter by granting separation pay to the private respondents.The concluding paragraphs of the
NLRC Resolution read:
"The contention of complainant is partly correct. One-half month salary should be US$120.00 but this
amount can not be paid to the complainant in U.S. Dollar which is not the legal tender in the
Philippines. Paras, in commenting on Art. 1249 of the New Civil Code, defines legal tender as 'that which
a debtor may compel a creditor to accept in payment of the debt. The complainants who are the creditors
in this instance can be compelled to accept the Philippine peso which is the legal tender, in which case,
the table of conversion (exchange rate) at the time of payment or satisfaction of the judgment should be
used. However, since the choice is left to the debtor, (respondents) they may choose to pay in US
dollar.' (Phoenix Assurance Co. vs. Macondray & Co. Inc., L-25048, May 13, 1975)
In discharging the above obligations, Sergio F. Naguiat Enterprises, which is headed by Sergio F. Naguiat
and Antolin Naguiat, father and son at the same time the President and Vice-President and General

2
 Manager, respectively, should be joined as indispensable party whose liability is joint and several. (Sec.
7, Rule 3, Rules of Court)"[8]
As mentioned earlier, the motion for reconsideration of herein petitioners was denied by the NLRC. Hence,
this petition with prayer for issuance of a temporary restraining order. Upon posting by the petitioners of a surety
bond, a temporary restraining order[9] was issued by this Court enjoining execution of the assailed Resolutions.

Issues

The petitioners raise the following issues before this Court for resolution:
"I. Whether or not public respondent NLRC (3rd Div.) committed grave abuse of discretion
amounting to lack of jurisdiction in issuing the appealed resolution;
II. Whether or not Messrs. Teofilo Rafols and Romeo N. Lopez could validly represent herein
private respondents; and,
III. Whether or not the resolution issued by public respondent is contrary to law." [10]
Petitioners also submit two additional issues by way of a supplement [11] to their petition, to Wit: that Petitioners
Sergio F. Naguiat and Antolin Naguiat were denied due process; and that petitioners were not furnished copies of
private respondents' appeal to the NLRC. As to the procedural lapse of insufficient copies of the appeal, the proper
forum before which petitioners should have raised it is the NLRC. They, however, failed to question this in their
motion for reconsideration. As a consequence, they are deemed to have waived the same and voluntarily submitted
themselves to the jurisdiction of the appellate body.
Anent the first issue raised in their original petition, petitioners contend that NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in unilaterally increasing the amount of severance pay granted
by the labor arbiter. They claim that this was not supported by substantial evidence since it was based simply on the
self-serving allegation of respondents that their monthly take-home pay was not lower than $240.00.
On the second issue, petitioners aver that NOWM cannot make legal representations in behalf of individual
respondents who should, instead, be bound by the decision of the union (AAFES Taxi Drivers Association) of which
they were members.
As to the third issue, petitioners incessantly insist that Sergio F. Naguiat Enterprises, Inc. is a separate and
distinct juridical entity which cannot be held jointly and severally liable for the obligations of CFTI. And similarly,
Sergio F. Naguiat and Antolin Naguiat were merely officers and stockholders of CFTI and, thus, could not be held
personally accountable for corporate debts.
Lastly, Sergio and Antolin Naguiat assail the Resolution of NLRC holding them solidarily liable despite not
having been impleaded as parties to the complaint.
Individual respondents filed a comment separate from that of NOWM. In sum, both aver that petitioners had
the opportunity but failed to refute, the taxi drivers' claim of having an average monthly earning of $240.00; that
individual respondents became members of NOWM after disaffiliating themselves from the AAFES Taxi Drivers
Association which, through the manipulations of its President Eduardo Castillo, unconscionably compromised their
separation pay; and that Naguiat Enterprises, being their indirect employer, is solidarily liable under the law for
violation of the Labor Code, in this case, for nonpayment of their separation pay.
The Solicitor General unqualifiedly supports the allegations of private respondents. In addition, he submits that
the separate personalities of respondent corporations and their officers should be disregarded and considered one and
the same as these were used to perpetrate injustice to their employees.

The Court's Ruling

3
 As will be discussed below, the petition is partially meritorious.

First Issue: Amount of Separation Pay

Firmly, we reiterate the rule that in a petition for certiorari filed pursuant to Rule 65 of the Rules of Court,
which is the only way a labor case may reach the Supreme Court, the petitioner/s must clearly show that the NLRC
acted without or in excess of jurisdiction or with grave abuse of discretion. [12]
Long-standing and well-settled in Philippine jurisprudence is the judicial dictum that findings of fact of
administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only great respect but even finality; and are binding upon
this Court unless there is a showing of grave abuse of discretion, or where it is clearly shown that they were arrived
at arbitrarily or in disregard of the evidence on record. [13]
Nevertheless, this Court carefully perused the records of the instant case if only to determine whether public
respondent committed grave abuse of discretion, amounting to lack of jurisdiction, in granting the clamor of private
respondents that their separation pay should be based on the amount of $240.00, allegedly their minimum monthly
earnings as taxi drivers of petitioners.
In their amended complaint before the Regional Arbitration Branch in San Fernando, Pampanga, herein private
respondents set forth in detail the work schedule and financial arrangement they had with their employer. Therefrom
they inferred that their monthly take-home pay amounted to not less than $240.00. Herein petitioners did not bother
to refute nor offer any evidence to controvert said allegations. Remaining undisputed, the labor arbiter adopted such
facts in his decision. Petitioners did not even appeal from the decision of the labor arbiter nor manifest any error in
his findings and conclusions. Thus, petitioners are in estoppel for not having questioned such facts when they had all
opportunity to do so. Private respondents, like petitioners, are bound by the factual findings of Respondent
Commission.
Petitioners also claim that the closure of their taxi business was due to great financial losses brought about by
the eruption of Mt. Pinatubo which made the roads practically impassable to their taxicabs. Likewise well-settled is
the rule that business losses or financial reverses, in order to sustain retrenchment of personnel or closure of business
and warrant exemption from payment of separation pay, must be proved with clear and satisfactory evidence. [14] The
records, however, are devoid of such evidence.
The labor arbiter; as affirmed by NLRC, correctly found that petitioners stopped their taxi business within
Clark Air Base because of the phase-out of U.S. military presence thereat. It was not due to any great financial loss
because petitioners' taxi business was earning profitably at the time of its closure.
With respect to the amount of separation pay that should be granted, Article 283 of the Labor Code provides:
"x x x In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half () month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1 ) whole year."
Considering the above, we find that NLRC did not commit grave abuse of discretion in ruling that individual
respondents were entitled to separation pay[15] in the amount $120.00 (one-half of $240.00 monthly pay) or its peso
equivalent for every year of service.
Second Issue: NOWM's Personality to
Represent Individual Respondents-Employees

On the question of NOWM's authority to represent private respondents, we hold petitioners in estoppel for not
having seasonably raised this issue before the labor arbiter or the NLRC.NOWM was already a party-litigant as the
organization representing the taxi driver-complainants before the labor arbiter. But petitioners who were party-
respondents in said complaint did not assail the juridical personality of NOWM and the validity of its

4
representations in behalf of the complaining taxi drivers before the quasi-judicial bodies. Therefore, they are now
estopped from raising such question before this Court. In any event, petitioners acknowledged before this Court that
the taxi drivers allegedly represented by NOWM, are themselves parties in this case.[16]

Third Issue: Liability of Petitioner-

Corporations and Their Respective Officers

The resolution of this issue involves another factual finding that Naguiat Enterprises actually managed,
supervised and controlled employment terms of the taxi drivers, making it their indirect employer. As adverted to
earlier, factual findings of quasi-judicial bodies are binding upon the court in the absence of a showing of grave
abuse of discretion.
Unfortunately, the NLRC did not discuss or give any explanation for holding Naguiat Enterprises and its
officers jointly and severally liable in discharging CFTI's liability for payment of separation pay. We again remind
those concerned that decisions, however concisely written, must distinctly and clearly set forth the facts and law
upon which they are based.[17] This rule applies as well to dispositions by quasi-judicial and administrative bodies.

Naguiat Enterprises Not Liable

In impleading Naguiat Enterprises as solidarily liable for the obligations of CFTI, respondents rely on Articles
106,[18] 107[19] and 109[20] of the Labor Code.
Based on factual submissions of the parties, the labor arbiter, however, found that individual respondents were
regular employees of CFTI who received wages on a boundary or commission basis.
We find no reason to make a contrary finding. Labor-only contracting exists where: (1) the person supplying
workers to an employer does not have substantial capital or investment in the form of tools, equipment, machinery,
and work premises, among others; and (2) the workers recruited and placed by such person are performing activities
which are directly related to the principal business of the employer. [21] Independent contractors, meanwhile, are
those who exercise independent employment, contracting to do a piece of work according to their own methods
without being subject to control of their employer except as to the result of their work. [22]
From the evidence proffered by both parties, there is no substantial basis to hold that Naguiat Enterprises is an
indirect employer of individual respondents much less a labor only contractor. On the contrary, petitioners submitted
documents such as the drivers' applications for employment with CFTI, [23] and social security remittances[24] and
payroll[25] of Naguiat Enterprises showing that none of the individual respondents were its employees. Moreover, in
the contract[26] between CFTI and AAFES, the former, as concessionaire, agreed to purchase from AAFES for a
certain amount within a specified period a fleet of vehicles to be "ke(pt) on the road" by CFTI, pursuant to their
concessionaire's contract. This indicates that CFTI became the owner of the taxicabs which became the principal
investment and asset of the company.
Private respondents failed to substantiate their claim that Naguiat Enterprises managed, supervised and
controlled their employment. It appears that they were confused on the personalities of Sergio F. Naguiat as an
individual who was the president of CFTI, and Sergio F. Naguiat Enterprises, Inc., as a separate corporate entity
with a separate business. They presumed that Sergio F. Naguiat, who was at the same time a stockholder and
director[27] of Sergio F. Naguiat Enterprises, Inc., was managing and controlling the taxi business on behalf of the
latter. A closer scrutiny and analysis of the records, however, evince the truth of the matter: that Sergio F. Naguiat,
in supervising the-taxi drivers and determining their employment terms, was rather carrying out his responsibilities
as president of CFTI. Hence, Naguiat Enterprises as a separate corporation does not appear to be involved at all in
the taxi business.
To illustrate further, we refer to the testimony of a driver-claimant on cross examination.
"Atty. Suarez

5
 Is it not true that you applied not with Sergio F. Naguiat but with Clark Field Taxi?
Witness
I applied for (sic) Sergio F. Naguiat
Atty. Suarez
Sergio F. Naguiat as an individual or the corporation?
Witness
'Sergio F. Naguiat na tao.'
Atty. Suarez
Who is Sergio F. Naguiat?
Witness
He is the one managing the Sergio F. Naguiat Enterprises and he is the one whom we believe as our
employer.
Atty. Suarez
What is exactly the position of Sergio F. Naguiat with the Sergio F. Naguiat Enterprises?
Witness
He is the owner, sir.
Atty. Suarez
How about with Clark Field Taxi Incorporated what is the position of Mr. Naguiat?
Witness
What I know is that he is a concessionaire.
xxx xxx xxx
Atty. Suarez
But do you also know that Sergio F. Naguiat is the President of Clark Field Taxi, Incorporated?
Witness
Yes. sir.
Atty. Suarez
How about Mr. Antolin Naguiat what is his role in the taxi services, the operation of the Clark Field
Taxi, Incorporated?
Witness
He is the vice president."[28]
And, although the witness insisted that Naguiat Enterprises was his employer, he could not deny that he
received his salary from the office of CFTI inside the base.[29]
Another driver-claimant admitted, upon the prodding of counsel for the corporations, that Naguiat Enterprises
was in the trading business while CFTI was in taxi services.[30]
In addition, the Constitution[31] of CFTI-AAFES Taxi Drivers Association which, admittedly, was the union of
individual respondents while still working at Clark Air Base, states that members thereof are the employees of CFTI
and "(f)or collective bargaining purposes, the definite employer is the Clark Field Taxi Inc."

6
 From the foregoing, the ineludible conclusion is that CFTI was the actual and direct employer of individual
respondents, and that Naguiat Enterprises was neither their indirect employer nor labor-only contractor. It was not
involved at all in the taxi business.

CFTI president solidarily liable

Petitioner-corporations would likewise want to avoid the solidary liability of their officers. To bolster their
position, Sergio F. Naguiat and Antolin T. Naguiat specifically aver that they were denied due process since they
were not parties to the complaint below.[32] In the broader interest of justice, we, however, hold that Sergio F.
Naguiat, in his capacity as president of CFTI, cannot be exonerated from joint and several liability in the payment of
separation pay to individual respondents.
A.C. Ransom Labor Union-CCLU vs. NLRC[33] is the case in point. A.C. Ransom Corporation was a family
corporation, the stockholders of which were members of the Hernandez family. In 1973, it filed an application for
clearance to close or cease operations, which was duly granted by the Ministry of Labor and Employment, without
prejudice to the right of employees to seek redress of grievance, if any. Backwages of 22 employees, who engaged
in a strike prior to the closure, were subsequently computed at P164,984.00. Up to September 1976, the union filed
about ten (10) motions for execution against the corporation, but none could be implemented, presumably for failure
to find leviable assets of said corporation. In its last motion for execution, the union asked that officers and agents of
the company be held personally liable for payment of the backwages. This was granted by the labor arbiter. In the
corporation's appeal to the NLRC, one of the issues raised was: "Is the judgment against a corporation to reinstate its
dismissed employees with backwages, enforceable against its officer and agents, in their individual, private and
personal capacities, who were not parties in the case where the judgment was rendered?" The NLRC answered in the
negative, on the ground that officers of a corporation are not liable personally for official acts unless they exceeded
the scope of their authority.
On certiorari, this Court reversed the NLRC and upheld the labor arbiter. In imposing joint and several
liability upon the company president, the Court, speaking through Mme. Justice Ameurfina Melencio-Herrera,
ratiocinated this wise:
"(b) How can the foregoing (Articles 265 and 273 of the Labor Code) provisions be implemented when
the employer is a corporation? The answer is found in Article 212(c) of the Labor Code which provides:

'(c) 'Employer' includes any person acting in the interest of an employer, directly or indirectly. The term shall not
include any labor organization or any of its officers or agents except when acting as employer.'

The foregoing was culled from Section 2 of RA 602, the Minimum Wage Law. Since RANSOM is an
artificial person, it must have an officer who can be presumed to be the employer, being the 'person acting
in the interest of (the) employer' RANSOM. The corporation, only in the technical sense, is the employer.
The responsible officer of an employer corporation can be held personally, not to say even criminally,
liable for nonpayment of back wages. That is the policy of the law. x x x

(c) If the policy of the law were otherwise, the corporation employer can have devious ways for evading payment of
back wages. x x x

(d) The record does not clearly identify 'the officer or officers' of RANSOM directly responsible for failure to pay
the back wages of the 22 strikers. In the absence of definite proof in that regard, we believe it should be presumed
that the responsible officer is the President of the corporation who can be deemed the chief operation officer
thereof. Thus, in RA 602, criminal responsibility is with the 'Manager or in his default, the person acting as such.' In
RANSOM, the President appears to be the Manager." (Underscoring supplied.)

7
 Sergio F. Naguiat, admittedly, was the president of CFTI who actively managed the business. Thus, applying
the ruling in A. C. Ransom, he falls within the meaning of an "employer" as contemplated by the Labor Code, who
may be held jointly and severally liable for the obligations of the corporation to its dismissed employees.
Moreover, petitioners also conceded that both CFTI and Naguiat Enterprises were "close family
corporations"[34] owned by the Naguiat family. Section 100, paragraph 5, (under Title XII on Close Corporations) of
the Corporation Code, states:
"(5) To the extent that the stockholders are actively engage(d) in the management or operation of the
business and affairs of a close corporation, the stockholders shall be held to strict fiduciary duties to each
other and among themselves. Said stockholders shall be personally liable for corporate torts unless the
corporation has obtained reasonably adequate liability insurance." (underscoring supplied)
Nothing in the records show whether CFTI obtained "reasonably adequate liability insurance;" thus, what remains is
to determine whether there was corporate tort.
Our jurisprudence is wanting as to the definite scope of "corporate tort." Essentially, "tort" consists in the
violation of a right given or the omission of a duty imposed by law. [35] Simply stated, tort is a breach of a legal
duty.[36] Article 283 of the Labor Code mandates the employer to grant separation pay to employees in case of
closure or cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, which is the condition obtaining at bar. CFTI failed to comply with this law-imposed duty or
obligation.Consequently, its stockholder who was actively engaged in the management or operation of the business
should be held personally liable.
Furthermore, in MAM Realty Development vs. NLRC,[37] the Court recognized that a director or officer may
still be held solidarily liable with a corporation by specific provision of law.Thus:
"x x x A corporation, being a juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, acting as such corporate agents, are not theirs but the direct
accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but
only when exceptional circumstances warrant such as, generally, in the following cases:
xxx xxx xxx

4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate
action." (footnotes omitted)

As pointed out earlier, the fifth paragraph of Section 100 of the Corporation Code specifically imposes
personal liability upon the stockholder actively managing or operating the business and affairs of the close
corporation.
In fact, in posting the surety bond required by this Court for the issuance of a temporary restraining order
enjoining the execution of the assailed NLRC Resolutions, only Sergio F. Naguiat, in his individual and personal
capacity, principally bound himself to comply with the obligation thereunder, i.e., "to guarantee the payment to
private respondents of any damages which they may incur by reason of the issuance of a temporary restraining order
sought, if it should be finally adjudged that said principals were not entitled thereto." [38]
The Court here finds no application to the rule that a corporate officer cannot be held solidarily liable with a
corporation in the absence of evidence that he had acted in bad faith or with malice. [39] In the present case, Sergio
Naguiat is held solidarily liable for corporate tort because he had actively engaged in the management and operation
of CFTI, a close corporation.

Antolin Naguiat not personally liable

Antolin T. Naguiat was the vice president of the CFTI. Although he carried the title of "general manager" as
well, it had not been shown that he had acted in such capacity. Furthermore, no evidence on the extent of his

8
participation in the management or operation of the business was proffered. In this light, he cannot be held solidarily
liable for the obligations of CFTI and Sergio Naguiat to the private respondents.

Fourth Issue: No Denial of Due Process

Lastly, in petitioners' Supplement to their original petition, they assail the NLRC Resolution holding Sergio F.
Naguiat and Antolin T. Naguiat jointly and severally liable with petitioner-corporations in the payment of separation
pay, averring denial of due process since the individual Naguiats were not impleaded as parties to the complaint.
We advert to the case of A.C. Ransom once more. The officers of the corporation were not parties to the case
when the judgment in favor of the employees was rendered. The corporate officers raised this issue when the labor
arbiter granted the motion of the employees to enforce the judgment against them. In spite of this, the Court held the
corporation president solidarily liable with the corporation.
Furthermore, Sergio and Antolin Naguiat voluntarily submitted themselves to the jurisdiction of the labor
arbiter when they, in their individual capacities, filed a position paper [40] together with CFTI, before the
arbiter. They cannot now claim to have been denied due process since they availed of the opportunity to present
their positions.
WHEREFORE, the foregoing premises considered, the petition is PARTLY GRANTED. The assailed
February 28, 1994 Resolution of the NLRC is hereby MODIFIED as follows:

(1) Petitioner Clark Field Taxi, Incorporated, and Sergio F. Naguiat, president and co-owner thereof,
are ORDERED to pay, jointly and severally, the individual respondents their separation pay computed at US$120.00
for every year of service, or its peso equivalent at the time of payment or satisfaction of the judgment;

(2) Petitioner Sergio F. Naguiat Enterprises, Incorporated, and Antolin T. Naguiat are ABSOLVED from liability in
the payment of separation pay to individual respondents.

SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 88694 January 11, 1993

ALBENSON ENTERPRISES CORP., JESSE YAP, AND BENJAMIN MENDIONA, petitioners,

vs.
THE COURT OF APPEALS AND EUGENIO S. BALTAO, respondents.

Puruganan, Chato, Chato & Tan for petitioners.

Lino M. Patajo, Francisco Ma. Chanco, Ananiano Desierto and Segundo Mangohig for private respondent.

9
BIDIN, J.:

This petition assails the decision of respondent Court of Appeals in

CA-GR CV No. 14948 entitled "Eugenio S. Baltao, plaintiff-appellee vs. Albenson Enterprises Corporation, et al,
defendants-appellants", which modified the judgment of the Regional Trial Court of Quezon City, Branch XCVIII in
Civil Case No. Q-40920 and ordered petitioner to pay private respondent, among others, the sum of P500,000.00 as
moral damages and attorney's fees in the amount of P50,000.00.

The facts are not disputed.

In September, October, and November 1980, petitioner Albenson Enterprises Corporation (Albenson for short)
delivered to Guaranteed Industries, Inc. (Guaranteed for short) located at 3267 V. Mapa Street, Sta. Mesa, Manila,
the mild steel plates which the latter ordered. As part payment thereof, Albenson was given Pacific Banking
Corporation Check No. 136361 in the amount of P2,575.00 and drawn against the account of E.L. Woodworks
(Rollo, p. 148).

When presented for payment, the check was dishonored for the reason "Account Closed." Thereafter, petitioner
Albenson, through counsel, traced the origin of the dishonored check. From the records of the Securities and
Exchange Commission (SEC), Albenson discovered that the president of Guaranteed, the recipient of the unpaid
mild steel plates, was one "Eugenio S. Baltao." Upon further inquiry, Albenson was informed by the Ministry of
Trade and Industry that E.L. Woodworks, a single proprietorship business, was registered in the name of one
"Eugenio Baltao". In addition, upon verification with the drawee bank, Pacific Banking Corporation, Albenson was
advised that the signature appearing on the subject check belonged to one "Eugenio Baltao."

After obtaining the foregoing information, Albenson, through counsel, made an extrajudicial demand upon private
respondent Eugenio S. Baltao, president of Guaranteed, to replace and/or make good the dishonored check.

Respondent Baltao, through counsel, denied that he issued the check, or that the signature appearing thereon is his.
He further alleged that Guaranteed was a defunct entity and hence, could not have transacted business with
Albenson.

On February 14, 1983, Albenson filed with the Office of the Provincial Fiscal of Rizal a complaint against Eugenio
S. Baltao for violation of Batas Pambansa Bilang 22. Submitted to support said charges was an affidavit of petitioner
Benjamin Mendiona, an employee of Albenson. In said affidavit, the above-mentioned circumstances were stated.

It appears, however, that private respondent has a namesake, his son Eugenio Baltao III, who manages a business
establishment, E.L. Woodworks, on the ground floor of the Baltao Building, 3267 V. Mapa Street, Sta. Mesa,
Manila, the very same business address of Guaranteed.

On September 5, 1983, Assistant Fiscal Ricardo Sumaway filed an information against Eugenio S. Baltao for
Violation of Batas Pambansa Bilang 22. In filing said information, Fiscal Sumaway claimed that he had given
Eugenio S. Baltao opportunity to submit controverting evidence, but the latter failed to do so and therefore, was
deemed to have waived his right.

Respondent Baltao, claiming ignorance of the complaint against him, immediately filed with the Provincial Fiscal of
Rizal a motion for reinvestigation, alleging that it was not true that he had been given an opportunity to be heard in
the preliminary investigation conducted by Fiscal Sumaway, and that he never had any dealings with Albenson or
Benjamin Mendiona, consequently, the check for which he has been accused of having issued without funds was not
issued by him and the signature in said check was not his.

10
On January 30, 1984, Provincial Fiscal Mauro M. Castro of Rizal reversed the finding of Fiscal Sumaway and
exonerated respondent Baltao. He also instructed the Trial Fiscal to move for dismissal of the information filed
against Eugenio S. Baltao. Fiscal Castro found that the signature in PBC Check No. 136361 is not the signature of
Eugenio S. Baltao. He also found that there is no showing in the records of the preliminary investigation that
Eugenio S. Baltao actually received notice of the said investigation. Fiscal Castro then castigated Fiscal Sumaway
for failing to exercise care and prudence in the performance of his duties, thereby causing injustice to respondent
who was not properly notified of the complaint against him and of the requirement to submit his counter evidence.

Because of the alleged unjust filing of a criminal case against him for allegedly issuing a check which bounced in
violation of Batas Pambansa Bilang 22 for a measly amount of P2,575.00, respondent Baltao filed before the
Regional Trial Court of Quezon City a complaint for damages against herein petitioners Albenson Enterprises, Jesse
Yap, its owner, and Benjamin Mendiona, its employee.

In its decision, the lower court observed that "the check is drawn against the account of "E.L. Woodworks," not of
Guaranteed Industries of which plaintiff used to be President. Guaranteed Industries had been inactive and had
ceased to exist as a corporation since 1975. . . . . The possibility is that it was with Gene Baltao or Eugenio Baltao
III, a son of plaintiff who had a business on the ground floor of Baltao Building located on V. Mapa Street, that the
defendants may have been dealing with . . . ." (Rollo, pp. 41-42).

The dispositive portion of the trial court 's decision reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants ordering
the latter to pay plaintiff jointly and severally:

1. actual or compensatory damages of P133,350.00;

2. moral damages of P1,000,000.00 (1 million pesos);

3. exemplary damages of P200,000.00;

4. attorney's fees of P100,000.00;

5 costs.

Defendants' counterclaim against plaintiff and claim for damages against Mercantile Insurance Co.
on the bond for the issuance of the writ of attachment at the instance of plaintiff are hereby
dismissed for lack of merit. (Rollo, pp. 38-39).

On appeal, respondent court modified the trial court's decision as follows:

WHEREFORE, the decision appealed from is MODIFIED by reducing the moral damages
awarded therein from P1,000,000.00 to P500,000.00 and the attorney's fees from P100,000.00 to
P50,000.00, said decision being hereby affirmed in all its other aspects. With costs against
appellants. (Rollo, pp. 50-51)

Dissatisfied with the above ruling, petitioners Albenson Enterprises Corp., Jesse Yap, and Benjamin Mendiona filed
the instant Petition, alleging that the appellate court erred in:

1. Concluding that private respondent's cause of action is not one based on malicious prosecution
but one for abuse of rights under Article 21 of the Civil Code notwithstanding the fact that the
basis of a civil action for malicious prosecution is Article 2219 in relation to Article 21 or Article
2176 of the Civil Code . . . .

11
 2. Concluding that "hitting at and in effect maligning (private respondent) with an unjust criminal
case was, without more, a plain case of abuse of rights by misdirection" and "was therefore,
actionable by itself," and which "became inordinately blatant and grossly aggravated when . . .
(private respondent) was deprived of his basic right to notice and a fair hearing in the so-called
preliminary investigation . . . . "

3. Concluding that petitioner's "actuations in this case were coldly deliberate and calculated", no
evidence having been adduced to support such a sweeping statement.

4. Holding the petitioner corporation, petitioner Yap and petitioner Mendiona jointly and severally
liable without sufficient basis in law and in fact.

5. Awarding respondents

5.1. P133,350.00 as actual or compensatory damages, even in the absence of

sufficient evidence to show that such was actually suffered.

5.2. P500,000.00 as moral damages considering that the evidence in this

connection merely involved private respondent's alleged celebrated status as a
businessman, there being no showing that the act complained of adversely
affected private respondent's reputation or that it resulted to material loss.

5.3. P200,000.00 as exemplary damages despite the fact that petitioners were
duly advised by counsel of their legal recourse.

5.4. P50,000.00 as attorney's fees, no evidence having been adduced to justify

such an award (Rollo, pp. 4-6).

Petitioners contend that the civil case filed in the lower court was one for malicious prosecution. Citing the case
of Madera vs. Lopez (102 SCRA 700 [1981]), they assert that the absence of malice on their part absolves them
from any liability for malicious prosecution. Private respondent, on the other hand, anchored his complaint for
Damages on Articles 19, 20, and 21 ** of the Civil Code.

Article 19, known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards
which may be observed not only in the exercise of one's rights but also in the performance of one's duties. These
standards are the following: to act with justice; to give everyone his due; and to observe honesty and good faith. The
law, therefore, recognizes the primordial limitation on all rights: that in their exercise, the norms of human conduct
set forth in Article 19 must be observed. A right, though by itself legal because recognized or granted by law as
such, may nevertheless become the source of some illegality. When a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby
committed for which the wrongdoer must be held responsible. Although the requirements of each provision is
different, these three (3) articles are all related to each other. As the eminent Civilist Senator Arturo Tolentino puts
it: "With this article (Article 21), combined with articles 19 and 20, the scope of our law on civil wrongs has been
very greatly broadened; it has become much more supple and adaptable than the Anglo-American law on torts. It is
now difficult to conceive of any malevolent exercise of a right which could not be checked by the application of
these articles" (Tolentino, 1 Civil Code of the Philippines 72).

There is however, no hard and fast rule which can be applied to determine whether or not the principle of abuse of
rights may be invoked. The question of whether or not the principle of abuse of rights has been violated, resulting in
damages under Articles 20 and 21 or other applicable provision of law, depends on the circumstances of each case.
(Globe Mackay Cable and Radio Corporation vs. Court of Appeals, 176 SCRA 778 [1989]).

12
The elements of an abuse of right under Article 19 are the following: (1) There is a legal right or duty; (2) which is
exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. Article 20 speaks of the general
sanction for all other provisions of law which do not especially provide for their own sanction (Tolentino, supra, p.
71). Thus, anyone who, whether willfully or negligently, in the exercise of his legal right or duty, causes damage to
another, shall indemnify his victim for injuries suffered thereby. Article 21 deals with acts contra bonus mores, and
has the following elements: 1) There is an act which is legal; 2) but which is contrary to morals, good custom, public
order, or public policy; 3) and it is done with intent to injure.

Thus, under any of these three (3) provisions of law, an act which causes injury to another may be made the basis for
an award of damages.

There is a common element under Articles 19 and 21, and that is, the act must be intentional. However, Article 20
does not distinguish: the act may be done either "willfully", or "negligently". The trial court as well as the
respondent appellate court mistakenly lumped these three (3) articles together, and cited the same as the bases for
the award of damages in the civil complaint filed against petitioners, thus:

With the foregoing legal provisions (Articles 19, 20, and 21) in focus, there is not much difficulty
in ascertaining the means by which appellants' first assigned error should be resolved, given the
admitted fact that when there was an attempt to collect the amount of P2,575.00, the defendants
were explicitly warned that plaintiff Eugenio S. Baltao is not the Eugenio Baltao defendants had
been dealing with (supra, p. 5). When the defendants nevertheless insisted and persisted in filing a
case a criminal case no less against plaintiff, said defendants ran afoul of the legal
provisions (Articles 19, 20, and 21 of the Civil Code) cited by the lower court and heretofore
quoted (supra).

Defendants, not having been paid the amount of P2,575.00, certainly had the right to complain.
But that right is limited by certain constraints. Beyond that limit is the area of excess, of abuse of
rights. (Rollo, pp.
44-45).

Assuming, arguendo, that all the three (3) articles, together and not independently of each one, could be validly
made the bases for an award of damages based on the principle of "abuse of right", under the circumstances, We see
no cogent reason for such an award of damages to be made in favor of private respondent.

Certainly, petitioners could not be said to have violated the aforestated principle of abuse of right. What prompted
petitioners to file the case for violation of Batas Pambansa Bilang 22 against private respondent was their failure to
collect the amount of P2,575.00 due on a bounced check which they honestly believed was issued to them by private
respondent. Petitioners had conducted inquiries regarding the origin of the check, and yielded the following results:
from the records of the Securities and Exchange Commission, it was discovered that the President of Guaranteed
(the recipient of the unpaid mild steel plates), was one "Eugenio S. Baltao"; an inquiry with the Ministry of Trade
and Industry revealed that E.L. Woodworks, against whose account the check was drawn, was registered in the name
of one "Eugenio Baltao"; verification with the drawee bank, the Pacific Banking Corporation, revealed that the
signature appearing on the check belonged to one "Eugenio Baltao".

In a letter dated December 16, 1983, counsel for petitioners wrote private respondent demanding that he make good
the amount of the check. Counsel for private respondent wrote back and denied, among others, that private
respondent ever transacted business with Albenson Enterprises Corporation; that he ever issued the check in
question. Private respondent's counsel even went further: he made a warning to defendants to check the veracity of
their claim. It is pivotal to note at this juncture that in this same letter, if indeed private respondent wanted to clear
himself from the baseless accusation made against his person, he should have made mention of the fact that there are
three (3) persons with the same name, i.e.: Eugenio Baltao, Sr., Eugenio S. Baltao, Jr. (private respondent), and
Eugenio Baltao III (private respondent's son, who as it turned out later, was the issuer of the check). He, however,
failed to do this. The last two Baltaos were doing business in the same building Baltao Building located at
3267 V. Mapa Street, Sta. Mesa, Manila. The mild steel plates were ordered in the name of Guaranteed of which

13
respondent Eugenio S. Baltao is the president and delivered to Guaranteed at Baltao building. Thus, petitioners had
every reason to believe that the Eugenio Baltao who issued the bouncing check is respondent Eugenio S. Baltao
when their counsel wrote respondent to make good the amount of the check and upon refusal, filed the complaint for
violation of BP Blg. 22.

Private respondent, however, did nothing to clarify the case of mistaken identity at first hand. Instead, private
respondent waited in ambush and thereafter pounced on the hapless petitioners at a time he thought was propitious
by filing an action for damages. The Court will not countenance this devious scheme.

The criminal complaint filed against private respondent after the latter refused to make good the amount of the
bouncing check despite demand was a sincere attempt on the part of petitioners to find the best possible means by
which they could collect the sum of money due them. A person who has not been paid an obligation owed to him
will naturally seek ways to compel the debtor to pay him. It was normal for petitioners to find means to make the
issuer of the check pay the amount thereof. In the absence of a wrongful act or omission or of fraud or bad faith,
moral damages cannot be awarded and that the adverse result of an action does not per se make the action wrongful
and subject the actor to the payment of damages, for the law could not have meant to impose a penalty on the right
to litigate (Rubio vs. Court of Appeals, 141 SCRA 488 [1986]).

In the case at bar, private respondent does not deny that the mild steel plates were ordered by and delivered to
Guaranteed at Baltao building and as part payment thereof, the bouncing check was issued by one Eugenio Baltao.
Neither had private respondent conveyed to petitioner that there are two Eugenio Baltaos conducting business in the
same building he and his son Eugenio Baltao III. Considering that Guaranteed, which received the goods in
payment of which the bouncing check was issued is owned by respondent, petitioner acted in good faith and
probable cause in filing the complaint before the provincial fiscal.

To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to
vex and humiliate a person, and that it was initiated deliberately by the defendant knowing that his charges were
false and groundless. Concededly, the mere act of submitting a case to the authorities for prosecution does not make
one liable for malicious prosecution. (Manila Gas Corporation vs. Court of Appeals, 100 SCRA 602 [1980]). Still,
private respondent argues that liability under Articles 19, 20, and 21 of the Civil Code is so encompassing that it
likewise includes liability for damages for malicious prosecution under Article 2219 (8). True, a civil action for
damages for malicious prosecution is allowed under the New Civil Code, more specifically Articles 19, 20, 26, 29,
32, 33, 35, and 2219 (8) thereof. In order that such a case can prosper, however, the following three (3) elements
must be present, to wit: (1) The fact of the prosecution and the further fact that the defendant was himself the
prosecutor, and that the action was finally terminated with an acquittal; (2) That in bringing the action, the
prosecutor acted without probable cause; (3) The prosecutor was actuated or impelled by legal malice (Lao vs. Court
of Appeals, 199 SCRA 58, [1991]).

Thus, a party injured by the filing of a court case against him, even if he is later on absolved, may file a case for
damages grounded either on the principle of abuse of rights, or on malicious prosecution. As earlier stated, a
complaint for damages based on malicious prosecution will prosper only if the three (3) elements aforecited are
shown to exist. In the case at bar, the second and third elements were not shown to exist. It is well-settled that one
cannot be held liable for maliciously instituting a prosecution where one has acted with probable cause. "Probable
cause is the existence of such facts and circumstances as would excite the belief, in a reasonable mind, acting on the
facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was
prosecuted. In other words, a suit will lie only in cases where a legal prosecution has been carried on without
probable cause. The reason for this rule is that it would be a very great discouragement to public justice, if
prosecutors, who had tolerable ground of suspicion, were liable to be sued at law when their indictment miscarried"
(Que vs. Intermediate Appellate Court, 169 SCRA 137 [1989]).

The presence of probable cause signifies, as a legal consequence, the absence of malice. In the instant case, it is
evident that petitioners were not motivated by malicious intent or by sinister design to unduly harass private
respondent, but only by a well-founded anxiety to protect their rights when they filed the criminal complaint against
private respondent.

14
 To constitute malicious prosecution, there must be proof that the prosecution was prompted by a
sinister design to vex and humiliate a person, that it was initiated deliberately by the defendant
knowing that his charges were false and groundless. Concededly, the mere act of submitting a case
to the authorities for prosecution does not make one liable for malicious prosecution. Proof and
motive that the institution of the action was prompted by a sinister design to vex and humiliate a
person must be clearly and preponderantly established to entitle the victims to damages (Ibid.).

In the case at bar, there is no proof of a sinister design on the part of petitioners to vex or humiliate private
respondent by instituting the criminal case against him. While petitioners may have been negligent to some extent in
determining the liability of private respondent for the dishonored check, the same is not so gross or reckless as to
amount to bad faith warranting an award of damages.

The root of the controversy in this case is founded on a case of mistaken identity. It is possible that with a more
assiduous investigation, petitioners would have eventually discovered that private respondent Eugenio S. Baltao is
not the "Eugenio Baltao" responsible for the dishonored check. However, the record shows that petitioners did exert
considerable effort in order to determine the liability of private respondent. Their investigation pointed to private
respondent as the "Eugenio Baltao" who issued and signed the dishonored check as the president of the debtor-
corporation Guaranteed Enterprises. Their error in proceeding against the wrong individual was obviously in the
nature of an innocent mistake, and cannot be characterized as having been committed in bad faith. This error could
have been discovered if respondent had submitted his counter-affidavit before investigating fiscal Sumaway and was
immediately rectified by Provincial Fiscal Mauro Castro upon discovery thereof, i.e., during the reinvestigation
resulting in the dismissal of the complaint.

Furthermore, the adverse result of an action does not per se make the act wrongful and subject the actor to the
payment of moral damages. The law could not have meant to impose a penalty on the right to litigate, such right is
so precious that moral damages may not be charged on those who may even exercise it erroneously. And an adverse
decision does not ipso facto justify the award of attorney's fees to the winning party (Garcia vs. Gonzales, 183
SCRA 72 [1990]).

Thus, an award of damages and attorney's fees is unwarranted where the action was filed in good faith. If damage
results from a person's exercising his legal rights, it is damnum absque injuria (Ilocos Norte Electric Company vs.
Court of Appeals, 179 SCRA 5 [1989]).

Coming now to the claim of private respondent for actual or compensatory damages, the records show that the same
was based solely on his allegations without proof to substantiate the same. He did not present proof of the cost of the
medical treatment which he claimed to have undergone as a result of the nervous breakdown he suffered, nor did he
present proof of the actual loss to his business caused by the unjust litigation against him. In determining actual
damages, the court cannot rely on speculation, conjectures or guesswork as to the amount. Without the actual proof
of loss, the award of actual damages becomes erroneous (Guilatco vs. City of Dagupan, 171 SCRA 382 [1989]).

Actual and compensatory damages are those recoverable because of pecuniary loss in business, trade, property,
profession, job or occupation and the same must be proved, otherwise, if the proof is flimsy and unsubstantiated,
no damages will be given (Rubio vs. Court of Appeals, 141 SCRA 488 [1986]). For these reasons, it was gravely
erroneous for respondent court to have affirmed the award of actual damages in favor of private respondent in the
absence of proof thereof.

Where there is no evidence of the other party having acted in wanton, fraudulent or reckless, or oppressive manner,
neither may exemplary damages be awarded (Dee Hua Liong Electrical Equipment Corporation vs. Reyes, 145
SCRA 488 [1986]).

As to the award of attorney's fees, it is well-settled that the same is the exception rather than the general rule.
Needless to say, the award of attorney's fees must be disallowed where the award of exemplary damages is
eliminated (Article 2208, Civil Code; Agustin vs. Court of Appeals, 186 SCRA 375 [1990]). Moreover, in view of

15
the fact that there was no malicious prosecution against private respondent, attorney's fees cannot be awarded him
on that ground.

In the final analysis, there is no proof or showing that petitioners acted maliciously or in bad faith in the filing of the
case against private respondent. Consequently, in the absence of proof of fraud and bad faith committed by
petitioners, they cannot be held liable for damages (Escritor, Jr. vs. Intermediate Appellate Court, 155 SCRA 577
[1987]). No damages can be awarded in the instant case, whether based on the principle of abuse of rights, or for
malicious prosecution. The questioned judgment in the instant case attests to the propensity of trial judges to award
damages without basis. Lower courts are hereby cautioned anew against awarding unconscionable sums as damages
without bases therefor.

WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals in C.A. G.R. C.V. No. 14948
dated May 13, 1989, is hereby REVERSED and SET ASIDE. Costs against respondent Baltao.

SO ORDERED.

Gutierrez, Jr., Davide, Jr., Romero and Melo, JJ., concur.

# Footnotes

** "Art. 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith.

"Art. 20. Every person who, contrary to law, willfully or negligently causes damage to another,
shall indemnify the latter for the same.

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

16
 SECOND DIVISION

[G.R. No. L-24803. May 26, 1977.]

PEDRO ELCANO and PATRICIA ELCANO, in their capacity as Ascendants of Agapito Elcano,
deceased, Plaintiffs-Appellants, v. REGINALD HILL, minor, and MARVIN HILL, as father and Natural
Guardian of said minor, Defendants-Appellees.

Cruz & Avecilla for Appellants.

Marvin R. Hill & Associates for Appellees.

DECISION

BARREDO, J.:

Appeal from the order of the Court of First Instance of Quezon City dated January 29, 1965 in Civil Case No. Q-
8102, Pedro Elcano Et. Al. v. Reginald Hill Et. Al. dismissing, upon motion to dismiss of defendants, the complaint
of plaintiffs for recovery of damages from defendant Reginald Hill, a minor, married at the time of the occurrence,
and his father, the defendant Marvin Hill, with whom he was living and getting subsistence, for the killing by
Reginald of the son of the plaintiffs, named Agapito Elcano, of which, when criminally prosecuted, the said accused
was acquitted on the ground that his act was not criminal, because of "lack of intent to kill, coupled with
mistake."cralaw virtua1aw library

Actually, the motion to dismiss based on the following grounds:jgc:chanrobles.com.ph

"1. The present action is not only against but a violation of section 1, Rule 107, which is now Rule III, of the
Revised Rules of Court;

"2. The action is barred by a prior judgment which is now final and or in res-adjudicata;

"3. The complaint had no cause of action against defendant Marvin Hill, because he was relieved as guardian of the
other defendant through emancipation by marriage." (P. 23, Record [p. 4, Record on Appeal.])

was first denied by the trial court. It was only upon motion for reconsideration of the defendants of such denial,
reiterating the above grounds that the following order was issued:jgc:chanrobles.com.ph

"Considering the motion for reconsideration filed by the defendants on January 14, 1965 and after thoroughly
examining the arguments therein contained, the Court finds the same to be meritorious and well-founded.

WHEREFORE, the Order of this Court on December 8, 1964 is hereby reconsidered by ordering the dismissal of the
above entitled case.

"SO ORDERED.

"Quezon City, Philippines, January 29, 1965." (p. 40, Record [p. 21, Record on Appeal.)

Hence, this appeal where plaintiffs-appellants, the spouses Elcano, are presenting for Our resolution the following
assignment of errors:jgc:chanrobles.com.ph

"THE LOWER COURT ERRED IN DISMISSING THE CASE BY UPHOLDING THE CLAIM OF
DEFENDANTS THAT

17
 I

"THE PRESENT ACTION IS NOT ONLY AGAINST BUT ALSO A VIOLATION OF SECTION 1, RULE 107,
NOW RULE 111, OF THE REVISED RULES OF COURT, AND THAT SECTION 3(c) OF RULE 111, RULES
OF COURT IS INAPPLICABLE;

II

"THE ACTION IS BARRED BY A PRIOR JUDGMENT WHICH IS NOW FINAL OR RES-ADJUDICATA;

III

"THE PRINCIPLES OF QUASI-DELICTS, ARTICLES 2176 TO 2194 OF THE CIVIL CODE, ARE
INAPPLICABLE IN THE INSTANT CASE; and

IV

"THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST DEFENDANT MARVIN HILL
BECAUSE HE WAS RELIEVED AS GUARDIAN OF THE OTHER DEFENDANT THROUGH
EMANCIPATION BY MARRIAGE." (page 4, Record.)

It appears that for the killing of the son, Agapito, of plaintiffs-appellants, defendant-appellee Reginald Hill was
prosecuted criminally in Criminal Case No. 5102 of the Court of First Instance of Quezon City. After due trial, he
was acquitted on the ground that his act was not criminal because of "lack of intent to kill, coupled with mistake."
Parenthetically, none of the parties has favored Us with a copy of the decision of acquittal, presumably because
appellants do not dispute that such indeed was the basis stated in the courts decision. And so, when appellants filed
their complaint against appellees Reginald and his father, Atty. Marvin Hill, on account of the death of their son, the
appellees filed the motion to dismiss above-referred to.

As We view the foregoing background of this case, the two decisive issues presented for Our resolution
are:chanrob1es virtual 1aw library

1. Is the present civil action for damages barred by the acquittal of Reginald in the criminal case wherein the action
for civil liability was not reversed?

2. May Article 2180 (2nd and last paragraphs) of the Civil Code be applied against Atty. Hill, notwithstanding the
undisputed fact that at the time of the occurrence complained of, Reginald, though a minor, living with and getting
subsistence from his father, was already legally married?

The first issue presents no more problem than the need for a reiteration and further clarification of the dual
character, criminal and civil, of fault or negligence as a source of obligation which was firmly established in this
jurisdiction in Barredo v. Garcia, 73 Phil. 607. In that case, this Court postulated, on the basis of a scholarly
dissertation by Justice Bocobo on the nature of culpa aquiliana in relation to culpa criminal or delito and mere culpa
or fault, with pertinent citation of decisions of the Supreme Court of Spain, the works of recognized civilians, and
earlier jurisprudence of our own, that the same given act can result in civil liability not only under the Penal Code
but also under the Civil Code. Thus, the opinion holds:jgc:chanrobles.com.ph

"The above case is pertinent because it shows that the same act may come under both the Penal Code and the Civil
Code. In that case, the action of the agent was unjustified and fraudulent and therefore could have been the subject
of a criminal action. And yet, it was held to be also a proper subject of a civil action under article 1902 of the Civil
Code. It is also to be noted that it was the employer and not the employee who was being sued." (pp. 615-616, 73
Phil.) 1

18
"It will be noticed that the defendant in the above case could have been prosecuted in a criminal case because his
negligence causing the death of the child was punishable by the Penal Code. Here is therefore a clear instance of the
same act of negligence being a proper subject matter either of a criminal action with its consequent civil liability
arising from a crime or of an entirely separate and independent civil action for fault or negligence under article 1902
of the Civil Code. Thus, in this jurisdiction, the separate individuality of a cuasi-delito or culpa aquiliana under the
Civil Code has been fully and clearly recognized, even with regard to a negligent act for which the wrongdoer could
have been prosecuted and convicted in a criminal case and for which, after such a conviction, he could have been
sued for this civil liability arising from his crime." (p. 617, 73 Phil.) 2

"It is most significant that in the case just cited, this Court specifically applied article 1902 of the Civil Code. It is
thus that although J. V. House could have been criminally prosecuted for reckless or simple negligence and not only
punished but also made civilly liable because of his criminal negligence, nevertheless this Court awarded damages
in an independent civil action for fault or negligence under article 1902 of the Civil Code." (p. 618, 73 Phil.) 3

"The legal provisions, authors, and cases already invoked should ordinarily be sufficient to dispose of this case. But
inasmuch as we are announcing doctrines that have been little understood, in the past, it might not be inappropriate
to indicate their foundations.

"Firstly, the Revised Penal Code in articles 365 punishes not only reckless but also simple negligence. If we were to
hold that articles 1902 to 1910 of the Civil Code refer only to fault or negligence not punished by law, accordingly
to the literal import of article 1093 of the Civil Code, the legal institution of culpa aquilina would have very little
scope and application in actual life. Death or injury to persons and damage to property through any degree of
negligence even the slightest would have to be indemnified only through the principle of civil liability arising
from a crime. In such a state of affairs, what sphere would remain for cuasi-delito or culpa aquiliana? We are loath
to impute to the lawmaker any intention to bring about a situation to absurd and anomalous. Nor are we, in the
interpretation of the laws, disposed to uphold the letter that killeth rather than the spirit that giveth life. We will not
use the literal meaning of the law to smother and render almost lifeless a principle of such ancient origin and such
full-grown development as culpa aquiliana or cuasi-delito, which is conserved and made enduring in articles 1902 to
1910 of the Spanish Civil Code.

"Secondly, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt is required, while in
a civil case, preponderance of evidence is sufficient to make the defendant pay in damages. There are numerous
cases of criminal negligence which can not be shown beyond reasonable doubt, but can be proved by a
preponderance of evidence. In such cases, the defendant can and should be made responsible in a civil action under
articles 1902 to 1910 of the Civil Code. Otherwise, there would be many instances of unvindicated civil wrongs. Ubi
jus ibi remedium." (p. 620, 73 Phil.)

"Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil Code on this subject,
which has given rise to the overlapping or concurrence of spheres already discussed, and for lack of understanding
of the character and efficacy of the action for culpa aquiliana, there has grown up a common practice to seek
damages only by virtue of the civil responsibility arising from a crime, forgetting that there is another remedy,
which is by invoking articles 1902-1910 of the Civil Code. Although this habitual method is allowed by our laws, it
has nevertheless rendered practically useless and nugatory the more expeditious and effective remedy based on
culpa aquiliana or culpa extra-contractual. In the present case, we are asked to help perpetuate this usual course. But
we believe it is high time we pointed out to the harms done by such practice and to restore the principle of
responsibility for fault or negligence under articles 1902 et seq. of the Civil Code to its full rigor. It is high time we
caused the stream of quasi-delict or culpa aquiliana to flow on its own natural channel, so that its waters may no
longer be diverted into that of a crime under the Penal Code. This will, it is believed, make for the better
safeguarding or private rights because it re-establishes an ancient and additional remedy, and for the further reason
that an independent civil action, not depending on the issues, limitations and results of a criminal prosecution, and
entirely directed by the party wronged or his counsel, is more likely to secure adequate and efficacious redress." (p.
621, 73 Phil.)

Contrary to an immediate impression one might get upon a reading of the foregoing excerpts from the opinion in
Garcia - that the concurrence of the Penal Code and the Civil Code therein referred to contemplate only acts of

19
negligence and not intentional voluntary acts deeper reflection would reveal that the thrust of the
pronouncements therein is not so limited, but that in fact it actually extends to fault or culpa. This can be seen in the
reference made therein to the Sentence of the Supreme Court of Spain of February 14, 1919, supra, which involved a
case of fraud or estafa, not a negligent act. Indeed, Article 1093 of the Civil Code of Spain, in force here at the time
of Garcia, provided textually that obligations "which are derived from acts or omissions in which fault or
negligence, not punishable by law, intervene shall be the subject of Chapter II, Title XV of this book (which refers
to quasi-delicts.)" And it is precisely the underline qualification, "not punishable by law", that Justice Bocobo
emphasized could lead to an undesirable construction or interpretation of the letter of the law that "killeth, rather
than the spirit that giveth life" hence, the ruling that" (W)e will not use the literal meaning of the law to smother and
render almost lifeless a principle of such ancient origin and such full-grown development as culpa aquiliana or
cuasi-delito, which is conserved and made enduring in articles 1902 to 1910 of the Spanish Civil Code." And so,
because Justice Bacobo was Chairman of the Code Commission that drafted the original text of the new Civil Code,
it is to be noted that the said Code, which was enacted after the Garcia doctrine, no longer uses the term, "not
punishable by law," thereby making it clear that the concept of culpa aquiliana includes acts which are criminal in
character or in violation of the penal law, whether voluntary or negligent. Thus, the corresponding provisions to said
Article 1093 in the new code, which is Article 1162, simply says, "Obligations derived from quasi-delicts shall be
governed by the provisions of Chapter 2, Title XVII of this Book, (on quasi-delicts) and by special laws." More
precisely, a new provision, Article 2177 of the new code provides:jgc:chanrobles.com.ph

"ART. 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from
the civil liability arising from negligence under the Penal Code. But the plaintiff cannot recover damages twice for
the same act or omission of the defendant."cralaw virtua1aw library

According to the Code Commission: "The foregoing provision (Article 2177) through at first sight startling, is not so
novel or extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation
of the criminal law, while the latter is a culpa aquilian or quasi-delict, of ancient origin, having always had its own
foundation and individuality, separate from criminal negligence. Such distinction between criminal negligence and
culpa extra-contractual or cuasi-delito has been sustained by decision of the Supreme Court of Spain and
maintained as clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist. Therefore, under the
proposed Article 2177, acquittal from an accusation of criminal negligence, whether on reasonable doubt or not,
shall not be a bar to a subsequent civil action, not for civil liability arising from criminal negligence, but for
damages due to a quasi-delict or culpa aquiliana. But said article forestalls a double recovery." (Report of the
Code) Commission, p. 162.)

Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same argument of
Justice Bacobo about construction that upholds "the spirit that giveth life" rather than that which is literal that killeth
the intent of the lawmaker should be observed in applying the same. And considering that the preliminary chapter on
human relations of the new Civil Code definitely establishes the separability and independence of liability in a civil
action for acts criminal in character (under Articles 29 to 32) from the civil responsibility arising from crime fixed
by Article 100 of the Revised Penal Code, and, in a sense, the Rules of Court, under Sections 2 and 3 (c), Rule 111,
contemplate also the same separability, it is "more congruent with the spirit of law, equity and justice, and more in
harmony with modern progress", to borrow the felicitous relevant language in Rakes v. Atlantic. Gulf and Pacific
Co., 7 Phil. 359, to hold, as We do hold, that Article 2176, where it refers to "fault or negligence," covers not only
acts "not punishable by law" but also acts criminal in character, whether intentional and voluntary or negligent.
Consequently, a separate civil action lies against the offender in a criminal act, whether or not he is criminally
prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is actually charged
also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger
award of the two, assuming the awards made in the two cases vary. In other words, the extinction of civil liability
referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100 of the
Revised Penal Code, whereas the civil liability for the same act considered as a quasi-delict only and not as a crime
is not estinguished even by a declaration in the criminal case that the criminal act charged has not happened or has
not been committed by the accused. Briefly stated, We here hold, in reiteration of Garcia, that culpa aquiliana
includes voluntary and negligent acts which may be punishable by law. 4

It results, therefore, that the acquittal of Reginal Hill in the criminal case has not extinguished his liability for quasi-
delict, hence that acquittal is not a bar to the instant action against him.

20
Coming now to the second issue about the effect of Reginalds emancipation by marriage on the possible civil
liability of Atty. Hill, his father, it is also Our considered opinion that the conclusion of appellees that Atty. Hill is
already free from responsibility cannot be upheld.

While it is true that parental authority is terminated upon emancipation of the child (Article 327, Civil Code), and
under Article 397, emancipation takes place "by the marriage of the minor (child)", it is, however, also clear that
pursuant to Article 399, emancipation by marriage of the minor is not really full or absolute. Thus" (E)mancipation
by marriage or by voluntary concession shall terminate parental authority over the childs person. It shall enable the
minor to administer his property as though he were of age, but he cannot borrow money or alienate or encumber real
property without the consent of his father or mother, or guardian. He can sue and be sued in court only with the
assistance of his father, mother or guardian."cralaw virtua1aw library

Now under Article 2180," (T)he 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. 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." In the instant case, it is not controverted
that Reginald, although married, was living with his father and getting subsistence from him at the time of the
occurrence in question. Factually, therefore, Reginald was still subservient to and dependent on his father, a
situation which is not unusual.

It must be borne in mind that, according to Manresa, the reason behind the joint and solidary liability of parents with
their offending child under Article 2180 is that is the obligation of the parent to supervise their minor children in
order to prevent them from causing damage to third persons. 5 On the other hand, the clear implication of Article
399, in providing that a minor emancipated by marriage may not, nevertheless, sue or be sued without the assistance
of the parents, is that such emancipation does not carry with it freedom to enter into transactions or do any act that
can give rise to judicial litigation. (See Manresa, id., Vol. II, pp. 766-767, 776.) And surely, killing someone else
invites judicial action. Otherwise stated, the marriage of a minor child does not relieve the parents of the duty to see
to it that the child, while still a minor, does not give answerable for the borrowings of money and alienation or
encumbering of real property which cannot be done by their minor married child without their consent. (Art. 399;
Manresa, supra.)

Accordingly, in Our considered view, Article 2180 applies to Atty. Hill notwithstanding the emancipation by
marriage of Reginald. However, inasmuch as it is evident that Reginald is now of age, as a matter of equity, the
liability of Atty. Hill has become merely subsidiary to that of his son.

WHEREFORE, the order appealed from is reversed and the trial court is ordered to proceed in accordance with the
foregoing opinion. Costs against appellees.

Fernando (Chairman), Antonio and Martin, JJ., concur.

Concepcion Jr., J., is on leave.

Martin, J., was designated to sit in the Second Division.

Separate Opinions

AQUINO, J., concurring:chanrob1es virtual 1aw library

Article 2176 of the Civil Code comprehends any culpable act, which is blameworthy, when judged by accepted legal
standards. "The idea thus expressed is undoubtedly board enough to include any rational conception of liability for
the tortious acts likely to be developed in any society." (Street, J. in Daywalt v. Corporacion de PP. Agustinos
Recoletos, 39 Phil. 587, 600). See article 38, Civil Code and the ruling that "the infant tortfeasor is liable in a civil
action to the injured person in the same manner and to the same extent as an adult" (27 Am. Jur. 812 cited by
Bocobo, J., in Magtibay v. Tiangco, 74 Phil. 576, 579).

21
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-46179 January 31, 1978

CANDIDA VIRATA, TOMAS VIRATA, MANOLITO VIRATA, EDERLINDA VIRATA, NAPOLEON

VIRATA, ARACELY VIRATA, ZENAIDA VIRATA, LUZMINDA VIRATA, PACITA VIRATA, and
EVANGELINA VIRATA, petitioners,
vs.
VICTORIO OCHOA, MAXIMO BORILLA and THE COURT OF FIRST INSTANCE OF CAVITE, 7th
JUDICIAL DISTRICT, BRANCH V, stationed at BACOOR, CAVITE, respondents.

Remulla, Estrella & Associates for petitioners

Exequil C. Masangkay for respondents.

FERNANDEZ, J.:

This is an appeal by certiorari, from the order of the Court of First Instance of Cavite, Branch V, in Civil Case No.
B-134 granting the motion of the defendants to dismiss the complaint on the ground that there is another action
pending between the same parties for the same cause. 1

The record shows that on September 24, 1975 one Arsenio Virata died as a result of having been bumped while
walking along Taft Avenue, Pasay City by a passenger jeepney driven by Maximo Borilla and registered in the name
Of Victoria Ochoa; that Borilla is the employer of Ochoa; that for the death of Arsenio Virata, a action for homicide
through reckless imprudence was instituted on September 25, 1975 against Maximo Borilla in the Court of First
Instance of Rizal at Pasay City, docketed as C Case No. 3162-P of said court; that at the hearing of the said criminal
case on December 12, 1975, Atty. Julio Francisco, the private prosecutor, made a reservation to file a separate civil
action for damages against the driver on his criminal liability; that on February 19, 1976 Atty. Julio Francisco filed a
motion in said c case to withdraw the reservation to file a separate civil action; that thereafter, the private prosecutor
actively participated in the trial and presented evidence on the damages; that on June 29, 1976 the heirs of Arsenio
Virata again reserved their right to institute a separate civil action; that on July 19, 1977 the heirs of Arsenio Virata,
petitioners herein, commenced Civil No. B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, for
damages based on quasi-delict against the driver Maximo Borilla and the registered owner of the jeepney, Victorio
Ochoa; that on August 13, 1976 the defendants, private respondents filed a motion to dismiss on the ground that
there is another action, Criminal Case No. 3162-P, pending between the same parties for the same cause; that on
September 8, 1976 the Court of First Instance of Rizal at Pasay City a decision in Criminal Case No. 3612-P
acquitting the accused Maximo Borilla on the ground that he caused an injury by name accident; and that on January
31, 1977, the Court of First Instance of Cavite at Bacoor granted the motion to Civil Case No. B-134 for damages. 2

The principal issue is weather or not the of the Arsenio Virata, can prosecute an action for the damages based on
quasi-delict against Maximo Borilla and Victoria Ochoa, driver and owner, respectively on the passenger jeepney
that bumped Arsenio Virata.

It is settled that in negligence cases the aggrieved parties may choose between an action under the Revised Penal
Code or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What is prohibited by Article 2177
of the Civil Code of the Philippines is to recover twice for the same negligent act.

22
The Supreme Court has held that:

According to the Code Commission: 'The foregoing provision (Article 2177) though at first sight
startling, is not so novel or extraordinary when we consider the exact nature of criminal and civil
negligence. The former is a violation of the criminal law, while the latter is a 'culpa aquiliana' or
quasi-delict, of ancient origin, having always had its own foundation and individuality, separate
from criminal negligence. Such distinction between criminal negligence and 'culpa extra-
contractual' or quasi-delito has been sustained by decision of the Supreme Court of Spain and
maintained as clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist.
Therefore, under the proposed Article 2177, acquittal from an accusation of criminal negligence,
whether on reasonable doubt or not, shall not be a bar to a subsequent civil action, not for civil
liability arising from criminal negligence, but for damages due to a quasi-delict or 'culpa
aquiliana'. But said article forestalls a double recovery. (Report of the Code Commission, p. 162.)

Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same
argument of Justice Bocobo about construction that upholds 'the spirit that given life' rather than
that which is literal that killeth the intent of the lawmaker should be observed in applying the
same. And considering that the preliminary chapter on human relations of the new Civil Code
definitely establishes the separability and independence of liability in a civil action for acts
criminal in character (under Articles 29 to 32) from the civil responsibility arising from crime
fixed by Article 100 of the Penal Code, and, in a sense, the Rules of Court, under Sections 2 and
3(c), Rule 111, contemplate also the same separability, it is 'more congruent' with the spirit of law,
equity and justice, and more in harmony with modern progress', to borrow the felicitous language
in Rakes vs. Atlantic Gulf and Pacific Co., 7 Phil. to 359, to hod as We do hold, that Article 2176,
where it refers to 'fault covers not only acts 'not punishable by law' but also criminal in character,
whether intentional and voluntary or consequently, a separate civil action lies against the in a
criminal act, whether or not he is criminally prosecuted and found guilty and acquitted, provided
that the offended party is not allowed, if he is actually charged also criminally, to recover damages
on both scores, and would be entitled in such eventuality only to the bigger award of the, two
assuming the awards made in the two cases vary. In other words the extinction of civil liability
refereed to in Par. (c) of Section 13, Rule 111, refers exclusively to civil liability founded on
Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as a
quasi-delict only and not as a crime is not extinguished even by a declaration in the criminal case
that the criminal act charged has not happened or has not been committed by the accused. Brief
stated, We hold, in reitration of Garcia, that culpa aquilina includes voluntary and negligent acts
which may be punishable by law. 3

The petitioners are not seeking to recover twice for the same negligent act. Before Criminal Case No. 3162-P was
decided, they manifested in said criminal case that they were filing a separate civil action for damages against the
owner and driver of the passenger jeepney based on quasi-delict. The acquittal of the driver, Maximo Borilla, of the
crime charged in Criminal Case No. 3162-P is not a bar to the prosecution of Civil Case No. B-134 for damages
based on quasi-delict The source of the obligation sought to be enforced in Civil Case No. B-134 is quasi-delict, not
an act or omission punishable by law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and an
act or omission punishable by law are two different sources of obligation.

Moreover, for the petitioners to prevail in the action for damages, Civil Case No. B-134, they have only to establish
their cause of action by preponderance of the evidence.

WHEREFORE, the order of dismissal appealed from is hereby set aside and Civil Case No. B-134 is reinstated and
remanded to the lower court for further proceedings, with costs against the private respondents.

SO ORDERED.

Teehankee (Chairman), Makasiar, Muoz Palma and Guerrero, JJ., concur.

23
Footnotes

1 Annex "A", Rollo, pp. 38-42.

2 Comment of Respondents, Rollo, pp. 48-51.

3 Elcano vs. Hill. 77 SCRA 98, 105-107.

24
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 74761 November 6, 1990

NATIVIDAD V. ANDAMO and EMMANUEL R. ANDAMO, petitioners,

vs.
INTERMEDIATE APPELLATE COURT (First Civil Cases Division) and MISSIONARIES OF OUR LADY
OF LA SALETTE, INC., respondents.

Lope E. Adriano for petitioners.

Padilla Law Office for private respondent.

FERNAN, C.J.:

The pivotal issue in this petition for certiorari, prohibition and mandamus is whether a corporation, which has built
through its agents, waterpaths, water conductors and contrivances within its land, thereby causing inundation and
damage to an adjacent land, can be held civilly liable for damages under Articles 2176 and 2177 of the Civil Code
on quasi-delicts such that the resulting civil case can proceed independently of the criminal case.

The antecedent facts are as follows:

Petitioner spouses Emmanuel and Natividad Andamo are the owners of a parcel of land situated in Biga (Biluso)
Silang, Cavite which is adjacent to that of private respondent, Missionaries of Our Lady of La Salette, Inc., a
religious corporation.

Within the land of respondent corporation, waterpaths and contrivances, including an artificial lake, were
constructed, which allegedly inundated and eroded petitioners' land, caused a young man to drown, damaged
petitioners' crops and plants, washed away costly fences, endangered the lives of petitioners and their laborers
during rainy and stormy seasons, and exposed plants and other improvements to destruction.

In July 1982, petitioners instituted a criminal action, docketed as Criminal Case No. TG-907-82, before the Regional
Trial Court of Cavite, Branch 4 (Tagaytay City), against Efren Musngi, Orlando Sapuay and Rutillo Mallillin,
officers and directors of herein respondent corporation, for destruction by means of inundation under Article 324 of
the Revised Penal Code.

Subsequently, on February 22, 1983, petitioners filed another action against respondent corporation, this time a civil
case, docketed as Civil Case No. TG-748, for damages with prayer for the issuance of a writ of preliminary
injunction before the same court. 1

On March 11, 1983, respondent corporation filed its answer to the complaint and opposition to the issuance of a writ
of preliminary injunction. Hearings were conducted including ocular inspections on the land. However, on April 26,
1984, the trial court, acting on respondent corporation's motion to dismiss or suspend the civil action, issued an
order suspending further hearings in Civil Case No, TG-748 until after judgment in the related Criminal Case No.
TG-907-82.

25
Resolving respondent corporation's motion to dismiss filed on June 22, 1984, the trial court issued on August 27,
1984 the disputed order dismissing Civil Case No. TG-748 for lack of jurisdiction, as the criminal case which was
instituted ahead of the civil case was still unresolved. Said order was anchored on the provision of Section 3 (a),
Rule III of the Rules of Court which provides that "criminal and civil actions arising from the same offense may be
instituted separately, but after the criminal action has been commenced the civil action cannot be instituted until
final judgment has been rendered in the criminal action." 2

Petitioners appealed from that order to the Intermediate Appellate Court. 3

On February 17, 1986, respondent Appellate Court, First Civil Cases Division, promulgated a decision 4 affirming
the questioned order of the trial court. 5 A motion for reconsideration filed by petitioners was denied by the
Appellate Court in its resolution dated May 19, 1986. 6

Directly at issue is the propriety of the dismissal of Civil Case No. TG-748 in accordance with Section 3 (a) of Rule
111 of the Rules of Court. Petitioners contend that the trial court and the Appellate Court erred in dismissing Civil
Case No. TG-748 since it is predicated on a quasi-delict. Petitioners have raised a valid point.

It is axiomatic that the nature of an action filed in court is determined by the facts alleged in the complaint as
constituting the cause of action. 7 The purpose of an action or suit and the law to govern it, including the period of
prescription, is to be determined not by the claim of the party filing the action, made in his argument or brief, but
rather by the complaint itself, its allegations and prayer for relief. 8 The nature of an action is not necessarily
determined or controlled by its title or heading but the body of the pleading or complaint itself. To avoid possible
denial of substantial justice due to legal technicalities, pleadings as well as remedial laws should be liberally
construed so that the litigants may have ample opportunity to prove their respective claims. 9

Quoted hereunder are the pertinent portions of petitioners' complaint in Civil Case No. TG-748:

4) That within defendant's land, likewise located at Biga (Biluso), Silang, Cavite, adjacent on the
right side of the aforesaid land of plaintiffs, defendant constructed waterpaths starting from the
middle-right portion thereof leading to a big hole or opening, also constructed by defendant, thru
the lower portion of its concrete hollow-blocks fence situated on the right side of its cemented gate
fronting the provincial highway, and connected by defendant to a man height inter-connected
cement culverts which were also constructed and lain by defendant cross-wise beneath the tip of
the said cemented gate, the left-end of the said inter-connected culverts again connected by
defendant to a big hole or opening thru the lower portion of the same concrete hollowblocks fence
on the left side of the said cemented gate, which hole or opening is likewise connected by
defendant to the cemented mouth of a big canal, also constructed by defendant, which runs
northward towards a big hole or opening which was also built by defendant thru the lower portion
of its concrete hollow-blocks fence which separates the land of plaintiffs from that of defendant
(and which serves as the exit-point of the floodwater coming from the land of defendant, and at the
same time, the entrance-point of the same floodwater to the land of plaintiffs, year after year,
during rainy or stormy seasons.

5) That moreover, on the middle-left portion of its land just beside the land of plaintiffs, defendant
also constructed an artificial lake, the base of which is soil, which utilizes the water being
channeled thereto from its water system thru inter-connected galvanized iron pipes (No. 2) and
complimented by rain water during rainy or stormy seasons, so much so that the water below it
seeps into, and the excess water above it inundates, portions of the adjoining land of plaintiffs.

6) That as a result of the inundation brought about by defendant's aforementioned water

conductors, contrivances and manipulators, a young man was drowned to death, while herein
plaintiffs suffered and will continue to suffer, as follows:

26
 a) Portions of the land of plaintiffs were eroded and converted to deep, wide and
long canals, such that the same can no longer be planted to any crop or plant.

b) Costly fences constructed by plaintiffs were, on several occasions, washed

away.

c) During rainy and stormy seasons the lives of plaintiffs and their laborers are
always in danger.

d) Plants and other improvements on other portions of the land of plaintiffs are
exposed to destruction. ... 10

A careful examination of the aforequoted complaint shows that the civil action is one under Articles 2176 and 2177
of the Civil Code on quasi-delicts. All the elements of a quasi-delict are present, to wit: (a) damages suffered by the
plaintiff, (b) fault or negligence of the defendant, or some other person for whose acts he must respond; and (c) the
connection of cause and effect between the fault or negligence of the defendant and the damages incurred by the
plaintiff. 11

Clearly, from petitioner's complaint, the waterpaths and contrivances built by respondent corporation are alleged to
have inundated the land of petitioners. There is therefore, an assertion of a causal connection between the act of
building these waterpaths and the damage sustained by petitioners. Such action if proven constitutes fault or
negligence which may be the basis for the recovery of damages.

In the case of Samson vs. Dionisio, 12 the Court applied Article 1902, now Article 2176 of the Civil Code and held
that "any person who without due authority constructs a bank or dike, stopping the flow or communication between
a creek or a lake and a river, thereby causing loss and damages to a third party who, like the rest of the residents, is
entitled to the use and enjoyment of the stream or lake, shall be liable to the payment of an indemnity for loss and
damages to the injured party.

While the property involved in the cited case belonged to the public domain and the property subject of the instant
case is privately owned, the fact remains that petitioners' complaint sufficiently alleges that petitioners have
sustained and will continue to sustain damage due to the waterpaths and contrivances built by respondent
corporation. Indeed, the recitals of the complaint, the alleged presence of damage to the petitioners, the act or
omission of respondent corporation supposedly constituting fault or negligence, and the causal connection between
the act and the damage, with no pre-existing contractual obligation between the parties make a clear case of a quasi
delict or culpa aquiliana.

It must be stressed that the use of one's property is not without limitations. Article 431 of the Civil Code provides
that "the owner of a thing cannot make use thereof in such a manner as to injure the rights of a third person." SIC
UTERE TUO UT ALIENUM NON LAEDAS. Moreover, adjoining landowners have mutual and reciprocal duties
which require that each must use his own land in a reasonable manner so as not to infringe upon the rights and
interests of others. Although we recognize the right of an owner to build structures on his land, such structures must
be so constructed and maintained using all reasonable care so that they cannot be dangerous to adjoining landowners
and can withstand the usual and expected forces of nature. If the structures cause injury or damage to an adjoining
landowner or a third person, the latter can claim indemnification for the injury or damage suffered.

Article 2176 of the Civil Code imposes a civil liability on a person for damage caused by his act or omission
constituting fault or negligence, thus:

Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this chapter.

27
Article 2176, whenever it refers to "fault or negligence", covers not only acts "not punishable by law" but also acts
criminal in character, whether intentional and voluntary or negligent. Consequently, a separate civil action lies
against the offender in a criminal act, whether or not he is criminally prosecuted and found guilty or acquitted,
provided that the offended party is not allowed, (if the tortfeasor is actually charged also criminally), to recover
damages on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming the
awards made in the two cases vary. 13

The distinctness of quasi-delicta is shown in Article 2177 of the Civil Code, which states:

Article 2177. Responsibility for fault or negligence under the preceding article is entirely separate
and distinct from the civil liability arising from negligence under the Penal Code. But the plaintiff
cannot recover damages twice for the same act or omission of the defendant.

According to the Report of the Code Commission "the foregoing provision though at first sight startling, is not so
novel or extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation
of the criminal law, while the latter is a distinct and independent negligence, which is a "culpa aquiliana" or quasi-
delict, of ancient origin, having always had its own foundation and individuality, separate from criminal negligence.
Such distinction between criminal negligence and "culpa extra-contractual" or "cuasi-delito" has been sustained by
decisions of the Supreme Court of Spain ... 14

In the case of Castillo vs. Court of Appeals, 15 this Court held that a quasi-delict or culpa aquiliana is a separate legal
institution under the Civil Code with a substantivity all its own, and individuality that is entirely apart and
independent from a delict or crime a distinction exists between the civil liability arising from a crime and the
responsibility for quasi-delicts or culpa extra-contractual. The same negligence causing damages may produce civil
liability arising from a crime under the Penal Code, or create an action for quasi-delicts or culpa extra-contractual
under the Civil Code. Therefore, the acquittal or conviction in the criminal case is entirely irrelevant in the civil
case, unless, of course, in the event of an acquittal where the court has declared that the fact from which the civil
action arose did not exist, in which case the extinction of the criminal liability would carry with it the extinction of
the civil liability.

In Azucena vs. Potenciano, 16 the Court declared that in quasi-delicts, "(t)he civil action is entirely independent of
the criminal case according to Articles 33 and 2177 of the Civil Code. There can be no logical conclusion than this,
for to subordinate the civil action contemplated in the said articles to the result of the criminal prosecution
whether it be conviction or acquittal would render meaningless the independent character of the civil action and
the clear injunction in Article 31, that his action may proceed independently of the criminal proceedings and
regardless of the result of the latter."

WHEREFORE, the assailed decision dated February 17, 1986 of the then Intermediate Appellate Court affirming
the order of dismissal of the Regional Trial Court of Cavite, Branch 18 (Tagaytay City) dated August 17, 1984 is
hereby REVERSED and SET ASIDE. The trial court is ordered to reinstate Civil Case No. TG-748 entitled
"Natividad V. Andamo and Emmanuel R. Andamo vs. Missionaries of Our Lady of La Salette Inc." and to proceed
with the hearing of the case with dispatch. This decision is immediately executory. Costs against respondent
corporation.

SO ORDERED.

Gutierrez, Jr. and Bidin, JJ., concur.

Feliciano, J., is on leave.

28
Footnotes

1 Rollo. pp. 27-30.

2 Rollo, p. 33.

3 AC-G.R. CV No. 04340.

4 Through Associate Justice Ma. Rosario Quetulio-Losa, ponente, with Presiding Justice Ramon
G. Gaviola, Jr., and Associate Justices Eduardo P. Caguioa and Leonor Ines-Luciano, concurring.

5 Rollo, pp. 16-24.

6 Rollo, p. 26.

7 Republic v. Estenzo, G.R. No. L-35512, February 29, 1988, 158 SCRA 282; Alger Electric, Inc.
vs. Court of Appeals, G.R. No. L-34298, February 28, 1985, 135 SCRA 3; Paper Industries
Corporation of the Philippines vs. Intermediate Appellate Court, G.R. No. 71375, June 18,
1987,151 SCRA 161.

8 De Tavera vs. Philippine Tuberculosis Society, Inc., G.R. No. L-48928, February 25, 1982,112
SCRA 243.

9 Dominguez vs. Lee, G.R. No. 74960-61, November 27, 1987,155 SCRA 703.

10 Rollo, pp. 27-28.

11 Taylor vs. Manila Electric Company, 16 Phil. 8; Vergara vs Court of Appeals, G.R. No. 77679,
September 30, 1987,154 SCRA 564.

12 11 Phil 538 (1908).

13 Virata vs. Ochoa, G.R. No. L-46179, January 31, 1978, 81 SCRA 472.

14 Report of the Code Commission on the Proposed Civil Code of the Philippines, January 26,
1948, p. 162.

15 G.R. No. 48541, August 21, 1989,176 SCRA 591.

16 No. L-14028, June 30, 1962, 5 SCRA 468, 470-471.

29
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 74135 May 28, 1992

M. H. WYLIE and CAPT. JAMES WILLIAMS, petitioners,

vs.
AURORA I. RARANG and THE HONORABLE INTERMEDIATE APPELLATE COURT, respondents.

GUTIERREZ, JR., J.:

The pivotal issue in this petition centers on the extent of the "immunity from suit" of the officials of a United States
Naval Base inside Philippine territory.

In February, 1978, petitioner M. H. Wylie was the assistant administrative officer while petitioner Capt. James
Williams was the commanding officer of the U. S. Naval Base in Subic Bay, Olongapo City. Private respondent
Aurora I. Rarang was an employee in the office of the Provost Marshal assigned as merchandise control guard.

M. H. Wylie, in his capacity as assistant administrative officer of the U.S. Naval Station supervised the publication
of the "Plan of the Day" (POD) which was published daily by the US Naval Base station. The POD featured
important announcements, necessary precautions, and general matters of interest to military personnel. One of the
regular features of the POD was the "action line inquiry." On February 3, 1978, the POD published, under the
"NAVSTA ACTION LINE INQUIRY" the following:

Question: I have observed that Merchandise Control inspector/inspectress are (sic) consuming for
their own benefit things they have confiscated from Base Personnel. The observation is even more
aggravated by consuming such confiscated items as cigarettes and food stuffs PUBLICLY. This is
not to mention "Auring" who is in herself, a disgrace to her division and to the Office of the
Provost Marshal. In lieu of this observation, may I therefore, ask if the head of the Merchandise
Control Division is aware of this malpractice?

Answer: Merchandise Control Guards and all other personnel are prohibited from appropriating
confiscated items for their own consumption or use. Two locked containers are installed at the
Main Gate area for deposit of confiscated items and the OPM evidence custodian controls access
to these containers.

Merchandise Control Guards are permitted to eat their meals at their worksite due to heavy
workload. Complaints regarding merchandise control guards procedure or actions may be made
directly at the Office of the Provost Marshal for immediate and necessary action. Specific dates
and time along with details of suspected violations would be most appreciated. Telephone 4-
3430/4-3234 for further information or to report noted or suspected irregularities. Exhibits E & E-
1. (Rollo, pp. 11-12)

30
The private respondent was the only one who was named "Auring" in the Office of the Provost Marshal. That the
private respondent was the same "Auring" referred to in the POD was conclusively proven when on February 7,
1978, petitioner M. H. Wylie wrote her a letter of apology for the "inadvertent" publication. The private respondent
then commenced an action for damages in the Court of First Instance of Zambales (now Regional Trial Court)
against
M. H. Wylie, Capt. James Williams and the U. S. Naval Base. She alleged that the article constituted false, injurious,
and malicious defamation and libel tending to impeach her honesty, virtue and reputation exposing her to public
hatred, contempt and ridicule; and that the libel was published and circulated in the English language and read by
almost all the U. S. Naval Base personnel. She prayed that she be awarded P300,000.00 as moral damages;
exemplary damages which the court may find proper; and P50,000.00 as attorney's fees.

In response to the complaint, the defendants filed a motion to dismiss anchored on three grounds:

1. Defendants M. H. Wylie and Capt. James Williams acted in the performance of their official
functions as officers of the United States Navy and are, therefore, immune from suit;

2. The United States Naval Base is an instrumentality of the US government which cannot be sued
without its consent; and

3. This Court has no jurisdiction over the subject matter as well as the parties in this case. (Record
on Appeal, pp. 133-134)

The motion was, however, denied.

In their answer, the defendants reiterated the lack of jurisdiction of the court over the case.

In its decision, the trial court ruled that the acts of defendants M. H. Wylie and Cpt. James Williams were not
official acts of the government of the United States of America in the operation and control of the Base but personal
and tortious acts which are exceptions to the general rule that a sovereign country cannot be sued in the court of
another country without its consent. In short, the trial court ruled that the acts and omissions of the two US officials
were not imputable against the US government but were done in the individual and personal capacities of the said
officials. The trial court dismissed the suit against the US Naval Base. The dispositive portion of the decision reads
as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants
jointly and severally, as follows:

1) Ordering defendants M. H. Wylie and Capt. James Williams to pay the plaintiff Aurora Rarang
the sum of one hundred thousand (P100,000.00) pesos by way of moral and exemplary damages;

2) Ordering defendants M. H. Wylie and Capt. James Williams to pay the plaintiff the sum of
thirty thousand (P30,000.00) pesos by way of attorney's fees and expenses of litigation; and

3) To pay the costs of this suit.

Counterclaims are dismissed.

Likewise, the suit against the U.S. Naval Base is ordered dismissed. (Record on Appeal, p. 154)

On appeal, the petitioners reiterated their stance that they are immune from suit since the subject publication was
made in their official capacities as officers of the U. S. Navy. They also maintained that they did not intentionally
and maliciously cause the questioned publication.

31
The private respondent, not satisfied with the amount of damages awarded to her, also appealed the trial court's
decision.

Acting on these appeals, the Intermediate Appellate Court, now Court of Appeals, modified the trial court's decision,
to wit:

WHEREFORE, the judgment of the court below is modified so that the defendants are ordered to
pay the plaintiff, jointly and severally, the sum of P175,000.00 as moral damages and the sum of
P60,000.00 as exemplary damages. The rest of the judgment appealed from is hereby affirmed in
toto. Costs against the defendants-appellants. (Rollo, p. 44)

The appellate court denied a motion for reconsideration filed by the petitioners.

Hence, this petition.

In a resolution dated March 9, 1987, we gave due course to the petition.

The petitioners persist that they made the questioned publication in the performance of their official functions as
administrative assistant, in the case of M. H. Wylie, and commanding officer, in the case of Capt. James Williams of
the US Navy assigned to the U. S. Naval Station, Subic Bay, Olongapo City and were, therefore, immune from suit
for their official actions.

In the case of United States of America v. Guinto (182 SCRA 644 [1990]), we discussed the principle of the state
immunity from suit as follows:

The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3,
of the 1987 Constitution, is one of the generally accepted principles of international law that we
have adopted as part of the law of our land under Article II, Section 2.

xxx xxx xxx

Even without such affirmation, we would still be bound by the generally accepted principles of
international law under the doctrine of incorporation. Under this doctrine, as accepted by the
majority of states, such principles are deemed incorporated in the law of every civilized state as a
condition and consequence of its membership in the society of nations. Upon its admission to such
society, the state is automatically obligated to comply with these principles in its relations with
other states.

As applied to the local state, the doctrine of state immunity is based on the justification given by
Justice Holmes that "there can be no legal right against the authority which makes the law on
which the right depends." (Kawanakoa v. Polybank, 205 U.S. 349) There are other practical
reasons for the enforcement of the doctrine. In the case of the foreign state sought to be impleaded
in the local jurisdiction, the added inhibition is expressed in the maxim par in parem, non habet
imperium. All states are sovereign equals and cannot assert jurisdiction over one another. A
contrary disposition would, in the language of a celebrated case, "unduly vex the peace of
nations." (Da Haber v. Queen of Portugal, 17 Q. B. 171)

While the doctrine appears to prohibit only suits against the state without its consent, it is also
applicable to complaints filed against officials of the state for acts allegedly performed by them in
the discharge of their duties. The rule is that if the judgment against such officials will require the
state itself to perform an affirmative act to satisfy the same, such as the appropriation of the
amount needed to pay the damages awarded against them, the suit must be regarded as against the
state itself although it has not been formally impleaded. (Garcia v. Chief of Staff, 16 SCRA 120)

32
 In such a situation, the state may move to dismiss the complaint on the ground that it has been
filed without its consent.

The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of the
privilege it grants the state to defeat any legitimate claim against it by simply invoking its non-
suability. That is hardly fair, at least in democratic societies, for the state is not an unfeeling tyrant
unmoved by the valid claims of its citizens. In fact, the doctrine is not absolute and does not say
the state may not be sued under any circumstance. On the contrary, the rule says that the state may
not be sued without its consent, which clearly imports that it may be sued if it consents.

The consent of the state to be sued may be manifested expressly or impliedly. Express consent
may be embodied in a general law or a special law. Consent is implied when the state enters into a
contract it itself commences litigation.

xxx xxx xxx

The above rules are subject to qualification. Express consent is effected only by the will of the
legislature through the medium of a duly enacted statute. (Republic v. Purisima, 78 SCRA 470)
We have held that not all contracts entered into by the government will operate as a waiver of its
non-suability; distinction must be made between its sovereign and proprietary acts. (United States
of America v. Ruiz, 136 SCRA 487) As for the filing of a complaint by the government, suability
will result only where the government is claiming affirmative relief from the defendant. (Lim v.
Brownell, 107 Phil. 345) (at pp. 652-655)

In the same case we had opportunity to discuss extensively the nature and extent of immunity from suit of United
States personnel who are assigned and stationed in Philippine territory, to wit:

In the case of the United States of America, the customary rule of international law on state
immunity is expressed with more specificity in the RP-US Bases Treaty. Article III thereof
provides as follows:

It is mutually agreed that the United States shall have the rights, power and
authority within the bases which are necessary for the establishment, use,
operation and defense thereof or appropriate for the control thereof and all the
rights, power and authority within the limits of the territorial waters and air
space adjacent to, or in the vicinity of, the bases which are necessary to provide
access to them or appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, (57 SCRA 1) along with several other
decisions, to support their position that they are not suable in the cases below, the United States
not having waived its sovereign immunity from suit. It is emphasized that in Baer, the Court held:

The invocation of the doctrine of immunity from suit of a foreign state without
its consent is appropriate. More specifically, insofar as alien armed forces is
concerned, the starting point is Raquiza v. Bradford, a 1945 decision. In
dismissing a habeas corpus petition for the release of petitioners confined by
American army authorities, Justice Hilado, speaking for the Court,
cited Coleman v. Tennessee, where it was explicitly declared: "It is well settled
that a foreign army, permitted to march through a friendly country or to be
stationed in it, by permission of its government or sovereign, is exempt from the
civil and criminal jurisdiction of the place." Two years later, in Tubb and
Tedrow v. Griess, this Court relied on the ruling in Raquiza v. Bradford and
cited in support thereof excerpts from the works of the following authoritative
writers: Vattel, Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and

33
 McNair and Lauterpacht. Accuracy demands the clarification that after the
conclusion of the Philippine-American Military Bases Agreement, the treaty
provisions should control on such matter, the assumption being that there was a
manifestation of the submission to jurisdiction on the part of the foreign power
whenever appropriate. More to the point is Syquia v. Almeda Lopez, where
plaintiffs as lessors sued the Commanding General of the United States Army in
the Philippines, seeking the restoration to them of the apartment buildings they
owned leased to the United States armed forces station in the Manila area. A
motion to dismiss on the ground of non-suability was filed and upheld by
respondent Judge. The matter was taken to this Court in
a mandamus proceeding. It failed. It was the ruling that respondent Judge acted
correctly considering that the "action must be considered as one against the U.S.
Government." The opinion of Justice Montemayor continued: "It is clear that the
courts of the Philippines including the Municipal Court of Manila have no
jurisdiction over the present case for unlawful detainer. The question of lack of
jurisdiction was raised and interposed at the very beginning of the action. The
U.S. Government has not given its consent to the filing of this suit which is
essentially against her, though not in name. Moreover, this is not only a case of a
citizen filing a suit against his own Government without the latter's consent but
it is of a citizen filing an action against a foreign government without said
government's consent, which renders more obvious the lack of jurisdiction of the
courts of his country. The principles of law behind this rule are so elementary
and of such general acceptance that we deem it unnecessary to cite authorities in
support thereof."

xxx xxx xxx

It bears stressing at this point that the above observations do not confer on the United States of
America a blanket immunity for all acts done by it or its agents in the Philippines. Neither may the
other petitioners claim that they are also insulated from suit in this country merely because they
have acted as agents of the United States in the discharge of their official functions.

There is no question that the United States of America, like any other state, will be deemed to have
impliedly waived its non-suability if it has entered into a contract in its proprietary or private
capacity. It is only when the contract involves its sovereign or governmental capacity that no such
waiver may be implied. This was our ruling in United States of America v. Ruiz, (136 SCRA 487)
where the transaction in question dealt with the improvement of the wharves in the naval
installation at Subic Bay. As this was a clearly governmental function, we held that the contract
did not operate to divest the United States of its sovereign immunity from suit. In the words of
Justice Vicente Abad Santos:

The traditional rule of immunity excepts a State from being sued in the courts of
another State without its consent or waiver. This rule is a necessary consequence
of the principles of independence and equality of States. However, the rules of
International Law are not petrified; they are constantly developing and evolving.
And because the activities of states have multiplied, it has been necessary to
distinguish them between sovereign and governmental acts (jure imperii) and
private, commercial and proprietary acts (jure gestionis). The result is that State
immunity now extends only to acts jure imperii. The restrictive application of
State immunity is now the rule in the United States, the United Kingdom and
other states in Western Europe.

xxx xxx xxx

34
 The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign, its
commercial activities or economic affairs. Stated differently, a State may be said
to have descended to the level of an individual and can thus be deemed to have
tacitly given its consent to be sued only when it enters into business contracts. It
does not apply where the contract relates to the exercise of its sovereign
functions. In this case the projects are an integral part of the naval base which is
devoted to the defense of both the United States and the Philippines,
indisputably a function of the government of the highest order; they are not
utilized for nor dedicated to commercial or business purposes.

The other petitioners in the cases before us all aver they have acted in the discharge of their
official functions as officers or agents of the United States. However, this is a matter of evidence.
The charges against them may not be summarily dismissed on their mere assertion that their acts
are imputable to the United States of America, which has not given its consent to be sued. In fact,
the defendants are sought to be held answerable for personal torts in which the United States itself
is not involved. If found liable, they and they alone must satisfy the judgment. (At pp. 655-658)

In the light of these precedents, we proceed to resolve the present case.

The POD was published under the direction and authority of the commanding officer, U.S. Naval Station Subic Bay.
The administrative assistant, among his other duties, is tasked to prepare and distribute the POD. On February 3,
1978, when the questioned article was published in the POD, petitioner Capt. James Williams was the commanding
officer while petitioner M.H. Wylie was the administrative assistant of the US Naval Station at Subic bay.

The NAVSTA ACTION LINE INQUIRY is a regular feature of the POD. It is a telephone answering device in the
office of the Administrative Assistant. The Action Line is intended to provide personnel access to the Commanding
Officer on matters they feel should be brought to his attention for correction or investigation. The matter of inquiry
may be phoned in or mailed to the POD. (TSN, September 9, 1980, pp. 12-13, Jerry Poblon) According to
M. H. Wylie, the action line naming "Auring" was received about three (3) weeks prior to its being published in the
POD on February 3, 1978. It was forwarded to Rarang's office of employment, the Provost Marshal, for comment.
The Provost Marshal office's response ". . . included a short note stating that if the article was published, to remove
the name." (Exhibit 8-A, p. 5) The Provost Marshal's response was then forwarded to the executive officer and to the
commanding officer for approval. The approval of the Commanding officer was forwarded to the office of the
Administrative Assistant for inclusion in the POD. A certain Mrs. Dologmodin, a clerk typist in the office of the
Administrative Assistant prepared the smooth copy of the POD. Finally, M. H. Wylie, the administrative assistant
signed the smooth copy of the POD but failed to notice the reference to "Auring" in the action line inquiry. (Exh. 8-
A, pp. 4-5, Questions Nos. 14-15).

There is no question, therefore, that the two (2) petitioners actively participated in screening the features and articles
in the POD as part of their official functions. Under the rule that U.S. officials in the performance of their official
functions are immune from suit, then it should follow that the petitioners may not be held liable for the questioned
publication.

It is to be noted, however, that the petitioners were sued in their personal capacities for their alleged tortious acts in
publishing a libelous article.

The question, therefore, arises are American naval officers who commit a crime or tortious act while discharging
official functions still covered by the principle of state immunity from suit? Pursuing the question further, does the
grant of rights, power, and authority to the United States under the RP-US Bases Treaty cover immunity of its
officers from crimes and torts? Our answer is No.

Killing a person in cold blood while on patrol duty, running over a child while driving with reckless imprudence on
an official trip, or slandering a person during office hours could not possibly be covered by the immunity agreement.

35
Our laws and, we presume, those of the United States do not allow the commission of crimes in the name of official
duty.

The case of Chavez v. Sandiganbayan, 193 SCRA 282 [1991] gives the law on immunity from suit of public
officials:

The general rule is that public officials can be held personally accountable for acts claimed to have
been performed in connection with official duties where they have acted ultra vires or where there
is showing of bad faith.

xxx xxx xxx

Moreover, the petitioner's argument that the immunity proviso under Section 4(a) of Executive
Order No. 1 also extends to him is not well-taken. A mere invocation of the immunity clause does
not ipso facto result in the charges being automatically dropped.

In the case of Presidential Commission on Good Government v. Pea (159 SCRA 556 [1988] then
Chief Justice Claudio Teehankee, added a clarification of the immunity accorded PCGG officials
under Section 4(a) of Executive Order No. 1 as follows:

With respect to the qualifications expressed by Mr. Justice Feliciano in his

separate opinion, I just wish to point out two things: First, the main opinion does
not claim absolute immunity for the members of the Commission. The cited
section of Executive Order No. 1 provides the Commission's members immunity
from suit thus: "No civil action shall lie against the Commission or any member
thereof for anything done or omitted in the discharge of the task contemplated
by this order." No absolute immunity like that sought by Mr. Marcos in his
Constitution for himself and his subordinates is herein involved. It is understood
that the immunity granted the members of the Commission by virtue of the
unimaginable magnitude of its task to recover the plundered wealth and the
State's exercise of police power was immunity from liability for damages in the
official discharge of the task granted the members of the Commission much in
the same manner that judges are immune from suit in the official discharge of
the functions of their office.
. . . (at pp. 581-582)

xxx xxx xxx

Immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a
privileged status not claimed by any other official of the Republic. (id., at page 586)

Where the petitioner exceeds his authority as Solicitor General, acts in bad faith, or, as contended
by the private respondent, "maliciously conspir(es) with the PCGG commissioners in persecuting
respondent Enrile by filing against him an evidently baseless suit in derogation of the latter's
constitutional rights and liberties" (Rollo, p. 417), there can be no question that a complaint for
damages does not confer a license to persecute or recklessly injure another. The actions governed
by Articles 19, 20, 21, and 32 of the Civil Code on Human Relations may be taken against public
officers or private citizens alike. . . . (pp. 289-291)

We apply the same ruling to this case.

The subject article in the US Newsletter POD dated February 3, 1978 mentions a certain "Auring" as ". . a disgrace
to her division and to the Office of the Provost Marshal." The same article explicitly implies that Auring was

36
consuming and appropriating for herself confiscated items like cigarettes and foodstuffs. There is no question that
the Auring alluded to in the Article was the private respondent as she was the only Auring in the Office of the
Provost Marshal. Moreover, as a result of this article, the private respondent was investigated by her supervisor.
Before the article came out, the private respondent had been the recipient of commendations by her superiors for
honesty in the performance of her duties.

It may be argued that Captain James Williams as commanding officer of the naval base is far removed in the chain
of command from the offensive publication and it would be asking too much to hold him responsible for everything
which goes wrong on the base. This may be true as a general rule. In this particular case, however, the records show
that the offensive publication was sent to the commanding officer for approval and he approved it. The factual
findings of the two courts below are based on the records. The petitioners have shown no convincing reasons why
our usual respect for the findings of the trial court and the respondent court should be withheld in this particular case
and why their decisions should be reversed.

Article 2176 of the Civil Code prescribes a civil liability for damages caused by a person's act or omission
constituting fault or negligence, to wit:

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.

"Fault" or "negligence" in this Article covers not only acts "not punishable by law" but also acts criminal in
character, whether intentional or voluntary or negligent." (Andamo v. Intermediate Appellate Court, 191 SCRA 195
[1990]).

Moreover, Article 2219(7) of the Civil Code provides that moral damages may be recovered in case of libel, slander
or any other form of defamation. In effect, the offended party in these cases is given the right to receive from the
guilty party moral damages for injury to his feelings and reputation in addition to punitive or exemplary damages.
(Occena v. Icamina, 181 SCRA 328 [1990]). In another case, Heirs of Basilisa Justiva v. Gustilo, 7 SCRA 72
[1963], we ruled that the allegation of forgery of documents could be a defamation, which in the light of Article
2219(7) of the Civil Code could by analogy be ground for payment of moral damages, considering the wounded
feelings and besmirched reputation of the defendants.

Indeed the imputation of theft contained in the POD dated February 3, 1978 is a defamation against the character
and reputation of the private respondent. Petitioner Wylie himself admitted that the Office of the Provost Marshal
explicitly recommended the deletion of the name Auring if the article were published. The petitioners, however,
were negligent because under their direction they issued the publication without deleting the name "Auring." Such
act or omission is ultra vires and cannot be part of official duty. It was a tortious act which ridiculed the private
respondent. As a result of the petitioners' act, the private respondent, according to the record, suffered besmirched
reputation, serious anxiety, wounded feelings and social humiliation, specially so, since the article was baseless and
false. The petitioners, alone, in their personal capacities are liable for the damages they caused the private
respondent.

WHEREFORE, the petition is hereby DISMISSED. The questioned decision and resolution of the then Intermediate
Appellate Court, now Court of Appeals, are AFFIRMED.

Bidin, Davide, Jr. and Romero, JJ., concur.

Feliciano, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

37
 FIRST DIVISION

G.R. No. 147791 September 8, 2006

CONSTRUCTION DEVELOPMENT CORPORATION OF THE PHILIPPINES, petitioner,

vs.
REBECCA G. ESTRELLA, RACHEL E. FLETCHER, PHILIPPINE PHOENIX SURETY & INSURANCE
INC., BATANGAS LAGUNA TAYABAS BUS CO., and WILFREDO DATINGUINOO, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review assails the March 29, 2001 Decision1 of the Court of Appeals in CA-G.R. CV No. 46896,
which affirmed with modification the February 9, 1993 Decision2 of the Regional Trial Court of Manila, Branch 13,
in Civil Case No. R-82-2137, finding Batangas Laguna Tayabas Bus Co. (BLTB) and Construction Development
Corporation of the Philippines (CDCP) liable for damages.

The antecedent facts are as follows:

On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter, Rachel E. Fletcher, boarded in San
Pablo City, a BLTB bus bound for Pasay City. However, they never reached their destination because their bus was
rammed from behind by a tractor-truck of CDCP in the South Expressway. The strong impact pushed forward their
seats and pinned their knees to the seats in front of them. They regained consciousness only when rescuers created a
hole in the bus and extricated their legs from under the seats. They were brought to the Makati Medical Center
where the doctors diagnosed their injuries to be as follows:

Medical Certificate of Rebecca Estrella

Fracture, left tibia mid 3rd

Lacerated wound, chin
Contusions with abrasions, left lower leg
Fracture, 6th and 7th ribs, right3

Medical Certificate of Rachel Fletcher

Extensive lacerated wounds, right leg posterior aspect popliteal area

and antero-lateral aspect mid lower leg with severance of muscles.
Partial amputation BK left leg with severance of gastro-soleus and
antero-lateral compartment of lower leg.
Fracture, open comminuted, both tibial4

Thereafter, respondents filed a Complaint5 for damages against CDCP, BLTB, Espiridion Payunan, Jr. and Wilfredo
Datinguinoo before the Regional Trial Court of Manila, Branch 13. They alleged (1) that Payunan, Jr. and
Datinguinoo, who were the drivers of CDCP and BLTB buses, respectively, were negligent and did not obey traffic
laws; (2) that BLTB and CDCP did not exercise the diligence of a good father of a family in the selection and
supervision of their employees; (3) that BLTB allowed its bus to operate knowing that it lacked proper maintenance
thus exposing its passengers to grave danger; (4) that they suffered actual damages amounting to P250,000.00 for
Estrella and P300,000.00 for Fletcher; (5) that they suffered physical discomfort, serious anxiety, fright and mental
anguish, besmirched reputation and wounded feelings, moral shock, and lifelong social humiliation; (6) that
defendants failed to act with justice, give respondents their due, observe honesty and good faith which entitles them
to claim for exemplary damage; and (7) that they are entitled to a reasonable amount of attorney's fees and litigation
expenses.

38
CDCP filed its Answer6 which was later amended to include a third-party complaint against Philippine Phoenix
Surety and Insurance, Inc. (Phoenix).7

On February 9, 1993, the trial court rendered a decision finding CDCP and BLTB and their employees liable for
damages, the dispositive portion of which, states:

WHEREFORE, judgment is rendered:

In the Complaint

1. In favor of the plaintiffs and against the defendants BLTB, Wilfredo Datinguinoo, Construction and
Development Corporation of the Philippines (now PNCC) and Espiridion Payunan, Jr., ordering said
defendants, jointly and severally to pay the plaintiffs the sum of P79,254.43 as actual damages and to pay
the sum of P10,000.00 as attorney's fees or a total of P89,254.43;

2. In addition, defendant Construction and Development Corporation of the Philippines and defendant
Espiridion Payunan, Jr., shall pay the plaintiffs the amount of Fifty Thousand (P50,000.00) Pesos to
plaintiff Rachel Fletcher and Twenty Five Thousand (P25,000.00) Pesos to plaintiff Rebecca Estrella;

3. On the counterclaim of BLTB Co. and Wilfredo Datinguinoo

Dismissing the counterclaim;

4. On the crossclaim against Construction and Development Corporation of the Philippines (now PNCC)
and Espiridion Payunan, Jr.

Dismissing the crossclaim;

5. On the counterclaim of Construction and Development Corporation of the Philippines (now PNCC)

Dismissing the counterclaim;

6. On the crossclaim against BLTB

Dismissing the crossclaim;

7. On the Third Party Complaint by Construction and Development Corporation of the Philippines against
Philippine Phoenix Surety and Insurance, Incorporated

Dismissing the Third Party Complaint.

SO ORDERED.8

The trial court held that BLTB, as a common carrier, was bound to observe extraordinary diligence in the vigilance
over the safety of its passengers. It must carry the passengers safely as far as human care and foresight provide,
using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Thus, where a
passenger dies or is injured, the carrier is presumed to have been at fault or has acted negligently. BLTB's inability
to carry respondents to their destination gave rise to an action for breach of contract of carriage while its failure to
rebut the presumption of negligence made it liable to respondents for the breach. 9

Regarding CDCP, the trial court found that the tractor-truck it owned bumped the BLTB bus from behind. Evidence
showed that CDCP's driver was reckless and driving very fast at the time of the incident. The gross negligence of its

39
driver raised the presumption that CDCP was negligent either in the selection or in the supervision of its employees
which it failed to rebut thus making it and its driver liable to respondents. 10

Unsatisfied with the award of damages and attorney's fees by the trial court, respondents moved that the decision be
reconsidered but was denied. Respondents elevated the case 11 to the Court of Appeals which affirmed the decision
of the trial court but modified the amount of damages, the dispositive portion of which provides:

WHEREFORE, the assailed decision dated October 7, 1993 of the Regional Trial Court, Branch 13, Manila
is hereby AFFIRMED with the following MODIFICATION:

1. The interest of six (6) percent per annum on the actual damages of P79,354.43 should commence to run
from the time the judicial demand was made or from the filing of the complaint on February 4, 1980;

2. Thirty (30) percent of the total amount recovered is hereby awarded as attorney's fees;

3. Defendants-appellants Construction and Development Corporation of the Philippines (now PNCC) and
Espiridion Payunan, Jr. are ordered to pay plaintiff-appellants Rebecca Estrella and Rachel Fletcher the
amount of Twenty Thousand (P20,000.00) each as exemplary damages and P80,000.00 by way of moral
damages to Rachel Fletcher.

SO ORDERED.12

The Court of Appeals held that the actual or compensatory damage sought by respondents for the injuries they
sustained in the form of hospital bills were already liquidated and were ascertained. Accordingly, the 6% interest per
annum should commence to run from the time the judicial demand was made or from the filing of the complaint and
not from the date of judgment. The Court of Appeals also awarded attorney's fees equivalent to 30% of the total
amount recovered based on the retainer agreement of the parties. The appellate court also held that respondents are
entitled to exemplary and moral damages. Finally, it affirmed the ruling of the trial court that the claim of CDCP
against Phoenix had already prescribed.

Hence, this petition raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING

RESPONDENTS BLTB AND/OR ITS DRIVER WILFREDO DATINGUINOO SOLELY LIABLE FOR
THE DAMAGES SUSTAINED BY HEREIN RESPONDENTS FLETCHER AND ESTRELLA.

II

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN AWARDING EXCESSIVE

OR UNFOUNDED DAMAGES, ATTORNEY'S FEES AND LEGAL INTEREST TO RESPONDENTS
FLETCHER AND ESTRELLA.

III

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING

RESPONDENT PHOENIX LIABLE UNDER ITS INSURANCE POLICY ON THE GROUND OF
PRESCRIPTION.

The issues for resolution are as follows: (1) whether BLTB and its driver Wilfredo Datinguinoo are solely liable for
the damages sustained by respondents; (2) whether the damages, attorney's fees and legal interest awarded by the
CA are excessive and unfounded; (3) whether CDCP can recover under its insurance policy from Phoenix.

40
Petitioner contends that since it was made solidarily liable with BLTB for actual damages and attorney's fees in
paragraph 1 of the trial court's decision, then it should no longer be held liable to pay the amounts stated in
paragraph 2 of the same decision. Petitioner claims that the liability for actual damages and attorney's fees is based
on culpa contractual, thus, only BLTB should be held liable. As regards paragraph 2 of the trial court's decision,
petitioner claims that it is ambiguous and arbitrary because the dispositive portion did not state the basis and nature
of such award.

Respondents, on the other hand, argue that petitioner is also at fault, hence, it was properly joined as a party. There
may be an action arising out of one incident where questions of fact are common to all. Thus, the cause of action
based on culpa aquiliana in the civil suit they filed against it was valid.

The petition lacks merit.

The case filed by respondents against petitioner is an action for culpa aquiliana or quasi-delict under Article 2176 of
the Civil Code.13 In this regard, Article 2180 provides that the obligation imposed by Article 2176 is demandable for
the acts or omissions of those persons for whom one is responsible. Consequently, an action based on quasi-delict
may be instituted against the employer for an employee's act or omission. The liability for the negligent conduct of
the subordinate is direct and primary, but is subject to the defense of due diligence in the selection and supervision
of the employee.14 In the instant case, the trial court found that petitioner failed to prove that it exercised the
diligence of a good father of a family in the selection and supervision of Payunan, Jr.

The trial court and the Court of Appeals found petitioner solidarily liable with BLTB for the actual damages
suffered by respondents because of the injuries they sustained. It was established that Payunan, Jr. was driving
recklessly because of the skid marks as shown in the sketch of the police investigator.

It is well-settled in Fabre, Jr. v. Court of Appeals,15 that the owner of the other vehicle which collided with a
common carrier is solidarily liable to the injured passenger of the same. We held, thus:

The same rule of liability was applied in situations where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle,
thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the
operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the
injured passenger or the latter's heirs. The basis of this allocation of liability was explained in Viluan v.
Court of Appeals, thus:

Nor should it make any difference that the liability of petitioner [bus owner] springs from contract
while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as
1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to
the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the
drivers as well as the owners of the two vehicles are jointly and severally liable for damages. x x x

xxxx

As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their claim
against the carrier and the driver exclusively on one theory, much less on that of breach of contract
alone. After all, it was permitted for them to allege alternative causes of action and join as many
parties as may be liable on such causes of action so long as private respondent and her co-plaintiffs
do not recover twice for the same injury. What is clear from the cases is the intent of the plaintiff there to
recover from both the carrier and the driver, thus justifying the holding that the carrier and the driver were
jointly and severally liable because their separate and distinct acts concurred to produce the same
injury.16 (Emphasis supplied)

41
In a "joint" obligation, each obligor answers only for a part of the whole liability; in a "solidary" or "joint and
several" obligation, the relationship between the active and the passive subjects is so close that each of them must
comply with or demand the fulfillment of the whole obligation. In Lafarge Cement v. Continental Cement
Corporation,17 we reiterated that joint tort feasors are jointly and severally liable for the tort which they commit.
Citing Worcester v. Ocampo,18 we held that:

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

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

Joint tort feasors are jointly and severally liable for the tort which they commit. The persons injured may
sue all of them or any number less than all. Each is liable for the whole damages caused by all, and all
together are jointly liable for the whole damage. It is no defense for one sued alone, that the others who
participated in the wrongful act are not joined with him as defendants; nor is it any excuse for him that his
participation in the tort was insignificant as compared to that of the others. x x x

Joint tort feasors are not liable pro rata. The damages can not be apportioned among them, except among
themselves. They cannot insist upon an apportionment, for the purpose of each paying an aliquot part. They
are jointly and severally liable for the whole amount. x x x

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

Of course the court during trial may find that some of the alleged tort feasors are liable and that others are
not liable. The courts may release some for lack of evidence while condemning others of the alleged tort
feasors. And this is true even though they are charged jointly and severally. 19

Petitioner's claim that paragraph 2 of the dispositive portion of the trial court's decision is ambiguous and arbitrary
and also entitles respondents to recover twice is without basis. In the body of the trial court's decision, it was clearly
stated that petitioner and its driver Payunan, Jr., are jointly and solidarily liable for moral damages in the amount of
P50,000.00 to respondent Fletcher and P25,000.00 to respondent Estrella.20 Moreover, there could be no double
recovery because the award in paragraph 2 is for moral damages while the award in paragraph 1 is for actual
damages and attorney's fees.

Petitioner next claims that the damages, attorney's fees, and legal interest awarded by the Court of Appeals are
excessive.

Moral damages may be recovered in quasi-delicts causing physical injuries.21 The award of moral damages in favor
of Fletcher and Estrella in the amount of P80,000.00 must be reduced since prevailing jurisprudence fixed the same
at P50,000.00.22 While moral damages are not intended to enrich the plaintiff at the expense of the defendant, the
award should nonetheless be commensurate to the suffering inflicted. 23

The Court of Appeals correctly awarded respondents exemplary damages in the amount of P20,000.00 each.
Exemplary damages may be awarded in addition to moral and compensatory damages.24 Article 2231 of the Civil
Code also states that in quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.25 In this case, petitioner's driver was driving recklessly at the time its truck rammed the BLTB bus.
Petitioner, who has direct and primary liability for the negligent conduct of its subordinates, was also found
negligent in the selection and supervision of its employees. In Del Rosario v. Court of Appeals,26 we held, thus:

42
 ART. 2229 of the Civil Code also provides that such damages may be imposed, by way of example or
correction for the public good. While exemplary damages cannot be recovered as a matter of right, they
need not be proved, although plaintiff must show that he is entitled to moral, temperate or compensatory
damages before the court may consider the question of whether or not exemplary damages should be
awarded. Exemplary Damages are imposed not to enrich one party or impoverish another but to serve as a
deterrent against or as a negative incentive to curb socially deleterious actions.

Regarding attorney's fees, we held in Traders Royal Bank Employees Union-Independent v. National Labor
Relations Commission,27 that:

There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In
its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the
legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by
and his agreement with the client.

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to
be paid by the losing party in a litigation. The basis of this is any of the cases provided by law where
such award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the
lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof.28 (Emphasis supplied)

In the instant case, the Court of Appeals correctly awarded attorney's fees and other expenses of litigation as they
may be recovered as actual or compensatory damages when exemplary damages are awarded; when the defendant
acted in gross and evident bad faith in refusing to satisfy the plaintiff's valid, just and demandable claim; and in any
other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be
recovered.29

Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint, we held
in Eastern Shipping Lines, Inc. v. Court of Appeals,30 that when an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of
interest in the concept of actual and compensatory damages,31 subject to the following rules, to wit

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.32 (Emphasis supplied)

43
Accordingly, the legal interest of 6% shall begin to run on February 9, 1993 when the trial court rendered judgment
and not on February 4, 1980 when the complaint was filed. This is because at the time of the filing of the complaint,
the amount of the damages to which plaintiffs may be entitled remains unliquidated and unknown, until it is
definitely ascertained, assessed and determined by the court and only upon presentation of proof thereon. 33 From the
time the judgment becomes final and executory, the interest rate shall be 12% until its satisfaction.

Anent the last issue of whether petitioner can recover under its insurance policy from Phoenix, we affirm the
findings of both the trial court and the Court of Appeals, thus:

As regards the liability of Phoenix, the court a quo correctly ruled that defendant-appellant CDCP's claim
against Phoenix already prescribed pursuant to Section 384 of P.D. 612, as amended, which provides:

Any person having any claim upon the policy issued pursuant to this chapter shall, without any
unnecessary delay, present to the insurance company concerned a written notice of claim setting
forth the nature, extent and duration of the injuries sustained as certified by a duly licensed
physician. Notice of claim must be filed within six months from date of the accident, otherwise,
the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must
be brought in proper cases, with the Commissioner or Courts within one year from denial of the
claim, otherwise, the claimant's right of action shall prescribe. (As amended by PD 1814, BP
874.)34

The law is clear and leaves no room for interpretation. A written notice of claim must be filed within six months
from the date of the accident. Since petitioner never made any claim within six months from the date of the accident,
its claim has already prescribed.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 46896
dated March 29, 2001, which modified the Decision of the Regional Trial Court of Manila, Branch 13, in Civil Case
No. R-82-2137, is AFFIRMED with the MODIFICATIONS that petitioner is held jointly and severally liable to
pay (1) actual damages in the amount of P79,354.43; (2) moral damages in the amount of P50,000.00 each for
Rachel Fletcher and Rebecca Estrella; (3) exemplary damages in the amount of P20,000.00 each for Rebecca
Estrella and Rachel Fletcher; and (4) thirty percent (30%) of the total amount recovered as attorney's fees. The total
amount adjudged shall earn interest at the rate of 6% per annum from the date of judgment of the trial court until
finality of this judgment. From the time this Decision becomes final and executory and the judgment amount
remains unsatisfied, the same shall earn interest at the rate of 12% per annum until its satisfaction.

SO ORDERED.

Panganiban, C.J., Chairperson, Austria-Martinez, Callejo, Sr., Chico-Nazario, J.J., concur.

Footnotes

1
Penned by Associate Justice Remedios A. Salazar-Fernando and concurred in by Associate Justices
Romeo A. Brawner and Rebecca De Guia-Salvador; rollo, pp. 30-47.

2
CA rollo, pp. 89-116. Penned by Judge Cecilio F. Balagot.

3
Records, p. 538.

4
Id. at 540.

44
5
Id. at 3-10.

6
Id. at 30-34.

7
Id. at 70-75.

8
CA rollo, pp. 115-116.

9
Id. at 106-107.

10
Id. at 108-109.

11
Id. at 60-88.

12
Rollo, pp. 46-47.

13
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.

14
Equitable Leasing Corporation v. Suyom, 437 Phil. 244, 253 (2002).

15
Fabre, Jr. v. Court of Appeals, 328 Phil. 774 (1996).

16
Id. at 791-793.

17
Lafarge Cement Philippines, Inc. v. Continental Cement Corporation, G.R. No. 155173, November 23,
2004, 443 SCRA 522.

18
22 Phil. 42 (1912).

19
Supra note 17 at 544-545.

20
CA rollo, pp. 114-115.

21
CIVIL CODE, Art. 2219.

22
Macalinao v. Ong, G.R. No. 146635, December 14, 2005, 477 SCRA 740, 759.

23
Valenzuela v. Court of Appeals, 323 Phil. 374, 399 (1996).

24
ART. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show
that he is entitled to moral, temperate or compensatory damages before the court may consider the question
of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed
upon, although no proof of loss is necessary in order that such liquidated damages may be recovered,
nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated
damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages
were it not for the stipulation for liquidated damages.

25
Metro Manila Transit Corporation v. Court of Appeals, 359 Phil. 18, 38 (1998).

45
 26
G.R. No. 118325, January 29, 1997, 267 SCRA 158, 173.

27
336 Phil. 705 (1997).

28
Id. at 712.

29
Vital-Gozon v. Court of Appeals, 354 Phil. 128, 153 (1998).

30
G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95.

31
Victory Liner, Inc. v. Gammad, G.R. No. 159636, November 25, 2004, 444 SCRA 355, 371-372.

32
Supra note 30 at 95-96.

33
Philippine Airlines, Inc. v. Court of Appeals, 341 Phil. 624, 634 (1997); Lim v. Court of Appeals, 424
Phil. 457, 467 (2002).

34
Rollo, pp. 45-46.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. Nos. 74387-90 November 14, 1988

BATANGAS LAGUNA TAYABAS BUS COMPANY & ARMANDO PON, petitioners,

vs.
INTERMEDIATE APPELLATE COURT, THE HEIRS OF PAZ VDA. DE PAMFILO, THE HEIRS OF
NORMA NERI, and BAYLON SALES and NENA VDA. DE ROSALES, respondents.

Sibal, Custodia, Santos & Nofuente for petitioners.

Restituto L. Opis for respondents Pamfilos and Rosaleses.

Citizens Legal Assistance Office for N. Neri and Baylon Sales.

PARAS, J.:

Before Us is a Petition to Review by Certiorari, the decision 1 of the respondent appellate court which affirmed with
modification the joint decision of the trial court in four (4) cases involving similar facts and issues, finding favorably
for the plaintiffs (private respondents herein), the dispositive portion of said appellate judgment reading as follows:

WHEREFORE, with the modification that the death indemnity is raised to P30,000.00 to each set
of the victims' heirs, the rest of the judgment appealed from is hereby affirmed in toto. Costs
against the defendants-appellants.

46
 SO ORDERED. (p. 20, Rollo)

From the records of the case We have gathered the following antecedent facts:

The collision between Bus No. 1046 of the Batangas Laguna Tayabas Bus Company (BLTB, for brevity) driven by
Armando Pon and Bus No. 404 of Superlines Transportation Company (Superlines, for brevity) driven by Ruben
Dasco took place at the highway traversing Barangay Isabong, Tayabas, Quezon in the afternoon of August 11,
1978, which collision resulted in the death of Aniceto Rosales, Francisco Pamfilo and Romeo Neri and in several
injuries to Nena Rosales (wife of Anecito) and Baylon Sales, all passengers of the BLTB Bus No. 1046. The
evidence shows that as BLTB Bus No. 1046 was negotiating the bend of the highway, it tried to overtake a Ford
Fiera car just as Bus No. 404 of Superlines was coming from the opposite direction. Seeing thus, Armando Pon
(driver of the BLTB Bus) made a belated attempt to slacken the speed of his bus and tried to return to his proper
lane. It was an unsuccessful try as the two (2) buses collided with each other.

Nena Vda. de Rosales and Baylon Sales and the surviving heirs of the deceased Francisco Pamfilo, Aniceto Rosales
and Romeo Neri instituted separate cases in the Court of First Instance of Marinduque against BLTB and Superlines
together with their respective drivers praying for damages, attorney's fees and litigation expenses plus costs.
Criminal cases against the drivers of the two buses were filed in the Court of First Instance of Quezon.

Defendants BLTB and Superlines, together with their drivers Pon and Dasco, denied liability by claiming that they
exercised due care and diligence and shifted the fault, against each other. They all interposed counterclaims against
the plaintiffs and crossclaims against each other.

After trial on the merits, the lower court exonerated defendants Superlines and its driver Dasco from liability and
attributed sole responsibility to defendants BLTB and its driver Pon, and ordered them jointly and severally to pay
damages to the plaintiffs. Defendants BLTB and Armando Pon appealed from the decision of the lower court to
respondent appellate court which affirmed with modification the judgment of the lower court as earlier stated.

Hence, this petition to review by certiorari of defendant BLTB assigning a lone error, to wit:

THE INTERMEDIATE APPELLATE COURT ERRED IN ADJUDGING THAT THE

ACTIONS OF PRIVATE RESPONDENTS ARE BASED ON CULPA CONTRACTUAL. (p. 12,
Rollo)

It is argued by petitioners that if the intention of private respondents were to file an action based on culpa
contractual or breach of contract of carriage, they could have done so by merely impleading BLTB and its driver
Pon. As it was in the trial court, private respondents filed an action against all the defendants basing their action
on culpa aquiliana or tort.

Petitioners' contentions deserve no merit. A reading of the respondent court's decision shows that it anchored
petitioners' liability both on culpa contractual and culpa aquiliana, to wit:

The proximate cause of the collision resulting in the death of three and injuries to two of the
passengers of BLTB was the negligence of the driver of the BLTB bus, who recklessly operated
and drove said bus by overtaking a Ford Fiera car as he was negotiating the ascending bend of the
highway (tsn, October 4, 1979, pp. 9-10, 35, 36, 61; Exhibit 6 Superlines, p. 47) which was
divided into two lanes by a continuous yellow strip (tsn, October 4, 1979, p. 36). The driver of the
BLTB bus admitted in his cross-examination that the continuous yellow line on the ascending
bend of the highway signifies a no-overtaking zone (tsn, October 4, 1979, p. 36). It is no surprise
then that the driver of the Superlines bus was exonerated by the lower court. He had a valid reason
to presuppose that no one would overtake in such a dangerous situation. These facts show that
patient imprudence of the BLTB driver.

47
 It is well settled that a driver abandoning his proper lane for the purpose of overtaking another
vehicle in ordinary situation has the duty to see that the road is clear and not to proceed if he can
not do so in safety (People v. Enriquez, 40 O.G. No. 5, 984).

... Before attempting to pass the vehicle ahead, the rear driver must see that the road is clear and if
there is no sufficient room for a safe passage, or the driver ahead does not turn out so as to afford
opportunity to pass, or if, after attempting to pass, the driver of the overtaking vehicle finds that he
cannot make the passage in safety, the latter must slacken his speed so as to avoid the danger of a
collision, even bringing his car to a stop if necessary. (3-4 Huddy Encyclopedia of Automobile
Law, Sec. 212, p. 195).

The above rule becomes more particularly applicable in this case when the overtaking took place
on an ascending curved highway divided into two lanes by a continuous yellow line. Appellant
Pon should have remembered that:

When a motor vehicle is approaching or rounding a curve there is special necessity for keeping to
the right side of the road and the driver has not the right to drive on the left hand side relying upon
having time to turn to the right if a car is approaching from the opposite direction comes into view.
(42 C.J. 42 906).

Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation. (Art. 2165, Civil
Code).

In failing to observe these simple precautions, BLTB's driver undoubtedly failed to act with the
diligence demanded by the circumstances.

We now come to the subject of liability of the appellants.

For his own negligence in recklessly driving the truck owned by his employer, appellant Armando
Pon is primarily liable (Article 2176, Civil Code).<re||an1w>

On the other hand the liability of Pon's employer, appellant BLTB, is also primary, direct and
immediate in view of the fact that the death of or injuries to its passengers was through the
negligence of its employee (Marahan v. Mendoza, 24 SCRA 888, 894), and such liability does not
cease even upon proof that BLTB had exercised all the diligence of a good father of a family in
the selection and supervision of its employees (Article 1759, Civil Code).

The common carrier's liability for the death of or injuries to its passengers is based on its
contractual obligation to carry its passengers safely to their destination. That obligation is so
serious that the Civil Code requires "utmost diligence of very cautious person (Article 1755, Civil
Code). They are presumed to have been at fault or to have acted negligently unless they prove that
they have observed extraordinary diligence" (Article 1756, Civil Code). In the present case, the
appellants have failed to prove extraordinary diligence. Indeed, this legal presumption was
confirmed by the fact that the bus driver of BLTB was negligent. It must follow that both the
driver and the owner must answer for injuries or death to its passengers.

The liability of BLTB is also solidarily with its driver (Viluan v. Court of Appeals, 16 SCRA 742,
747) even though the liability of the driver springs from quasi delict while that of the bus company
from contract. (pp. 17-19, Rollo)

Conclusively therefore in consideration of the foregoing findings of the respondent appellate court it is settled that
the proximate cause of the collision resulting in the death of three and injuries to two of the passengers of BLTB was

48
the sole negligence of the driver of the BLTB Bus, who recklessly operated and drove said bus in a lane where
overtaking is not allowed by Traffic Rules and Regulations. Such negligence and recklessness is binding against
petitioner BLTB, more so when We consider the fact that in an action based on a contract of carriage, the court need
not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible for the
payment of the damages sought by the passenger. By the contract of carriage, the carrier BLTB assumed the express
obligation to transport the passengers to their destination safely and to observe extraordinary diligence with a due
regard for all the circumstances, and any injury that might be suffered by its passengers is right away attributable to
the fault or negligence of the carrier (Art. 1756, New Civil Code).

Petitioners also contend that "a common carrier is not an absolute insurer against all risks of travel and are not liable
for acts or accidents which cannot be foreseen or inevitable and that responsibility of a common carrier for the safety
of its passenger prescribed in Articles 1733 and 1755 of the New Civil Code is not susceptible of a precise and
definite formulation." (p. 13, Rollo) Petitioners' contention holds no water because they had totally failed to point
out any factual basis for their defense of force majeure in the light of the undisputed fact that the cause of the
collision was the sole negligence and recklessness of petitioner Armando Pon. For the defense of force majeure or
act of God to prosper the accident must be due to natural causes and exclusively without human intervention.

WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 34840 September 23, 1931

NARCISO GUTIERREZ, plaintiff-appellee,

vs.
BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ, ABELARDO
VELASCO, and SATURNINO CORTEZ, defendants-appellants.

L.D. Lockwood for appellants Velasco and Cortez.

San Agustin and Roxas for other appellants.
Ramon Diokno for appellee.

MALCOLM, J.:

This is an action brought by the plaintiff in the Court of First Instance of Manila against the five defendants, to
recover damages in the amount of P10,000, for physical injuries suffered as a result of an automobile accident. On
judgment being rendered as prayed for by the plaintiff, both sets of defendants appealed.

On February 2, 1930, a passenger truck and an automobile of private ownership collided while attempting to pass
each other on the Talon bridge on the Manila South Road in the municipality of Las Pias, Province of Rizal. The
truck was driven by the chauffeur Abelardo Velasco, and was owned by Saturnino Cortez. The automobile was
being operated by Bonifacio Gutierrez, a lad 18 years of age, and was owned by Bonifacio's father and mother, Mr.
and Mrs. Manuel Gutierrez. At the time of the collision, the father was not in the car, but the mother, together will
several other members of the Gutierrez family, seven in all, were accommodated therein. A passenger in the
autobus, by the name of Narciso Gutierrez, was en route from San Pablo, Laguna, to Manila. The collision between

49
the bus and the automobile resulted in Narciso Gutierrez suffering a fracture right leg which required medical
attendance for a considerable period of time, and which even at the date of the trial appears not to have healed
properly.

It is conceded that the collision was caused by negligence pure and simple. The difference between the parties is
that, while the plaintiff blames both sets of defendants, the owner of the passenger truck blames the automobile, and
the owner of the automobile, in turn, blames the truck. We have given close attention to these highly debatable
points, and having done so, a majority of the court are of the opinion that the findings of the trial judge on all
controversial questions of fact find sufficient support in the record, and so should be maintained. With this general
statement set down, we turn to consider the respective legal obligations of the defendants.

In amplification of so much of the above pronouncement as concerns the Gutierrez family, it may be explained that
the youth Bonifacio was in incompetent chauffeur, that he was driving at an excessive rate of speed, and that, on
approaching the bridge and the truck, he lost his head and so contributed by his negligence to the accident. The
guaranty given by the father at the time the son was granted a license to operate motor vehicles made the father
responsible for the acts of his son. Based on these facts, pursuant to the provisions of article 1903 of the Civil Code,
the father alone and not the minor or the mother, would be liable for the damages caused by the minor.

We are dealing with the civil law liability of parties for obligations which arise from fault or negligence. At the same
time, we believe that, as has been done in other cases, we can take cognizance of the common law rule on the same
subject. In the United States, it is uniformly held that the head of a house, the owner of an automobile, who
maintains it for the general use of his family is liable for its negligent operation by one of his children, whom he
designates or permits to run it, where the car is occupied and being used at the time of the injury for the pleasure of
other members of the owner's family than the child driving it. The theory of the law is that the running of the
machine by a child to carry other members of the family is within the scope of the owner's business, so that he is
liable for the negligence of the child because of the relationship of master and servant. (Huddy On Automobiles, 6th
ed., sec. 660; Missell vs. Hayes [1914], 91 Atl., 322.) The liability of Saturnino Cortez, the owner of the truck, and
of his chauffeur Abelardo Velasco rests on a different basis, namely, that of contract which, we think, has been
sufficiently demonstrated by the allegations of the complaint, not controverted, and the evidence. The reason for this
conclusion reaches to the findings of the trial court concerning the position of the truck on the bridge, the speed in
operating the machine, and the lack of care employed by the chauffeur. While these facts are not as clearly
evidenced as are those which convict the other defendant, we nevertheless hesitate to disregard the points
emphasized by the trial judge. In its broader aspects, the case is one of two drivers approaching a narrow bridge
from opposite directions, with neither being willing to slow up and give the right of way to the other, with the
inevitable result of a collision and an accident.

The defendants Velasco and Cortez further contend that there existed contributory negligence on the part of the
plaintiff, consisting principally of his keeping his foot outside the truck, which occasioned his injury. In this
connection, it is sufficient to state that, aside from the fact that the defense of contributory negligence was not
pleaded, the evidence bearing out this theory of the case is contradictory in the extreme and leads us far afield into
speculative matters.

The last subject for consideration relates to the amount of the award. The appellee suggests that the amount could
justly be raised to P16,517, but naturally is not serious in asking for this sum, since no appeal was taken by him from
the judgment. The other parties unite in challenging the award of P10,000, as excessive. All facts considered,
including actual expenditures and damages for the injury to the leg of the plaintiff, which may cause him permanent
lameness, in connection with other adjudications of this court, lead us to conclude that a total sum for the plaintiff of
P5,000 would be fair and reasonable. The difficulty in approximating the damages by monetary compensation is
well elucidated by the divergence of opinion among the members of the court, three of whom have inclined to the
view that P3,000 would be amply sufficient, while a fourth member has argued that P7,500 would be none too
much.

In consonance with the foregoing rulings, the judgment appealed from will be modified, and the plaintiff will have
judgment in his favor against the defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino Cortez, jointly and
severally, for the sum of P5,000, and the costs of both instances.

50
Avancea, C.J., Johnson, Street, Villamor, Ostrand, Romualdez, and Imperial, JJ., concur.

VILLA-REAL, J.:

I vote for an indemnity of P7,500.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-41423 February 23, 1989

LUIS JOSEPH, petitioner

vs.
HON. CRISPIN V. BAUTISTA, PATROCINIO PEREZ, ANTONIO SIOSON, JACINTO PAGARIGAN,
ALBERTO CARDENO and LAZARO VILLANUEVA, respondents.

Jose M. Castillo for petitioner.

Arturo Z. Sioson for private respondent, Patrocinio Perez.

Cipriano B. Farrales for private respondents except P. Perez.

REGALAD0, J.:

Petitioner prays in this appeal by certiorari for the annulment and setting aside of the order, dated July 8, 1975,
dismissing petitioner's complaint, as well as the order, dated August 22, 1975, denying his motion for
reconsideration of said dismissal, both issued by respondent Judge Crispin V. Bautista of the former Court of First
Instance of Bulacan, Branch III.

Petitioner herein is the plaintiff in Civil Case No. 50-V-73 entitled "Luis Joseph vs. Patrocinio Perez, Domingo Villa
y de Jesus, Rosario Vargas, Antonio Sioson, Lazaro Villanueva and Jacinto Pagarigan", filed before the Court of
First Instance of Bulacan, Branch III, and presided over by respondent Judge Crispin V. Bautista; while private
respondents Patrocinio Perez, Antonio Sioson, Jacinto Pagarigan and Lazaro Villanueva are four of the defendants
in said case. Defendant Domingo Villa y de Jesus did not answer either the original or the amended complaint, while
defendant Rosario Vargas could not be served with summons; and respondent Alberto Cardeno is included herein as
he was impleaded by defendant Patrocinio Perez, one of respondents herein, in her cross-claim.

The generative facts of this case, as culled from the written submission of the parties, are as follows:

Respondent Patrocinio Perez is the owner of a cargo truck with Plate No. 25-2 YT Phil. '73 for conveying cargoes
and passengers for a consideration from Dagupan City to Manila. On January 12, 1973, said cargo truck driven by
defendant Domingo Villa was on its way to Valenzuela, Bulacan from Pangasinan. Petitioner, with a cargo of
livestock, boarded the cargo truck at Dagupan City after paying the sum of P 9.00 as one way fare to Valenzuela,
Bulacan. While said cargo truck was negotiating the National Highway proceeding towards Manila, defendant

51
Domingo Villa tried to overtake a tricycle likewise proceeding in the same direction. At about the same time, a pick-
up truck with Plate No. 45-95 B, supposedly owned by respondents Antonio Sioson and Jacinto Pagarigan, then
driven by respondent Lazaro Villanueva, tried to overtake the cargo truck which was then in the process of
overtaking the tricycle, thereby forcing the cargo truck to veer towards the shoulder of the road and to ram a mango
tree. As a result, petitioner sustained a bone fracture in one of his legs. 1

The following proceedings thereafter took place: 2

Petitioner filed a complaint for damages against respondent Patrocinio Perez, as owner of the cargo truck, based on a
breach of contract of carriage and against respondents Antonio Sioson and Lazaro Villanueva, as owner and driver,
respectively, of the pick-up truck, based on quasi-delict.

Respondent Sioson filed his answer alleging that he is not and never was an owner of the pick-up truck and neither
would he acquire ownership thereof in the future.

On September 24, 1973, petitioner, with prior leave of court, filed his amended complaint impleading respondents
Jacinto Pagarigan and a certain Rosario Vargas as additional alternative defendants. Petitioner apparently could not
ascertain who the real owner of said cargo truck was, whether respondents Patrocinio Perez or Rosario Vargas, and
who was the real owner of said pick-up truck, whether respondents Antonio Sioson or Jacinto Pagarigan.

Respondent Perez filed her amended answer with crossclaim against her co-defendants for indemnity and
subrogation in the event she is ordered to pay petitioner's claim, and therein impleaded cross-defendant Alberto
Cardeno as additional alternative defendant.

On September 27, 1974, respondents Lazaro Villanueva, Alberto Cardeno, Antonio Sioson and Jacinto Pagarigan,
thru their insurer, Insurance Corporation of the Philippines, paid petitioner's claim for injuries sustained in the
amount of P 1,300.00. By reason thereof, petitioner executed a release of claim releasing from liability the following
parties, viz: Insurance Corporation of the Philippines, Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and
Jacinto Pagarigan.

On December 2, 1974, respondents Lazaro Villanueva, Alberto Cardeno and their insurer, the Insurance Corporation
of the Philippines, paid respondent Patrocinio Perez' claim for damages to her cargo truck in the amount of P
7,420.61.

Consequently, respondents Sioson, Pagarigan, Cardeno and Villanueva filed a "Motion to Exonerate and Exclude
Defs/ Cross defs. Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan on the Instant Case",
alleging that respondents Cardeno and Villanueva already paid P 7,420.61 by way of damages to respondent Perez,
and alleging further that respondents Cardeno, Villanueva, Sioson and Pagarigan paid P 1,300.00 to petitioner by
way of amicable settlement.

Thereafter, respondent Perez filed her "Opposition to Cross-defs.' motion dated Dec. 2, 1974 and Counter Motion"
to dismiss. The so-called counter motion to dismiss was premised on the fact that the release of claim executed by
petitioner in favor of the other respondents inured to the benefit of respondent Perez, considering that all the
respondents are solidarity liable to herein petitioner.

On July 8, 1975, respondent judge issued the questioned order dismissing the case, and a motion for the
reconsideration thereof was denied. Hence, this appeal, petitioner contending that respondent judge erred in
declaring that the release of claim executed by petitioner in favor of respondents Sioson, Villanueva and Pagarigan
inured to the benefit of respondent Perez; ergo, it likewise erred in dismissing the case.

We find the present recourse devoid of merit.

52
The argument that there are two causes of action embodied in petitioner's complaint, hence the judgment on the
compromise agreement under the cause of action based on quasi-delict is not a bar to the cause of action for breach
of contract of carriage, is untenable.

A cause of action is understood to be the delict or wrongful act or omission committed by the defendant in violation
of the primary rights of the plaintiff. 3 It is true that a single act or omission can be violative of various rights at the
same time, as when the act constitutes juridically a violation of several separate and distinct legal obligations.
However where there is only one delict or wrong, there is but a single cause of action regardless of the number of
rights that may have been violated belonging to one person. 4

The singleness of a cause of action lies in the singleness of the- delict or wrong violating the rights of one person.
Nevertheless, if only one injury resulted from several wrongful acts, only one cause of action arises. 5 In the case at
bar, there is no question that the petitioner sustained a single injury on his person. That vested in him a single cause
of action, albeit with the correlative rights of action against the different respondents through the appropriate
remedies allowed by law.

The trial court was, therefore, correct in holding that there was only one cause of action involved although the bases
of recovery invoked by petitioner against the defendants therein were not necessarily Identical since the respondents
were not identically circumstanced. However, a recovery by the petitioner under one remedy necessarily bars
recovery under the other. This, in essence, is the rationale for the proscription in our law against double recovery for
the same act or omission which, obviously, stems from the fundamental rule against unjust enrichment.

There is no question that the respondents herein are solidarily liable to petitioner. On the evidence presented in the
court below, the trial court found them to be so liable. It is undisputed that petitioner, in his amended complaint,
prayed that the trial court hold respondents jointly and severally liable. Furthermore, the allegations in the amended
complaint clearly impleaded respondents as solidary debtors. We cannot accept the vacuous contention of petitioner
that said allegations are intended to apply only in the event that execution be issued in his favor. There is nothing in
law or jurisprudence which would countenance such a procedure.

The respondents having been found to be solidarity liable to petitioner, the full payment made by some of the
solidary debtors and their subsequent release from any and all liability to petitioner inevitably resulted in the
extinguishment and release from liability of the other solidary debtors, including herein respondent Patrocinio Perez.

The claim that there was an agreement entered into between the parties during the pre-trial conference that, after
such payment made by the other respondents, the case shall proceed as against respondent Perez is both incredible
and unsubstantiated. There is nothing in the records to show, either by way of a pre-trial order, minutes or a
transcript of the notes of the alleged pre-trial hearing, that there was indeed such as agreement.

WHEREFORE, the challenged orders of the respondent judge are hereby AFFIRMED.

SO ORDERED.

Melencio-Herrera, (Chairperson), Paras, Padilla, and Sarmiento, JJ., concur.

THIRD DIVISION

[G.R. No. 115849. January 24, 1996]

53
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in
substitution of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents.

DECISION
PANGANIBAN, J.:

In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters
and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of land
in Sta. Rosa, Laguna? Does the doctrine of apparent authority apply in this case? If so, may the Central Bank-
appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such apparent
authority after said contract has been deemed perfected? During the pendency of a suit for specific performance,
does the filing of a derivative suit by the majority shareholders and directors of the distressed bank to prevent the
enforcement or implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review on
certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the
respondent Court of Appeals[1] in CA-G.R. CV No. 35756 and the Resolution promulgated June 14, 1994 denying
the motion for reconsideration. The dispositive portion of the said Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under
paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to P75,000.00,
to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED.

All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and hereafter, to
legally refer to the plaintiff-appellee Carlos C. Ejercito.

Costs against appellant bank.

The dispositive portion of the trial courts[2] decision dated July 10, 1991, on the other hand, is as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants as follows:

1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don Jose,
Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer Certificates of
Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and
the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;

2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the
plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the
aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owners copies of T.C.T. Nos.
T-106932 to T-106937, inclusive, for purposes of registration of the same deed and transfer of the six (6) titles in the
names of the plaintiffs;

3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the sums of
P 200,000.00 each in moral damages;

4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as exemplary damages;

5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by way of
attorneys fees;

54
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the amount of
P20,000.00;

With costs against the defendants.

After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was
given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda and
reply memoranda. The First Division transferred this case to the Third Division per resolution dated October 23,
1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the undersigned
ponente for the writing of this Decision.

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for
brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines. Petitioner
Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this case, Head
Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original
plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside
through this petition.

The Facts

The facts of this case are summarized in the respondent Courts Decision, [3] as follows:

(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of
land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by Transfer Certificates of
Title Nos. T-106932 to T-106937. The property used to be owned by BYME Investment and Development
Corporation which had them mortgaged with the bank as collateral fora loan. The original plaintiffs, Demetrio
Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose.

(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal counsel, Jose
Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the defendant
bank. The meeting was held pursuant to plaintiffs plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After
the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank
through a letter dated August 30, 1987 (Exh. B), as follows:

August 30, 1987

The Producers Bank of the Philippines

Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept.

Gentlemen:

55
I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located at
Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.

TCT NO. AREA

T-106932 113,580 sq.m.

T-106933 70,899 sq.m.
T-106934 52,246 sq.m.
T-106935 96,768 sq.m.
T-106936 187,114 sq.m.
T-106937 481,481 sq.m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash.

Kindly contact me at Telephone Number 921-1344.

(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is hereunder
quoted (Exh. C):

September 1, 1987

J-P M-P GUTIERREZ ENTERPRISES

142 Charisma St., Doa Andres II
Rosario, Pasig, Metro Manila

Attention: JOSE O. JANOLO Dear Sir:

Dear Sir:

Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned by
Byme industrial Corp.). Please be informed however that the banks counter-offer is at P5.5 million for more than
101 hectares on lot basis.

We shall be very glad to hear your position on the matter.

Best regards.

(4)On September 17, 1987, plaintiff Janolo, responding to Riveras aforequoted reply, wrote (Exh.

September 17, 1987

Producers Bank
Paseo de Roxas
Makati, Metro Manila

Attention: Mr. Mercurio Rivera

Gentlemen:

In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa Laguna, I would
like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.

56
Hoping that this proposal meets your satisfaction.

(5) There was no reply to Janolos foregoing letter of September 17, 1987. What took place was a meeting
on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as
well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo
sent to the bank, through Rivera, the following letter (Exh. E):

The Producers Bank of the Philippines

Paseo de Roxas, Makati
Metro Manila

Attention: Mr. Mercurio Rivera

Re: 101 Hectares of Land in Sta. Rosa, Laguna

Gentlemen:

Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your offer
for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme In-vestment, for a total price of
PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).

Thank you.

(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the Central
Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion.
On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. F):

Attention: Atty. Demetrio Demetria

Dear Sir:

Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. located at Sta. Rosa, Laguna
is under study yet as of this time by the newly created committee for submission to the newly designated Acting
Conservator of the bank.

For your information.

(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what
plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the bank.
As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant Rivera
(Exhibit G) tendered payment of the amount of P5.5 million pursuant to (our) perfected sale agreement. Defendants
refused to receive both the payment and the letter. Instead, the parcels of land involved in the transaction were
advertised by the bank for sale to any interested buyer (Exhs. H and H-1). Plaintiffs demanded the execution by the
bank of the documents on what was considered as a perfected agreement. Thus:

Mr. Mercurio Rivera

Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila

Dear Mr. Rivera:

57
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in
Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937.

From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the
amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by you
on October 5, 1987.

In view of the above circumstances, we believe that an agreement has been perfected. We were also informed that
despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead, you
have advertised for sale the same lot to others.

In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the
necessary actions/documentation within three (3) days from your receipt hereof We are ready to remit the agreed
amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to
protect the interest of our client.

We trust that you will be guided accordingly.

(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its
communication of December 2, 1987 (Exh. I), that said letter has been referred x x x to the office of our Conservator
for proper disposition. However, no response came from the Acting Conservator. On December 14, 1987, the
plaintiffs made a second tender of payment (Exhs. L and L-1), this time through the Acting Conservator, defendant
Encarnacion. Plaintiffs letter reads:

PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila

Attn.: Atty. NIDA ENCARNACION Central Bank Conservator

Gentlemen:

We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the
amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932, 106933,
106934, 106935, 106936 and 106937 and registered under Producers Bank.

This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase price
of the said lots. Please inform us of the date of documentation of the sale immediately.

Kindly acknowledge receipt of our payment.

(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through
counsel, made a final demand for compliance by the bank with its obligations under the considered perfected
contract of sale (Exhibit N). As recounted by the trial court (Original Record, p. 656), in a reply letter dated May 12,
1988 (Annex 4 of defendants answer to amended complaint), the defendants through Acting Conservator
Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the plaintiffs,
particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified the
refusal of the tenders of payment and the non-compliance with the obligations under what the plaintiffs considered
to be a perfected contract of sale.

(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its Manager
Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the bank resulted

58
in a perfected contract of sale. The defendants took the position that there was no such perfected sale because the
defendant Rivera is not authorized to sell the property, and that there was no meeting of the minds as to the price.

On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and Gatmaitan,
filed a motion to intervene in the trial court, alleging that as owner of 80% of the Banks outstanding shares of stock,
he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an order denying the
motion to intervene on the ground that it was filed after trial had already been concluded. It also denied a motion for
reconsideration filed thereafter. From the trial courts decision, the Bank, petitioner Rivera and conservator
Encarnacion appealed to the Court of Appeals which subsequently affirmed with modification the said judgment.
Henry Co did not appeal the denial of his motion for intervention.

In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of
Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said private
respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other
stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter,
the Second Case) -purportedly a derivative suit - with the Regional Trial Court of Makati, Branch 134, docketed as
Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo to declare any perfected sale of the property as
unenforceable and to stop Ejercito from enforcing or implementing the sale. [4] In his answer, Janolo argued that the
Second Case was barred by litis pendentia by virtue of the case then pending in the Court of Appeals. During the
pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case Without
Prejudice. Private respondent opposed this motion on the ground, among others, that plaintiffs act of forum shopping
justifies the dismissal of both cases, with prejudice.[5] Private respondent, in his memorandum, averred that this
motion is still pending in the Makati RTC.
In their Petition[6] and Memorandum,[7] petitioners summarized their position as follows:
I.

The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution of
Demetria and Janolo) and the bank.

II.

The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.

III.

The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts of
previous management.

IV.

The findings and conclusions of the Court of Appeals do not conform to the evidence on record.

On the other hand, private respondents prayed for dismissal of the instant suit on the ground[8] that:
I.

Petitioners have engaged in forum shopping.

II.

59
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may no
longer be questioned in this case.

III.

The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo (substituted by
respondent Ejercito) and the bank.

IV.

The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the agency
and the contract, has no authority to revoke the contract of sale.

The Issues

From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to
revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?

The First Issue: Was There Forum-Shopping?

In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised
Circular No. 28-91 requiring that a party must certify under oath x x x [that] (a) he has not (t)heretofore commenced
any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other
tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending in said courts or
agencies. A violation of the said circular entails sanctions that include the summary dismissal of the multiple
petitions or complaints. To be sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition
stating for the record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch
134, involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other defendants
but which is the subject of a pending Motion to Dismiss Without Prejudice. [9]
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual
forum shopping because the instant petition pending before this Court involves identical parties or interests
represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati
Branch 134 in the Second Case. In fact, the issues in the two cases are so intertwined that a judgment or resolution
in either case will constitute res judicata in the other.[10]
On the other hand, petitioners explain[11] that there is no forum-shopping because:

1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a defendant, whereas in
the Second Case (assuming the Bank is the real party in interest in a derivative suit), it was the plaintiff;

2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances;

60
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to the
Petition identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a legal question for the
courts to decide;

4) Petitioners did not hide the Second Case as they mentioned it in the said VERIFICATION/CERTIFICATION.

We rule for private respondent.

To begin with, forum-shopping originated as a concept in private international law, [12] where non-resident
litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or excuses,
including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to
select a more friendly venue. To combat these less than honorable excuses, the principle of forum non
conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its jurisdiction
where it is not the most convenient or available forum and the parties are not precluded from seeking remedies
elsewhere.
In this light, Blacks Law Dictionary[13] says that forum-shopping occurs when a party attempts to have his
action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or verdict.
Hence, according to Words and Phrases,[14] a litigant is open to the charge of forum shopping whenever he chooses a
forum with slight connection to factual circumstances surrounding his suit, and litigants should be encouraged to
attempt to settle their differences without imposing undue expense and vexatious situations on the courts.
In the Philippines, forum-shopping has acquired a connotation encompassing not only a choice of venues, as it
was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues), the
Rules of Court, for example, allow a plaintiff to commence personal actions where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing civil
liabilities independently of the criminal, arising from the same set of facts. A passenger of a public utility vehicle
involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal - each remedy being
available independently of the others - although he cannot recover more than once.

In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his
action. This was the original concept of the term forum shopping.

Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and
consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience to
some of the parties to the action.

Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice. And this
necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting the
practice.[15]

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for
solving problems has been abused and misused to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned,
promulgated Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules and Guidelines
issued on January 11, 1983 and had struck down in several cases[16] the inveterate use of this insidious malpractice.
Forum-shopping as the filing of repetitious suits in different courts has been condemned by Justice Andres R.
Narvasa (now Chief Justice) in Minister of Natural Resources, et al. vs. Heirs of Orval Hughes, et al., as a
reprehensible manipulation of court processes and proceedings x x x.[17] When does forum-shopping take place?

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion
(other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in the courts

61
but also in connection with litigations commenced in the courts while an administrative proceeding is pending, as in
this case, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and
a favorable court ruling. This is specially so, as in this case, where the court in which the second suit was brought,
has no jurisdiction [18]

The test for determining whether a party violated the rule against forum-shopping has been laid down in the
1986 case of Buan vs. Lopez,[19] also by Chief Justice Narvasa, and that is, forum-shopping exists where the
elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the other,
as follows:

There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at least
such parties as represent the same interests in both actions, as well as identity of rights asserted and relief prayed for,
the relief being founded on the same facts, and the identity on the two preceding particulars is such that any
judgment rendered in the other action, will, regardless of which party is successful, amount to res adjudicata in the
action under consideration: all the requisites, in fine, of auter action pendant.

xxx xxx xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards parties,
or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to give rise
to the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into operation the
sanction of twin dismissals just mentioned. The application of this sanction will prevent any further delay in the
settlement of the controversy which might ensue from attempts to seek reconsideration of or to appeal from the
Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the
petition upon grounds which appear persuasive.

Consequently, where a litigant (or one representing the same interest or person) sues the same party against
whom another action or actions for the alleged violation of the same right and the enforcement of the same relief
is/are still pending, the defense of litis pendencia in one case is a bar to the others; and, a final judgment in one
would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could be
cited by the other party as a ground to ask for summary dismissal of the two [20] (or more) complaints or petitions,
and for the imposition of the other sanctions, which are direct contempt of court, criminal prosecution, and
disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious
that there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by
the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to
enforce the alleged perfected sale of real estate. On the other hand, the complaint [21] in the Second Case seeks to
declare such purported sale involving the same real property as unenforceable as against the Bank, which is the
petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are
seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or
the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from
the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission on Audit,[22] this Court
ruled that the filing by a party of two apparently different actions, but with the same objective, constituted forum
shopping:

In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein -
PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be
different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10,
1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and
petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a
rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to
comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief

62
prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is,
the approval of the sale of vessel in favor of petitioner, and to overturn the letter-directive of the COA of October
10, 1988 disapproving the sale. (italics supplied)

In an earlier case,[23] but with the same logic and vigor, we held:

In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in this
Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forum-shopping. Both
actions unquestionably involve the same transactions, the same essential facts and circumstances. The petitioners
claim of absence of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit did not
involve certain acts which transpired after its commencement, is specious. In the RTC action, as in the action before
this Court, the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been
efficaciously rescinded, and the propriety of implementing the same (by paying the pledgee banks the amount of
their loans, obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief was the same:
the prevention of such implementation and/or the restoration of the status quo ante. When the acts sought to be
restrained took place anyway despite the issuance by the Trial Court of a temporary restraining order, the RTC suit
did not become functus oflcio. It remained an effective vehicle for obtention of relief; and petitioners remedy in the
premises was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so as to include
the PCGG as defendant and seek nullification of the acts sought to be enjoined but nonetheless done. The remedy
was certainly not the institution of another action in another forum based on essentially the same facts. The adoption
of this latter recourse renders the petitioners amenable to disciplinary action and both their actions, in this Court as
well as in the Court a quo, dismissible.

In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the
plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same
interest and entity, namely, petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in
controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed
contract of sale; and

Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a derivative
suit. In the caption itself, petitioners claim to have brought suit for and in behalf of the Producers Bank of
the Philippines.[24] Indeed, this is the very essence of a derivative suit:

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds
stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are
the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as a
nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979];
italics supplied).

In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite
strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the
minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding
capital stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they
really represent the Bank. So, whether they sued derivatively or directly, there is undeniably an identity of
interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and
distinct from its shareholders. But the rulings of this Court are consistent: When the fiction is urged as a means of
perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of
statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with
which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to
allow for its consideration merely as an aggregation of individuals. [25]

63
 In addition to the many cases[26] where the corporate fiction has been disregarded, we now add the instant case,
and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the prohibition
against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a
derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation
itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying
remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as
fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is
identity of parties, causes of action and reliefs sought, because it (the Bank) was the defendant in the (first) case
while it was the plaintiff in the other (Second Case), citing as authority Victronics Computers, Inc. vs. Regional
Trial Court, Branch 63, Makati, etc. et al.,[27] where the Court held:

The rule has not been extended to a defendant who, for reasons known only to him, commences a new action against
the plaintiff - instead of filing a responsive pleading in the other case - setting forth therein, as causes of action,
specific denials, special and affirmative defenses or even counterclaims. Thus, Velhagens and Kings motion to
dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not exist in the first
place. (italics supplied)

Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the
forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the
present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file
any responsive pleading in the first case. In other words, they did not make any denial or raise any defense or
counter-claim therein. In the case before us however, petitioners filed a responsive pleading to the complaint - as a
result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings, the
petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they repeated
in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the
vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to
rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating
the possibility of conflicting decisions being rendered by the different fora upon the same issue. In this case, this is
exactly the problem: a decision recognizing the perfection and directing the enforcement of the contract of sale will
directly conflict with a possible decision in the Second Case barring the parties from enforcing or implementing the
said sale. Indeed, a final decision in one would constitute res judicata in the other.[28]
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible
now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners
present counsel entered their appearance only during the proceedings in this Court, and the Petitions
VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to show
good faith in observing Circular 28-91. The lawyers who filed the Second Case are not before us; thus the rudiments
of due process prevent us from motu propio imposing disciplinary measures against them in this Decision. However,
petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules
against forum-shopping and not to trifle with court proceedings and processes. They are warned that a repetition of
the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of forum-
shopping but also because of the substantive issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected?

64
 The respondent Court correctly treated the question of whether or not there was, on the basis of the facts
established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established,
respondent Court stated:

There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired assets
consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T-106932 to T-
106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the Banks Deputy
Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs wanted
to purchase the property and it was precisely for this purpose that they met with defendant Rivera, Manager of the
Property Management Department of the defendant bank, in early August 1987. The procedure in the sale of
acquired assets as well as the nature and scope of the authority of Rivera on the matter is clearly delineated in the
testimony of Rivera himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs.
Thus (TSN of July 30, 1990. pp. 19-20):

A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the form of an
inter-office memorandum distributed to all branches that these are acquired assets for sale. I was instructed to
advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon
having been offered, I present it to the Committee. I provide the Committee with necessary information about the
property such as original loan of the borrower, bid price during the foreclosure, total claim of the bank, the appraised
value at the time the property is being offered for sale and then the information which are relative to the evaluation
of the bank to buy which the Committee considers and it is the Committee that evaluate as against the exposure of
the bank and it is also the Committee that submit to the Conservator for final approval and once approved, we have
to execute the deed of sale and it is the Conservator that sign the deed of sale, sir.

The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt with
and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were dealing with
the bank official authorized to entertain offers, to accept offers and to present the offer to the Committee before
which the said official is authorized to discuss information relative to price determination. Necessarily, too, it being
inherent in his authority, Rivera is the officer from whom official information regarding the price, as determined by
the Committee and approved by the Conservator, can be had. And Rivera confirmed his authority when he talked
with the plaintiff in August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31, 1990,
pp. 27-28):

Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-
blank his authority to sell any property?
A: No, sir. Not point blank although it came from him. (W)hen I asked him how long it would take
because he was saying that the matter of pricing will be passed upon by the committee. And when I
asked him how long it will take for the committee to decide and he said the committee meets every
week. If I am not mistaken Wednesday and in about two weeks (sic) time, in effect what he was
saying he was not the one who was to decide. But he would refer it to the committee and he would
relay the decision of the committee to me.
Q: Please answer the question.
A: He did not say that he had the authority(.) But he said he would refer the matter to the committee and
he would relay the decision to me and he did just like that.

Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with Jose
Entereso as one of the members.

What transpired after the meeting of early August 1987 are consistent with the authority and the duties of Rivera and
the banks internal procedure in the matter of the sale of banks assets. As advised by Rivera, the plaintiffs made a
formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 Million in cash. The
letter was for the attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering an
aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-buyers with their proposed

65
buying price on one hand, and the bank Committee, the Conservator and ultimately the bank itself with the set price
on the other, and considering further the discussion of price at the meeting of August resulting in a formal offer of
P3.5 Million in cash, there can be no other logical conclusion than that when, on September 1, 1987, Rivera
informed plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis,
such counter-offer price had been determined by the Past Due Committee and approved by the Conservator after
Rivera had duly presented plaintiffs offer for discussion by the Committee of such matters as original loan of
borrower, bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the established
facts, the price of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at
which the bank was selling the property.

There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not
discussed by the Committee and that it was merely quoted to start negotiations regarding the price. As correctly
characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point are at
best equivocal and considering the gratuitous and self-serving character of these declarations, the banks submission
on this point does not inspire belief. Both Co and Entereso, as members of the Past Due Committee of the bank,
claim that the offer of the plaintiff was never discussed by the Committee. In the same vein, both Co and
Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note that
negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase
price, having been made to understand by Rivera, the official in charge of the negotiation, that the price will be
submitted for approval by the bank and that the banks decision will be relayed to plaintiffs. From the facts, the
amount of P5.5 Million has a definite significance. It is the official bank price. At any rate, the bank placed its
official, Rivera, in a position of authority to accept offers to buy and negotiate the sale by having the offer officially
acted upon by the bank. The bank cannot turn around and later say, as it now does, that what Rivera states as the
banks action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a
corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent
authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against
any one who has in good faith dealt with the corporation through such agent, he estopped from denying his authority
(Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v.
Court of Appeals, G.R. No. 103957, June 14, 1993). [29]

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: (1)
Consent of the contracting parties; (2) Object certain which is the subject matterof the contract; (3) Cause of the
obligation which is established.
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of
land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer
Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites.
Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer which
Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for
Ejercito (in substitution of Demetria and Janolo) to accept. [30] They disputed the factual basis of the respondent
Courts findings that there was an offer made by Janolo for P3.5 million, to which the Bank counter-offered P5.5
million. We have perused the evidence but cannot find fault with the said Courts findings of fact. Verily, in a
petition under Rule 45 such as this, errors of fact -if there be any - are, as a rule, not reviewable. The mere fact that
respondent Court (and the trial court as well) chose to believe the evidence presented by respondent more than that
presented by petitioners is not by itself a reversible error. in fact, such findings merit serious consideration by this
Court, particularly where, as in this case, said courts carefully and meticulously discussed their findings. This is
basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the
question of Riveras authority to act and petitioners allegations that the P5.5 million counter-offer was extinguished
by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be drawn from the factual
findings of the respondent Court. They also delve into the contractual elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of
apparent authority, with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals, [31] where it
was held that:

66
Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the
agent. The agents apparent representation yields to the principals true representation and the contract is considered
as entered into between the principal and the third person (citing National Food Authority vs. Intermediate Appellate
Court, 184 SCRA 166).

A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the
officers in their representative capacity but not for acts outside the scope of their authority (9 C.J.S., p. 417). A bank
holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may
thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its
responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114).
Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the course
of its business by an agent acting within the general scope of his authority even though, in the particular case, the
agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person,
for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021).

Application of these principles is especially necessary because banks have a fiduciary relationship with the public
and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded
where banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to
their depositors.

From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied
authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following:

(a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager of the
Property Management Department of the Bank. By his own admission, Rivera was already the person in charge of
the Banks acquired assets (TSN, August 6, 1990, pp. 8-9);

(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial meeting
between the buyers and Rivera, the latter suggested that the buyers offer should be no less than P3.3 million (TSN,
April 26, 1990, pp. 16-17);

(c) Rivera received the buyers letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p. 11);

(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30, p.
11);

(e) Rivera received the letter dated September 17, 1987 containing the buyers proposal to buy the property for P4.25
million (TSN, July 30, 1990, p. 12);

(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank (TSN,
January 16, 1990, p. 18);

(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1987, during which the Banks
offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major
shareholder and officer of the Bank, confirmed Riveras statement as to the finality of the Banks counter-offer of
P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);

(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for the
Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the officer
mentioned in the Banks advertisements offering for sale the property in question (cf. Exhs. S and S-I).

In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al.,[32] the Court, through
Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the

67
officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding his
dealings with buyers.
To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and testimony
which seek to establish Riveras actual authority. These pieces of evidence, however, are inherently weak as they
consist of Riveras self-serving testimony and various inter-office memoranda that purport to show his limited actual
authority, of which private respondent cannot be charged with knowledge. In any event, since the issue is apparent
authority, the existence of which is borne out by the respondent Courts findings, the evidence of actual authority is
immaterial insofar as the liability of a corporation is concerned.[33]
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had once
acted for the Bank in three criminal cases, they should be charged with actual knowledge of Riveras limited
authority. But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had no
notice of Riveras actual authority prior to the sale. In fact, the Bank has not shown that they acted as its counsel in
respect to any acquired assets; on the other hand, respondent has proven that Demetria and Janolo merely associated
with a loose aggrupation of lawyers (not a professional partnership), one of whose members (Atty. Susana Parker)
acted in said criminal cases.
Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter dated September
17, 1987 extinguished the Banks offer of P5.5 million.[34] They disputed the respondent Courts finding that there was
a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex L (letter dated September 30,
1987) accepted Riveras counter offer of P5.5 million under Annex J (letter dated September 17, 1987), citing the late
Justice Paras,[35] Art. 1319 of the Civil Code[36] and related Supreme Court rulings starting with Beaumont vs.
Prieto.[37]
However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the
respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in his letter dated
September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose
Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30,
1987 begins with (p)ursuant to our discussion last 28 September 1987 x x x.
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that
the September 28, 1987 meeting was meant to have the offerors improve on their position of P5.5
million.[38] However, both the trial court and the Court of Appeals found petitioners testimonial evidence not
credible, and we find no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that private
respondents evidence is more in keeping with truth and logic - that during the meeting on September 28, 1987, Luis
Co and Rivera confirmed that the P5.5 million price has been passed upon by the Committee and could no longer be
lowered (TSN of April 27, 1990, pp. 34-35).[39] Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Cos reiteration of the said P5.5 million price during the September 28,
1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting this revived offer,
there was a meeting of the minds, as the acceptance in said letter was absolute and unqualified.
We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action,
particularly the latters counter-offer of P5.5 million, as being unauthorized and illegal came only on May 12, 1988
or more than seven (7) months after Janolos acceptance. Such delay, and the absence of any circumstance which
might have justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as nothing more
than a last-minute attempt on the Banks part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of the
petitioners that the written offer made on September 1, 1987 was carried through during the meeting of September
28, 1987. This is the conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for the first
time on appeal and should thus be disregarded.

This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact and
arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be,

68
considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243,
November 14, 1986, 145 SCRA 592).[40]

xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in
the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play,
justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos
Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC,
G.R. 77029, August 30, 1990).[41]

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an
opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due
process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, and
we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the
inevitable conclusion is simply that there was a perfected contract of sale.

The Third Issue: Is the Contract Enforceable?

The petition alleged:[42]

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28
September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September
1987, the contract produced thereby would be unenforceable by action - there being no note, memorandum or
writing subscribed by the Bank to evidence such contract. (Please see Article 1403[2], Civil Code.)

Upon the other hand, the respondent Court in its Decision (p. 14) stated:

x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of the price
on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear embodiments of the
fact that a contract of sale was perfected between the parties, such contract being binding in whatever form it may
have been entered into (case citations omitted). Stated simply, the banks letter of September 1, 1987, taken together
with plaintiffs letter dated September 30, 1987, constitute in law a sufficient memorandum of a perfected contract of
sale.

The respondent Court could have added that the written communications commenced not only from September
1, 1987 but from Janolos August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient
memoranda - since they include the names of the parties, the terms and conditions of the contract, the price and a
description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute
a new offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by
reason of the failure of petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5 million.
Hence, petitioners - by such utter failure to object - are deemed to have waived any defects of the contract under the
statute of frauds, pursuant to Article 1405 of the Civil Code:

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the failure
to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.

As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer
of P5.5 million is aplenty -and the silence of petitioners all throughout the presentation makes the evidence binding
on them thus:

69
 A - Yes, sir. I think it was September 28, 1987 and I was again present because Atty. Demetria told me to
accompany him and we were able to meet Luis Co at the Bank.
xxx xxx xxx
Q - Now, what transpired during this meeting with Luis Co of the Producers Bank?
A - Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q - What price?
A - The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final
price and that is the price they intends (sic) to have, sir.
Q - What do you mean?
A - That is the amount they want, sir.
Q - What is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant Riveras
counter-offer of 5.5 million was the defendants bank (sic) final offer?
A - He said in a day or two, he will make final acceptance, sir.
Q - What is the response of Mr. Luis Co?
A - He said he will wait for the position of Atty. Demetria, sir.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]

----0----
Q - What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A - We went straight to the point because he being a busy person, I told him if the amount of P5.5 million
could still be reduced and he said that was already passed upon by the committee. What the bank
expects which was contrary to what Mr. Rivera stated. And he told me that is the final offer of the
bank P5.5 million and we should indicate our position as soon as possible.
Q - What was your response to the answer of Mr. Luis Co?
A - I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo
and I and Mr. Mercurio [Rivera] was with us at the time at his office.
Q - For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this meeting?
A - Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q - By Mr. Co you are referring to?
A - Mr. Luis Co.
Q - After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the
bank?
A - Yes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we accepted, the
offer of the bank which is P5.5 million.

[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]

---- 0 ----

70
 Q - According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee
and it is not within his power to reduce this amount. What can you say to that statement that the
amount of P5.5 million was reached by the Committee?
A - It was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty.
Demetrio Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.

[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]

The Fourth Issue: May the Conservator Revoke

the Perfected and Enforceable Contract?
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of
the Philippines during the time that the negotiation and perfection of the contract of sale took place. Petitioners
energetically contended that the conservator has the power to revoke or overrule actions of the management or the
board of directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank
Act) as follows:

Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary
Board finds that a bank or a non-bank financial intermediary performing quasi - banking functions is in a state of
continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets, liabilities, and
the management of that institution, collect all monies and debts due said institution and exercise all powers
necessary to preserve the assets of the institution, reorganize the management thereof, and restore its viability. He
shall have the power to overrule or revoke the actions of the previous management and board of directors of the
bank or non-bank financial intermediary performing quasi-banking functions, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall deem necessary.

In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected contract
of sale was raised for the first time in this Petition - as this was not litigated in the trial court or Court of Appeals. As
already stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals, cannot
be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due
process.[43]
In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected,
actually repudiated or overruled said contract of sale. The Banks acting conservator at the time, Rodolfo Romey,
never objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter
of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987 (Annex
V, petition) which unilaterally repudiated - not the contract - but the authority of Rivera to make a binding offer -
and which unarguably came months after the perfection of the contract. Said letter dated May 12, 1988 is
reproduced hereunder:

May 12, 1988

Atty. Noe C. Zarate

Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro Manila

Dear Atty. Zarate:

This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6) parcels
of land located at Sta. Rosa, Laguna.

71
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a contract to
sell and buy with any of them for the following reasons.

In the Inter-Office Memorandum dated April 25, 1986 addressed to and approved by former Acting Conservator Mr.
Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of Property
Management Department (PMD) staff and officers (Annex A), you will immediately read that Manager Mr.
Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged counter-offer. In
short, your lawyer-clients did not deal with the authorized officers of the bank.

Moreover, under Secs. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68) and Sec. 28-
A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator may authorize
the sale of any property of the corporation/bank.

Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators
(starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were just
preliminary discussions/ consultations between him and your clients, which everyone knows cannot bind the Banks
Board or Conservator.

We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative of
corporate and banking laws. We believe that this is more than sufficient legal justification for refusing said alleged
tender.

Rest assured that we have nothing personal against your clients. All our acts are official, legal and in accordance
with law. We also have no personal interest in any of the properties of the Bank.

Please be advised accordingly.

Very truly yours,

(Sgd.) Leonida T. Encarnacion

LEONIDA T. ENCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator
of a bank, it must be pointed out that such powers must be related to the (preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the restoration of) its viability. Such powers, enormous and
extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution.[44] If the legislature itself cannot revoke an existing
valid contract, how can it delegate such non-existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under
existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence, the conservator
merely takes the place of a banks board of directors. What the said board cannot do - such as repudiating a contract
validly entered into under the doctrine of implied authority - the conservator cannot do either. Ineluctably, his power
is not unilateral and he cannot simply repudiate valid obligations of the Bank. His authority would be only to bring
court actions to assail such contracts - as he has already done so in the instant case. A contrary understanding of the
law would simply not be permitted by the Constitution. Neither by common sense. To rule otherwise would be to
enable a failing bank to become solvent, at the expense of third parties, by simply getting the conservator to
unilaterally revoke all previous dealings which had one way or another come to be considered unfavorable to the
Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had dealt with the
Bank.

The Fifth Issue: Were There Reversible Errors of Fact?

72
 Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the
Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust
Corporation,[45] we held:

x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of
the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA
138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of
the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is
limited to reviewing and revising the errors of law imputed to it, its findings of the fact being conclusive [Chan vs.
Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court
has emphatically declared that it is not the function of the Supreme Court to analyze or weigh such evidence all
over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower
court (Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R.
No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G.R. No. L-47531, February 20, 1984,
127 SCRA 596). Barring, therefore, a showing that the findings complained of are totally devoid of support in the
record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand,
for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by
the parties [Santa Ana, Jr. vs. Hernandez, G.R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]

Likewise, in Bernardo vs. Court of Appeals,[46] we held:

The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of
evidence and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme
Court to analyze or weigh such evidence all over again. The Supreme Courts jurisdiction is limited to reviewing
errors of law that may have been committed by the lower court. The Supreme Court is not a trier of facts. x x x

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp.:[47]

The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are final
and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of
facts found by the lower courts is allowed are when the conclusion is a finding grounded entirely on speculation,
surmises or conjectures; when the inference made is manifestly absurd, mistaken or impossible; when there is grave
abuse of discretion in the appreciation of facts; when the judgment is premised on a misapprehension of facts; when
the findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-
evaluation of the findings of fact made by the courts below.

In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company, Inc.
vs. Hon. Court of Appeals, et al.[48] is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of this
Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties,
particularly where, such as here, the findings of both the trial court and the appellate court on the matter coincide.
(italics supplied)

Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions which
were not only contrary to the evidence on record but have no bases at all, specifically the findings that (1) the Banks
counter-offer price of P5.5 million had been determined by the past due committee and approved by conservator
Romey, after Rivera presented the same for discussion and (2) the meeting with Co was not to scale down the price
and start negotiations anew, but a meeting on the already determined price of P5.5 million. Hence, citing Philippine
National Bank vs. Court of Appeals,[49] petitioners are asking us to review and reverse such factual findings.

73
 The first point was clearly passed upon by the Court of Appeals, [50] thus:

There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by letter
that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer price had
been determined by the Past Due Committee and approved by the Conservator after Rivera had duly presented
plaintiffs offer for discussion by the Committee x x x. Tersely put, under the established fact, the price of P5.5
Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at which the bank was
selling the property. (p. 11, CA Decision)

xxx xxx xxx

xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September 28,
1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was the
possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been passed
upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).

The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as not
credible and at best equivocal, and considering the gratuitous and self-serving character of these declarations, the
banks submissions on this point do not inspire belief.
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to
testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules on
evidence,[51] such suppression gives rise to the presumption that his testimony would have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed insufficient
by both the trial court and the respondent Court, and instead, it was respondents submissions that were believed and
became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are
valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they are
espousing. This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court
of Appeals.[52] We have studied both the records and the CA Decision and we find no such exceptions in this case.
On the contrary, the findings of the said Court are supported by a preponderance of competent and credible
evidence. The inferences and conclusions are reasonably based on evidence duly identified in the Decision. Indeed,
the appellate court patiently traversed and dissected the issues presented before it, lending credibility and
dependability to its findings. The best that can be said in favor of petitioners on this point is that the factual findings
of respondent Court did not correspond to petitioners claims, but were closer to the evidence as presented in the trial
court by private respondent. But this alone is no reason to reverse or ignore such factual findings, particularly where,
as in this case, the trial court and the appellate court were in common agreement thereon. Indeed, conclusions of fact
of a trial judge - as affirmed by the Court of Appeals - are conclusive upon this Court, absent any serious abuse or
evident lack of basis or capriciousness of any kind, because the trial court is in a better position to observe the
demeanor of the witnesses and their courtroom manner as well as to examine the real evidence presented.

Epilogue

In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the first
time on appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators powers to repudiate
contracts entered into by the Banks officers] - which per se could justify the dismissal of the present case. We did
not limit ourselves thereto, but delved as well into the substantive issues - the perfection of the contract of sale and
its enforceability, which required the determination of questions of fact. While the Supreme Court is not a trier of
facts and as a rule we are not required to look into the factual bases of respondent Courts decisions and resolutions,
we did so just the same, if only to find out whether there is reason to disturb any of its factual findings, for we are

74
only too aware of the depth, magnitude and vigor by which the parties, through their respective eloquent counsel,
argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a
government-appointed conservator and there is need to rehabilitate the Bank in order to get it back on its feet x x x
as many people depend on (it) for investments, deposits and well as employment. As of June 1987, the Banks
overdraft with the Central Bank had already reached P1.023 billion x x x and there were (other) offers to buy the
subject properties for a substantial amount of money.[53]
While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally
close its eyes to overriding considerations of substantive and procedural law, like respect for perfected contracts,
non-impairment of obligations and sanctions against forum-shopping, which must be upheld under the rule of law
and blind justice.
This Court cannot just gloss over private respondents submission that, while the subject properties may
currently command a much higher price, it is equally true that at the time of the transaction in 1987, the price agreed
upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure sale for no
more than P 3.5 million.[54] That the Bank procrastinated and refused to honor its commitment to sell cannot now be
used by it to promote its own advantage, to enable it to escape its binding obligation and to reap the benefits of the
increase in land values. To rule in favor of the Bank simply because the property in question has algebraically
accelerated in price during the long period of litigation is to reward lawlessness and delays in the fulfillment of
binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby
DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for
engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more
severely. Costs against petitioners.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

[1]
Eleventh Division, J. Emeterio C. Cui, Chairman and ponente, and JJ. Quirino D. Abad Santos, Jr. and
Buenaventura J. Guerrero, members.
[2]
Regional Trial Court, National Capital Region, Branch 59, Makati City, Hon. Lucia Violago-Isnani, presiding
judge.
[3]
Rollo, pp. 101-107.
[4]
Memorandum for Petitioners, p. 30; RoIlo, p. 997.
[5]
Memorandum for Respondent, p. 18; Rollo, p. 1074.
[6]
Rollo, p. 43.
[7]
Rollo, pp. 995-996.
[8]
Rollo, pp. 1094-1095.
[9]
Rollo, p. 96.
[10]
Memorandum for Respondent, pp. 21-22; Rollo, pp. 1077-1078.
[11]
Memorandum for Petitioners, pp. 31-36; Rollo, pp. 998-1003.
[12]
Cf. Salonga, Private International Law, 1995 ed., p. 56 et seq.
[13]
Fifth edition, 1979, p. 590.

75
[14]
Permanent edition, Vol. 17, p. 646.
[15]
Annotation on Forum Shopping, by David G. Nitafan, 179 SCRA 157-162.
[16]
See Annotation referred to in footnote No. 15, supra, for a summary of these cases.
[17]
155 SCRA 566, at pp. 568 and 575 (November 12, 1987).
[18]
Villanueva vs. Adre, 178 SCRA 876, at p. 882 (April 27, 1989). Also cited in Crisostomo vs. Securities and
Exchange Commission, 179 SCRA 146 (November 6, 1989), and Earth Minerals Exploration, Inc. vs. Macaraig, Jr.,
194 SCRA 1 (February 11, 1991).
[19]
145 SCRA 34 (October 13, 1986).
[20]
In Buan vs. Lopez, supra, the Court expressly ruled: That same identity puts into operation the sanction of twin
dismissals just mentioned.
[21]
Rollo,pp. 534-541.
[22]
175 SCRA 701 (July 28, 1989). In this case, petitioner filed with the Supreme Court a petition for certiorari
questioning a letter-directive of the Commission on Audit ordering the re-bidding of a vessel, the T/T Andres
Bonifacio, being sold by the Philippine National Oil Company (PNOC). Simultaneously, a separate complaint for
injunction and damages was filed by the same petitioner before the Makati RTC to enjoin PNOC from conducting
such a re-bidding.
[23]
Palm Avenue Realty Development Corporation, et al. vs. PCGG, et al., 153 SCRA 579 (August31, 1987); at pp.
591-592.
[24]
See Footnote 21, supra.
[25]
Villa-Rey Transit, Inc. vs. Ferrer, 25 SCRA 845, (October 29, 1968), at pp. 857-858.
[26]
This Court has pierced the veil of corporate fiction in numerous cases where it was used, among others, to avoid
a judgment credit (Sibagat Timber Corp. vs. Garcia, 216 SCRA 470 [December 11, 1992]; Tan Boon Bee & Co.,
Inc. vs. Jarencio, 163 SCRA 205 [June 30, 1988]); to avoid inclusion of corporate assets as part of the estate of a
decedent (Cease vs. CA, 93 SCRA 483 [October 18, 1979]); to avoid liability arising from debt (Arcilla vs. CA, 215
SCRA 120 [October 23, 1992]; Philippine Bank of Communications vs. CA, 195 SCRA 567 [March 22, 1991]); or
when made use of as a shield to perpetrate fraud and/or confuse legitimate issues (Jacinto vs. CA, 198 SCRA 211
[June 6, 1991]); or to promote unfair objectives or otherwise to shield them ( Villanueva vs. Adre, 172 SCRA 876
[April 27, 1989]).
[27]
217 SCRA 517 (Jan. 25, 1993).
[28]
See footnote 15 for further discussion on forum shopping.
[29]
Rollo,pp. 108-111.
[30]
Memorandum for Petitioners, p. 42; Rollo, p. 1009.
[31]
223 SCRA 350 (June 14, 1993).
[32]
G.R. No. 118509 (December 1, 1995).
[33]
2 Fletcher 351.
[34]
Petition, p. 56 et seq.; Rollo, p. 64 et seq. Memorandum, p. 54 et seq.; Rollo, p. 1021 et seq.
[35]
IV E. Paras, Civil Code of the Philippines (1971 ed.), pp. 462-463.
[36]
Art. 1319 of Civil Code reads as follows:
Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance
constitutes a counter-offer.

76
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The
contract, in such a case, is presumed to have been entered into in the place where the offer was made.
[37]
41 Phil. 670 (March 30, 1916); see also Batagan vs. Cojuangco, 78 Phil. 481.
[38]
Memorandum, p. 64; Rollo, p. 1031.
[39]
CA Decision, p. 15; Rollo, p. 114.
[40]
Berin vs. Court ofAppeals, 194 SCRA 508, 512 (February 27, 1991).
[41]
The Reparations Commission vs. The Visayan Packing Corporation, 193 SCRA 531, 539-540 (February 6,
1991).
[42]
At p.75; Rollo, p. 83.
[43]
Dihiansan vs. CA, 153 SCRA 713 (September 14, 1987); Anchuelo vs. IAC, 147 SCRA 434 (January29, 1987);
Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 (January 28, 1988); Ramos vs. IAC, 175 SCRA 70 (July
5, 1989), Gevero vs. IAC, 89 SCRA 201 (August 30, 1990); The Reparations Commission vs. The Visayan Packing
Corporation, 193 SCRA 531, 540 (February 6, 1991).
[44]
Section 10 of Art. III of the Constitution reads as follows:
Sec. 10. No law impairing the obligation of contracts shall be passed.
[45]
177 SCRA 618,624 (September 15, 1989).
[46]
216 SCRA 224,232 (December 7, 1992).
[47]
G.R.No. 112130 (March 31, 1995).
[48]
G.R.No. 102253 (June 2, 1995).
[49]
187 SCRA 735, 739 (July 24, 1990).
[50]
CA Decision, pp. 11 and 15.
[51]
Sec. 3(e), Rule 131, Rules of Court.
[52]
Vide Regalado, Remedial Law Compendium, 1988 ed., Vol. I, pp. 352-353. See also Chua Tiong Tay vs. Court
of Appeals, et al., supra.
[53]
Memorandum for Petitioners, p.76; Rollo, p. 1043
[54]
In his Memorandum, private respondent alleged (and petitioners have not denied) that (a) the property was sold
at foreclosure for only P3,033,264.00 and (b) in a suit for deficiency judgment against the propertys former owner
and mortgage debtor, the petitioner Bank maintained that the value of the property was only P3 million.

epublic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-44330 January 29, 1988

JULITA T. VDA. DE SEVERO, ANTONIETE SEVERO, BERNADIT SEVERO, RICARDO SEVERO, JR.
and MARISOL SEVERO, petitioners,
vs.
LUNINGNING FELICIANO GO AND JOAQUIN GO, and THE HONORABLE COURT OF FIRST
INSTANCE OF SAMAR, BRANCH V, respondents.

77
BIDIN, J.:

This case treated as a special civil action for certiorari was originally filed as a petition for review by way of
appeal on certiorari seeking to set aside the order of the then Court of First Instance of Samar, Branch V, in
Calbayog City dated April 6, 1976 dismissing Civil Case No. 522-CC entitled "Julita T. Vda, de Severo, et al.,
versus Luningning Feliciano Go, et al.' for lack of jurisdiction.

The antecedents of the case are as follows:

The late Ricardo Severo was an employee of herein private respondents Luningning Feliciano Go and
Joaquin Go, first as baker of 'Joni's Cakes and Pastries," an enterprise owned by respondents located at 1634
P. Guevarra Street, Santa Cruz, Manila and finally, as driver-mechanic from 1961 up to February 16, 1972.
On the latter date, unidentified armed men forcibly took away and/or carnapped the car owned by
respondents and driven by Ricardo Severo who, in his efforts to resist the carnappers, was shot and killed by
the latter. Up to now, the parties responsible for Severo's death have not been Identified nor apprehended.

On September 18, 1974, herein petitioners, the widow and minor children of Ricardo Severo, filed an action
against respondents-employers before the trial court for "Death Compensation and Damages" in the total
amount of P74,500.00 the complaint inter alia alleging:

IV

That sometime on February 16, 1972 whi le the said Ricardo Severo was in the actual
discharge of his duties as an employee of defendants that is, he was driving the car of
defendants, carnappers forcefully took away and/or carnapped the said car of defendants
and in his attempts to resist and prevent the subject car from being taken away, the said
carnappers shot and killed the said Ricardo Severo, thus his death arose out of and in the
course of his employment with defendants;

That plaintiffs herein depend solely and rely completely upon the late Ricardo Severo for
their financial needs and means of living, and at the time of his death the said Ricardo
Severo was receiving monthly compensation by defendants herein at the rate of P250.00;

VI

That for the loss of the life of said Ricardo Severo, plaintiffs herein are entitled to
indemnification or death compensation from defendants in the least amount of P50,000.00
considering the fact that at the time of his death the said Ricardo Severo was only 33 years
and could have lived for many years as he was in a very good physical condition;

VII

That because of the sudden and violent death which Ricardo Severo met in the faithful
service to his employers the defendants herein, the plaintiffs herein suffered moral damages
in the form of deep grief, lonesomeness, mental anguish and shock which sufferings although
not capable of pecuniary estimation may be conservatively fixed at P20,000.00;

VIII

78
 That defendants manifested bad faith when they willfully failed to comply with their promise
that they would properly compensate plaintiffs herein for the death of Ricardo Severo and
that they would help plaintiffs prosecute the carnappers-killers of said Ricardo Severo,
thereby plaintiffs were compelled to institute this suit whereby they incur litigation expenses
of at least P500.00 and to contract the services of their counsel on a contingent basis of
P2,000.00.

On November 18, 1974, private respondents filed a motion to dismiss the complaint on the ground that
respondent Court has no jurisdiction over the nature of the action but the same was denied by respondent
Court in its order dated January 9, 1975. Respondents' motion for reconsideration was likewise denied by the
trial court. On May 3, 1975, private respondents filed their answer traversing the material allegations of the
complaint and raised as special affirmative defenses that the lower court has no jurisdiction over the claim of
the petitioner and that the complaint failed to state a sufficient cause of action.

During the pre-trial on January 16, 1976, private respondents again filed a motion to dismiss reiterating their
allegation that the lower court has no jurisdiction over the claim of petitioner and that the complaint failed to
state a cause of action. Petitioners filed a reply (opposition) dated February 5, 1976 contending that their
claim is not for compensation under the Workmen's Compensation Act but for damages under Article 1711
and Article 21 of the Civil Code, hence, cognizable by the regular courts.

The respondent court, acting on the latest motion to dismiss, issued an order dated April 6, 1976 stating that
petitioners' cause of action falls within the purview of the Workmen's Compensation Act and the proper
forum was the Workmen's Compensation Commission. It declared itself without jurisdiction following Our
ruling in the case of Robles vs. Yap Wing, L-20442, October 4, 1971, 41 SCRA 267, to wit:

The Court after a careful consideration of the grounds in the defendants' motion, and
considering the allegation of the complaint describing their main cause of action, which is a
claim for death compensation and damages, is of the opinion and so holds that this Court has
no jurisdiction to hear and decide the case. The plaintiffs' right to relief being derived on an
accident resulting in death of Ricardo Severo, an employee of the defendants, while engaged
in the performance of the task assigned to him, this Court is devoid of statutory competence
to pass upon the subject matter of the plaintiffs' claim, as of the time the cause of action
accrue, falls within the purview of the Workmen's Compensation Act as amended and,
therefore, the proper form (sic) was the Workmen's Compensation Commission, thru its
regional offices under the Department of Labor, a body empowered to act upon all claims
for compensation for death, injury or sickness. Thus our Supreme Court in the case of
Ciriaco Robles vs. Yap Wing, No. L-20442, Oct. 4, 1971 ruled:

Before the enactment of Republic Act No. 722(Amending Act. No. 3228), which took effect
on June 20, 1952, claims for compensation under the Workmen's Compensation Act were
cognizable by the regular courts, but since then, as provided in Section 46 thereof as
amended, 'the Workmen's Compensation shall have jurisdiction to hear and decide claims
for compensation under the Workmen's Compensation Act, subject to appeal to the
Supreme Court. ... In relation to this, Section 5 of the Act provides that the rights and
remedies granted by this Act to an employee by reason of a personal injury entitling him to
compensation shall exclude all other rights and remedies accruing to an employee, his
personal representatives, dependents or nearest of kin against the employer under the Civil
Code or other laws, because of said injury.

The petition is impressed with merit. The ruling in the case of Robles vs. Yap Wing, supra, that the action of
the injured employee or that of his heirs in case of his death is restricted to seeking the limited compensation
provided under the Workmen's Compensation Act relied upon by the trial court, no longer controls. We have
abandoned the same in the recent case of Ysmael Maritime Corporation vs. Hon. Celso Avelino, G.R. No. L-
43674, promulgated on June 30, 1987, citing the case of Floresca vs. Philex Mining Company, L-30642, April
30, 1985, 136 SCRA 141. We stated thus.

79
 In the recent case of Floresca vs. Philex Mining Company, L-30642, April 30, 1985, 136
SCRA 141, involving a complaint for damages for the death of five miners in a cave-in on
June 28, 1967, this Court was confronted with three divergent opinions on the exclusivity
rule as presented by several amici curiae. One view is that the injured employee or his heirs,
in case of death, may initiate an action to recover damages (not compensation under the
Workmen's Compensation Act) with the regular courts on the basis of negligence of the
employer pursuant to the Civil Code. Another view, as enunciated in the Robles case, is that
the remedy of an employee for work connected injury or accident is exclusive in accordance
with Section 5 of the WCA. A third view is that the action is selective and the employee of his
heirs have a choice of availing themselves of the benefits under the WCA or of suing in the
regular courts under the Civil Code for higher damages from the employer by reason of his
negligence. But once the election has been exercised, the employee or his heirs are no longer
free to opt for the other remedy. In other words, the employee cannot pursue both actions
simultaneously. This latter view was adopted by the majority in the Floresca case, reiterating
as main authority its earlier decision in Pacana vs. Cebu Autobus Company, L-25382, April
30, 1982, 32 SCRA 442. In so doing, the Court rejected the doctrine of exclusivity of the
rights and remedies granted by the WCA as laid down in the Robles case. Three justices
dissented.

As clarified by Mr. Chief Justice Claudio Teehankee in his concurring opinion in Ysmael, "the employee or
his heirs have the choice of cause of action and corresponding relief, i.e., either an ordinary action for
damages before the regular courts or a special claim for limited compensation under the Workmen's
Compensation Act before the Workmen's Compensation Commission ... However, tills right of choice is
qualified in that the employee should be held to the particular remedy in which he has staked his fortunes
and must pursue even his alternative claim for compensation exclusively in the same regular courts once he
has opted to seek his remedy there rather than in the Workmen's Compensation Commission." This is what
the petitioners did in filing their complaint for "Death Compensation and Damages" before respondent
Court. Petitioners have opted to seek their remedy before the regular court. Their demand for compensation
is predicated on the employer's liability for the death of their employee (Ricardo Severo) imposed by Article
1711 of the Civil Code which reads:

Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for
the death of or injuries to their laborers, workmen, mechanics or other employees even
though the event may have been purely accidental or entirely due to fortuitous cause if the
death or personal injury arose out of and in the course of employment ...

Petitioner's claim for compensation based on the Civil Code pertain to the jurisdiction of the regular courts
(Pacana vs. Cebu Autobus Co., 32 SCRA 442).

WHEREFORE, the petition is Granted and the order dated April 6, 1976 of respondent Court dismissing
petitioner's complaint is hereby Set Aside and the case Remanded to the trial court for further proceedings.
No pronouncement as to costs.

SO ORDERED.

Yap, Fernan Narvasa, Cruz, Paras, Feliciano, Gancayco, Padilla, Sarmiento and Cortes, JJ., concur.

Separate Opinions

80
TEEHANKEE, C.J., concurring:

The judgment at bar adheres to the Court's prevailing doctrine categorically enunciated in Ysmael Maritime
Corporation vs. Hon. Celso Avelino, G.R. No. L-43674, June 30, 1987, based on Floresca vs. Philex Mining
Co., 136 SCRA 141 (1985), that the action of the injured employee or that of his heirs, in case of his death, is
not restricted to seeking the limited compensation provided under the Workmen's Compensation Act, such
that they cannot seek higher damages from the employer by virtue of negligence or fault of the latter or of his
other employees, but, the employee or his heirs have the choice of cause of action and corresponding relief, i.e.
either an ordinary action for damages before the regular courts or a special claim for limited compensation
under the Workmen's Compensation Act, in consonance with the Court's jurisprudence which has long
sustained this right of choice of action. 1

Thus, Mr. Justice J.B.L. Reyes, speaking for the Court in Esguerra vs. Munoz-Palma, 104 Phil. 582(1958),
pointed out that the injured worker has the choice of remedies but cannot pursue both courses of action
simultaneously and balance the relative advantage of recourse under the Workmen's Compensation Act as
against an ordinary action, in this wise: ... the injured laborer was initially free to choose either to recover
from the employer the fixed amounts set by the Compensation Law or else, to prosecute an ordinary civil
action against the tort-feasor for higher damages. While perhaps not as profitable, the smaller indemnity
obtainable by the first course is balanced by the claimants' being relieved of the burden of proving the causal
connection between the defendant's negligence and the resulting injury, and of having to establish the extent
of the damage suffered; issues that are apt to be troublesome to establish satisfactorily."

The rationale for upholding the employee's or his heirs' choice of forum and cause of action and
corresponding relief was set forth in my separate opinion in Robles: "Such tight to recover higher damages
from a third party would generally arise from a tort committed against the employee, based on fault or
negligence. In the interest of avoiding multiplicity of suits, the employee may file such action for damages
jointly against the third party and his employer; or as in the case at bar, where the employer rather than his
other employees was directly charged of negligence, the employee may choose to file such damage suit only
against the employer. I believe that to hold that the employee's right of recovery, as far as his employer is
concerned, is limited to the fixed amounts of the Workmen's Compensation Act and that he has no right to
seek greater actual, moral and exemplary damages in appropriate cases from his employer just like any
other person or like his employer, for that matter would be in violation of the employee's constitutional
right to due process and equal protection of the laws." 2

Of course, as the cited jurisprudence clearly indicate, once the choice of forum and remedy has been made,
the claimants are bound thereby and may no longer pursue the alternative course, in consonance with the
established principles that enjoin multiplicity of suits and splitting a cause of action.

GUTIERREZ, JR., J., dissenting opinion:

I am reiterating my dissent in Floresca v. Philex Mining Corporation (136 SCRA 178) where I pointed out that
to allow victims of industrial accidents to file damage suits based on torts would be a radical innovation
contrary to the express provisions of the Workmen's Compensation Act and an unfortunate and unwise
departure from the principles evolved in the long history of workmen's compensation.

Quite recently the Court has revisited and modified earlier decisions which I contended at the time were
wrong because they allowed payment of compensation for contingencies never envisioned to be compensable
when the law was formulated. Perhaps, the time will also come when the Court shall return to earlier rulings
and undo the harm which was foisted on the principle of workmen's compensation when Floresca v. Philex
Mining Corporation was promulgated.

MELENCIO-HERRERA, J, dissenting:

81
In the Floresca and Ysmael cases considering the clear exclusory provision of Section 5 of the Workmen's
Compensation Act.

Separate Opinions

TEEHANKEE, C.J., concurring:

The judgment at bar adheres to the Court's prevailing doctrine categorically enunciated in Ysmael Maritime
Corporation vs. Hon. Celso Avelino, G.R. No. L-43674, June 30, 1987, based on Floresca vs. Philex Mining
Co., 136 SCRA 141 (1985), that the action of the injured employee or that of his heirs, in case of his death, is
not restricted to seeking the limited compensation provided under the Workmen's Compensation Act, such
that they cannot seek higher damages from the employer by virtue of negligence or fault of the latter or of his
other employees, but, the employee or his heirs have the choice of cause of action and corresponding relief, i.e.
either an ordinary action for damages before the regular courts or a special claim for limited compensation
under the Workmen's Compensation Act, in consonance with the Court's jurisprudence which has long
sustained this right of choice of action. 1

Thus, Mr. Justice J.B.L. Reyes, speaking for the Court in Esguerra vs. Munoz-Palma, 104 Phil. 582(1958),
pointed out that the injured worker has the choice of remedies but cannot pursue both courses of action
simultaneously and balance the relative advantage of recourse under the Workmen's Compensation Act as
against an ordinary action, in this wise: ... the injured laborer was initially free to choose either to recover
from the employer the fixed amounts set by the Compensation Law or else, to prosecute an ordinary civil
action against the tort-feasor for higher damages. While perhaps not as profitable, the smaller indemnity
obtainable by the first course is balanced by the claimants' being relieved of the burden of proving the causal
connection between the defendant's negligence and the resulting injury, and of having to establish the extent
of the damage suffered; issues that are apt to be troublesome to establish satisfactorily."

The rationale for upholding the employee's or his heirs' choice of forum and cause of action and
corresponding relief was set forth in my separate opinion in Robles: 'Such tight to recover higher damages
from a third party would generally arise from a tort committed against the employee, based on fault or
negligence. In the interest of avoiding multiplicity of suits, the employee may file such action for damages
jointly against the third party and his employer; or as in the case at bar, where the employer rather than his
other employees was directly charged of negligence, the employee may choose to file such damage suit only
against the employer. I believe that to hold that the employee's right of recovery, as far as his employer is
concerned, is limited to the fixed amounts of the Workmen's Compensation Act and that he has no right to
seek greater actual, moral and exemplary damages in appropriate cases from his employer just like any other
person or like his employer, for that matter would be in violation of the employee's constitutional right to due
process and equal protection of the laws. 2 Of course, as the cited jurisprudence clearly indicate, once the
choice of forum and remedy has been made, the claimants are bound thereby and may no longer pursue the
alternative course, in consonance with the established principles that enjoin multiplicity of suits and splitting
a cause of action.

GUTIERREZ, JR., J., dissenting opinion:

I am reiterating my dissent in Floresca v. Philex Mining Corporation (136 SCRA 178) where I pointed out
that to allow victims of industrial accidents to file damage suits based on torts would be a radical innovation
contrary to the express provisions of the Workmen's Compensation Act and an unfortunate and unwise
departure from the principles evolved in the long history of workmen's compensation.

Quite recently the Court has revisited and modified earlier decisions which I contended at the time were
wrong because they allowed payment of compensation for contingencies never envisioned to be compensable
when the law was formulated. Perhaps, the time will also come when the Court shall return to earlier rulings

82
and undo the harm which was foisted on the principle of workmen's compensation when Floresca U. Philex
Mining Corporation was promulgated.

MELENCIO-HERRERA, J, dissenting:

In the Floresca and Ysmael cases considering the clear exclusory provision of Section 5 of the Workmen's
Compensation Act.

Footnotes

1 See cases cited in writer's separate opinion in Robles vs. Yap Wing, 41 SCRA 267, 276-285
(1971); Pacana vs. Cebu Autobus Co., 32 SCRA 442 (1970).

2 his question is extensively discussed in Floresca

SECOND DIVISION

[G.R. No. 111127. July 26, 1996]

MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS,
THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO,
JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA,
ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN
GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO,
ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA, ROSARIO
MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA
REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA
NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA
MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.

DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals[1] in CA-GR No. 28245, dated
September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch
58, ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its
resolution which denied petitioners motion for reconsideration for lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school children which they operated in Manila. The couple had a
driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job was to take school
children to and from the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged
with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and
back in consideration of which private respondent paid petitioners the amount of P3,000.00.

83
 The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the afternoon. However, as several
members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA
until 8:00 oclock in the evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was
under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was
forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil
came upon a sharp curve on the highway, running on a south to east direction, which he described as siete. The road
was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to
skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of
one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of
impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and
pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her
from this position. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar
with the area and he could not have seen the curve despite the care he took in driving the bus, because it was dark
and there was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of
it. He allegedly slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding
they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen
Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latters fence. On the basis
of Escanos affidavit of desistance the case against petitioners Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a
result of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist
down. During the trial she described the operations she underwent and adduced evidence regarding the cost of her
treatment and therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Ba-ay,
Lingayen. As this hospital was not adequately equipped, she was transferred to the Sto. Nio Hospital, also in the
town of Ba-ay, where she was given sedatives. An x-ray was taken and the damage to her spine was determined to
be too severe to be treated there. She was therefore brought to Manila, first to the Philippine General Hospital and
later to the Makati Medical Center where she underwent an operation to correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and that
the driver was properly screened and tested before being admitted for employment. Indeed, all the evidence
presented have shown the negligent act of the defendants which ultimately resulted to the accident subject of this
case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only
ones who adduced evidence in support of their claim for damages, the Court is therefore not in a position to award
damages to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio
Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said
defendants are ordered to pay jointly and severally to the plaintiffs the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;

84
 4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it
with respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of
Appeals modified the award of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise due care and
precaution in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals
held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following
issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT
EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is
insisted that, on the assumption that petitioners are liable, an award of P600,000.00 is unconscionable and highly
speculative. Amyline Antonio testified that she was a casual employee of a company called Suaco, earning
P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00 monthly. Petitioners contend
that as casual employees do not have security of tenure, the award of P600,000.00, considering Amyline Antonios
earnings, is without factual basis as there is no assurance that she would be regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners
are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa
aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and
carrier is contractual both in origin and nature, nevertheless the act that breaks the contract may be also a tort. [2] In
either case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to
exercise the diligence of a good father of the family in the selection and supervision of their employee is fully
supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining,
and, as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that
there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per
hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. [3] By then it was too late for him
to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabils first one
outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony[4] that the vehicles

85
passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour,
Cabil was running at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he drove
his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and
that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered
by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his
employers, the Fabres, were themselves negligent in the selection and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional
drivers license. The employer should also examine the applicant for his qualifications, experience and record of
service.[5] Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the
guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of
consistent compliance with the rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the
fact that Cabil had been driving for school children only, from their homes to the St. Scholasticas College in Metro
Manila.[7] They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such as
whether he could remember the names of the children he would be taking to school, which were irrelevant to his
qualification to drive on a long distance travel, especially considering that the trip to La Union was his first.The
existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of
negligence on the part of an employer.[8]
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregations delayed meeting) could have averted the mishap and (2) under the contract, the WWCF was directly
responsible for the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been
fixed. Even if it had been, the delay did not bear directly on the cause of the accident. With respect to the second
contention, it was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be
conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of negligence of
the latter or prevented from recovering for injuries suffered from a collision between the automobile and a train,
caused by the negligence either of the locomotive engineer or the automobile driver. [9]

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be
engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to
them. As this Court has held:[10]

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the
public.

The above article makes no distinction between one whose principal business activity is the carrying of persons
or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article
1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier offering its services to the general public, i.e., the general
community or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making such distinctions.
As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation of the
passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good
father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides:

86
 Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of
the formers employees, although such employees may have acted beyond the scope of their authority or in violation
of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good
father of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify finding them guilty of breach of
contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of
Appeals erred in increasing the amount of compensatory damages because private respondents did not question this
award as inadequate.[11] To the contrary, the award of P500,000.00 for compensatory damages which the Regional
Trial Court made is reasonable considering the contingent nature of her income as a casual employee of a company
and as distributor of beauty products and the fact that the possibility that she might be able to work again has not
been foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her
again.
With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not
sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence in
the records of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art.
2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are
liable for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art.
2220, since Cabils gross negligence amounted to bad faith. [12] Amyline Antonios testimony, as well as the
testimonies of her father and co-passengers, fully establish the physical suffering and mental anguish she endured as
a result of the injuries caused by petitioners negligence.
The award of exemplary damages and attorneys fees was also properly made. However, for the same reason
that it was error for the appellate court to increase the award of compensatory damages, we hold that it was also
error for it to increase the award of moral damages and reduce the award of attorneys fees, inasmuch as private
respondents, in whose favor the awards were made, have not appealed.[13]
As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on
that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners and
driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may
be. In Dangwa Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to those in this case, this Court held the bus
company and the driver jointly and severally liable for damages for injuries suffered by a passenger.Again,
in Bachelor Express, Inc. v. Court of Appeals[15] a driver found negligent in failing to stop the bus in order to let off
passengers when a fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus
and suffered injuries, was held also jointly and severally liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the bus on which
plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus
causing an accident. In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,[18] the bus company, its driver, the operator of
the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the
latters heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals,[19] thus:

Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of
respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the
bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles
are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the
circumstances they are liable on quasi-delict.[20]

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals [21] this Court exonerated the jeepney
driver from liability to the injured passengers and their families while holding the owners of the jeepney jointly and

87
severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa
contractual. As this Court there explained:

The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and Carreon [the
jeepney owners] were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally
liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with the carrier in case of
breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is
between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible
therefore to the passenger, even if such breach be due to the negligence of his driver (see Viluan v. The Court of
Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . . . [22]

As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their claim
against the carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all,
it was permitted for them to allege alternative causes of action and join as many parties as may be liable on such
causes of action[23] so long as private respondent and her co-plaintiffs do not recover twice for the same injury. What
is clear from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus
justifying the holding that the carrier and the driver were jointly and severally liable because their separate and
distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to the award
of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the
following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

**
The name of petitioner Engracio Fabre, Jr.s wife cannot be ascertained from the record. Hence she is unnamed.*
[1]
Per Justice Jainal D. Rasul and concurred in by Justices Emeterio C. Cui and Segundino G. Chua.
[2]
Air France v. Carrascoso, 18 SCRA 155, 168 (1966). Accord, Singson v. Bank of the Philippine Islands, 23
SCRA 1117, 1119 (1968).
[3]
Testimony of Porfirio Cabil, TSN, p. 14, Oct. 26, 1987.
[4]
Testimony of Pat. Chito Esmenda, TSN, pp. 37-38, Sept. 12, 1985.
[5]
Metro Manila Transit Corp. v. Court of Appeals, 223 SCRA 521 (1993); Campo v. Camarote, 100 Phil. 459
(1956).
[6]
Filamer Christian Institute v. Intermediate Appellate Court, 212 SCRA 637 (1992).
[7]
Testimony of Porfirio Cabil, TSN, p. 7, Oct. 26, 1987.
[8]
Supra note 5.
[9]
Yamada v. Manila Railroad Co., 33 Phil. 8, 14 (1915).

88
[10]
De Guzman v. Court of Appeals, 168 SCRA 612, 618 (1988); Bascos v. Court of Appeals, 221 SCRA 318
(1993).
[11]
Philippine Airlines v. Court of Appeals, 226 SCRA 423 (1993).
[12]
Gatchalian v. Delim, 203 SCRA 126 (1991); Prudenciado v. Alliance Transport System, Inc., 148 SCRA 440
(1987).
[13]
La Mallorca v. Court of Appeals, 175 SCRA 739 (1989).
[14]
202 SCRA 574 (1991).
[15]
188 SCRA 216 (1990).
[16]
17 SCRA 224 (1966).
[17]
167 SCRA 379 (1988).
[18]
223 SCRA 521 (1993).
[19]
16 SCRA 742 (1966).
[20]
Id., at 747.
[21]
189 SCRA 158 (1988).
[22]
Id., at 172-173.
[23]
La Mallorca v. Court of Appeals, 17 SCRA 739 (1966).
Rule 8, 2 provides: Alternative causes of action or defenses. A party may set forth two or more statements of a claim
or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of action or
defenses. When two or more statements are made in the alternative and one of them if made independently would be
sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements.
Rule 3, 6 provides: Permissive joinder of parties. - All persons in whom or against whom any right to relief in
respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly,
severally, or in the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as
defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such
defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or
defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no
interest.
EN BANC
[G.R. No. L-8194. July 11, 1956.]
EMERENCIANA M. VDA. DE MEDINA, ET AL., Plaintiffs-Appellees, vs. GUILLERMO CRESENCIA, ET
AL., Defendants. GUILLERMO CRESENCIA, Appellant.

DECISION
REYES, J.B.L., J.:
Appeal by Defendant Guillermo Cresencia from the judgment of the Court of First Instance of Manila in its civil
case No. 19890, sentencing Appellant, jointly and severally with his co-Defendant Brigido Avorque, to
pay Plaintiffs Emerencia M. Vda. de Medina and her minor children damages in the total amount of P56,000, P5,000
attorneys fees, and costs.
It appears that on May 31, 1953, passenger jeepney bearing plate No. TPU-2232 (Manila), driven by Brigido
Avorque, smashed into a Meralco post on Azcarraga Street, resulting in the death of Vicente Medina, one of its
passengers. A criminal case for homicide through reckless imprudence was filed against Avorque (criminal case No.
22775 of the Court of First Instance of Manila), to which he pleaded guilty on September 9, 1953. The heirs of the

89
deceased, however, reserved their right to file a separate action for damages, and on June 16, 1953, brought suit
against the driver Brigido Avorque and Appellant Guillermo Cresencia, the registered owner and operator of the
jeepney in question. Defendant Brigido Avorque did not file any answer; chan
roblesvirtualawlibrarywhile Defendant Cresencia answered, disclaiming liability on the ground that he had sold the
jeepney in question on October 14, 1950 to one Maria A. Cudiamat; chan roblesvirtualawlibrarythat the jeepney had
been repeatedly sold by one buyer after another, until the vehicle was purchased on January 29, 1953 by Rosario
Avorque, the absolute owner thereof at the time of the accident. In view of Cresencias answer, Plaintiffs filed leave,
and was allowed, to amend their complaint making Rosario Avorque a co-Defendant; chan
roblesvirtualawlibraryand the latter, by way of answer, admitted having purchased the aforesaid jeepney on May 31,
1953, but alleged in defense that she was never the public utility operator thereof. The case then proceeded to trial,
during which, after the Plaintiffs had presented their evidence, Defendants Guillermo Cresencia and Rosario
Avorque made manifestations admitting that the former was still the registered operator of the jeepney in question in
the records of the Motor Vehicles Office and the Public Service Commission, while the latter was the owner thereof
at the time of the accident; chan roblesvirtualawlibraryand submitted the case for the decision on the question of
who, as between the two, should be held liable to Plaintiffs for damages. The lower court, by Judge Jose Zulueta,
held that as far as the public is concerned, Defendant Cresencia, in the eyes of the law, continued to be the legal
owner of the jeepney in question; chan roblesvirtualawlibraryand rendered judgment against him, jointly and
severally with the driver Brigido Avorque, for P6,000 compensatory damages, P30,000 moral damages, P10,000
exemplary damages, P10,000 nominal damages, P5,000 attorneys fees, and costs, while Defendant Rosario Avorque
was absolved from liability. From this judgment, Defendant Cresencia appealed.
We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December 29, 1953), which the court below
cited, that the law (section 20 [g], C. A. No. 146 as amended) requires the approval of the Public Service
Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing
the certificate issued to the grantee; chan roblesvirtualawlibraryand that if property covered by the franchise is
transferred or leased without this requisite approval, the transfer is not binding against the public or the Service
Commission; chan roblesvirtualawlibraryand in contemplation of law, the grantee of record continues to be
responsible under the franchise in relation to the Commission and to the public. There we gave the reason for this
rule to be as follows:chanroblesvirtuallawlibrary
cralaw Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service
Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law
requires that, before the approval is granted, there should be a public hearing, with notice to all interested parties, in
order that the Commission may determine if there are good and reasonable grounds justifying the transfer or lease of
the property covered by the franchise, or if the sale or lease is detrimental to public interest cralaw .
The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April 30, 1955 and Roque vs.
Malibay Transit Inc., L- 8561, November 18, 1955.
As the sale of the jeepney here in question was admittedly without the approval of the Public Service
Commission, Appellant herein, Guillermo Cresencia, who is the registered owner and operator thereof, continued to
be liable to the Commission and the public for the consequences incident to its operation. Wherefore, the lower
court did not err in holding him, and not the buyer Rosario Avorque, responsible for the damages sustained
by Plaintiff by reason of the death of Vicente Medina resulting from the reckless negligence of the jeepneys driver,
Brigido Avorque.
Appellant also argues that the basis of Plaintiffs action being the employers subsidiary liability under the Revised
Penal Code for damages arising from his employees criminal acts, it is Defendant Rosario Avorque who should
answer subsidiarily for the damages sustained by Plaintiffs, since she admits that she, and not Appellant, is the
employer of the negligent driver Brigido Avorque. The argument is untenable, because Plaintiffs action for
damages is independent of the criminal case filed against Brigido Avorque, and based, not on the employers
subsidiary liability under the Revised Penal Code, but on a breach of the carriers contractual obligation to carry his
passengers safely to their destination (culpa contractual). And it is also for this reason that there is no need of first
proving the insolvency of the driver Brigido Avorque before damages can be recovered from the carrier, for in culpa
contractual, the liability of the carrier is not merely subsidiary or secondary, but direct and immediate (Articles
1755, 1756, and 1759, New Civil Code).
The propriety of the damages awarded has not been questioned, Nevertheless, it is patent upon the record that the
award of P10,000 by way of nominal damages is untenable as a matter of law, since nominal damages cannot co-

90
exist with compensatory damages. The purpose of nominal damages is to vindicate or recognize a right that has been
violated, in order to preclude further contest thereon; chan roblesvirtualawlibraryand not for the purpose of
indemnifying the Plaintiff for any loss suffered by him (Articles 2221, 2223, new Civil Code.) Since the court
below has already awarded compensatory and exemplary damages that are in themselves a judicial recognition
that Plaintiffs right was violated, the award of nominal damages is unnecessary and improper. Anyway, ten
thousand pesos cannot, in common sense, be deemed nominal.
With the modification that the award of P10,000 nominal damages be eliminated, the decision appealed from is
affirmed. Costs against Appellant. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and
Endencia, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 84458 November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and
GORGONIA VIANA, and PIONEER STEVEDORING CORPORATION, respondents.

Herenio E. Martinez for petitioner.

M.R. Villaluz Law Office for private respondent.

REGALADO, J.:

In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of respondent
Court of Appeals, dated July 29, 1988, the decretal portion of which reads:

WHEREFORE, the judgment appealed from as modified by the order of October 27, 1982, is
hereby affirmed with the modification that appellant Aboitiz Shipping is hereby ordered to pay
plaintiff-appellees the amount of P30,000.00 for the death of Anacleto Viana; actual damages of
P9,800.00; P150,000.00 for unearned income; P7,200.00 as support for deceased's parents;
P20,000.00 as moral damages; P10,000.00 as attorney's fees; and to pay the costs.

The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are as follows: .

The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia,
owned by defendant, at the port at San Jose, Occidental Mindoro, bound for Manila, having
purchased a ticket (No. 117392) in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel
arrived at Pier 4, North Harbor, Manila, and the passengers therein disembarked, a gangplank
having been provided connecting the side of the vessel to the pier. Instead of using said gangplank
Anacleto Viana disembarked on the third deck which was on the level with the pier. After said
vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the
cargoes loaded on said vessel pursuant to the Memorandum of Agreement dated July 26, 1975

91
 (Exh. '2') between the third party defendant Pioneer Stevedoring Corporation and defendant
Aboitiz Shipping Corporation.

The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa
was placed alongside the vessel and one (1) hour after the passengers of said vessel had
disembarked, it started operation by unloading the cargoes from said vessel. While the crane was
being operated, Anacleto Viana who had already disembarked from said vessel obviously
remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and
it was while he was pointing to the crew of the said vessel to the place where his cargoes were
loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was
thereafter brought to the hospital where he later expired three (3) days thereafter, on May 15,
1975, the cause of his death according to the Death Certificate (Exh. "C") being "hypostatic
pneumonia secondary to traumatic fracture of the pubic bone lacerating the urinary bladder" (See
also Exh. "B"). For his hospitalization, medical, burial and other miscellaneous expenses,
Anacleto's wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5").
Anacleto Viana who was only forty (40) years old when he met said fateful accident (Exh. 'E') was
in good health. His average annual income as a farmer or a farm supervisor was 400 cavans of
palay annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his death had
been recipient of twenty (20) cavans of palay as support or P120.00 monthly. Because of
Anacleto's death, plaintiffs suffered mental anguish and extreme worry or moral damages. For the
filing of the instant case, they had to hire a lawyer for an agreed fee of ten thousand (P10,000.00)
pesos. 2

Private respondents Vianas filed a complaint 3 for damages against petitioner corporation (Aboitiz, for brevity) for
breach of contract of carriage.

In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely
under the control of respondent Pioneer Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring
contractor of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. It is also averred that since
the crane operator was not an employee of Aboitiz, the latter cannot be held liable under the fellow-servant rule.

Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing liability thereto
for Anacleto Viana's death as having been allegedly caused by the negligence of the crane operator who was an
employee of Pioneer under its exclusive control and supervision.

Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of action against
Pioneer considering that Aboitiz is being sued by the Vianas for breach of contract of carriage to which Pioneer is
not a party; that Pioneer had observed the diligence of a good father of a family both in the selection and supervision
of its employees as well as in the prevention of damage or injury to anyone including the victim Anacleto Viana;
that Anacleto Viana's gross negligence was the direct and proximate cause of his death; and that the filing of the
third-party complaint was premature by reason of the pendency of the criminal case for homicide through reckless
imprudence filed against the crane operator, Alejo Figueroa.

In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas for damages
incurred, and Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas. The
dispositive portion of said decision provides:

WHEREFORE, judgment is hereby rendered in favor of the plantiffs:

(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum of P12,000.00 for
the death of Anacleto Viana P9,800.00 as actual damages; P533,200.00 value of the 10,664 cavans
of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; F 5,000.00, value of the 100
cavans of palay as support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio
and Gorgonia Viana computed at P50.00 per cavan; P7,200.00 as support for deceased's parents

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 computed at P120.00 a month for five years pursuant to Art. 2206, Par. 2, of the Civil Code;
P20,000.00 as moral damages, and costs; and

(2) ordering the third party defendant Pioneer Stevedoring Corporation to reimburse defendant and
third party plaintiff Aboitiz Shipping Corporation the said amounts that it is ordered to pay to
herein plaintiffs.

Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the trial court's
failure to declare that Anacleto Viana acted with gross negligence despite the overwhelming evidence presented in
support thereof. In addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the memorandum of
agreement the liability of Pioneer as contractor is automatic for any damages or losses whatsoever occasioned by
and arising from the operation of its arrastre and stevedoring service.

In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the Vianas and
Aboitiz to preponderantly establish a case of negligence against the crane operator which the court a quo ruled is
never presumed, aside from the fact that the memorandum of agreement supposedly refers only to Pioneer's liability
in case of loss or damage to goods handled by it but not in the case of personal injuries, and, finally that Aboitiz
cannot properly invoke the fellow-servant rule simply because its liability stems from a breach of contract of
carriage. The dispositive portion of said order reads:

WHEREFORE, judgment is hereby modified insofar as third party defendant Pioneer Stevedoring
Corporation is concerned rendered in favor of the plaintiffs-,:

(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the sum of P12,000.00
for the death of Anacleto Viana; P9,000.00 (sic) as actual damages; P533,200.00 value of the
10,664 cavans of palay computed at P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00
value of the 100 cavans of palay as support for five (5) years for deceased's parents, herein
plaintiffs Antonio and Gorgonia Viana,computed at P50.00 per cavan; P7,200.00 as support for
deceased's parents computed at P120.00 a month for five years pursuant to Art. 2206, Par. 2, of the
Civil Code; P20,000.00 as moral damages, and costs; and

(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic) any liability for the
death of Anacleto Viana the passenger of M/V Antonia owned by defendant third party plaintiff
Aboitiz Shipping Corporation it appearing that the negligence of its crane operator has not been
established therein.

Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to respondent Court of
Appeals which affirmed the findings of of the trial court except as to the amount of damages awarded to the Vianas.

Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:

(A) In holding that the doctrine laid down by this honorable Court in La Mallorca vs. Court of
Appeals, et al. (17 SCRA 739, July 27, 1966) is applicable to the case in the face of the
undisputable fact that the factual situation under the La Mallorca case is radically different from
the facts obtaining in this case;

(B) In holding petitioner liable for damages in the face of the finding of the court a quo and
confirmed by the Honorable respondent court of Appeals that the deceased, Anacleto Viana was
guilty of contributory negligence, which, We respectfully submit contributory negligence was the
proximate cause of his death; specifically the honorable respondent Court of Appeals failed to
apply Art. 1762 of the New Civil Code;

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 (C) In the alternative assuming the holding of the Honorable respondent Court of Appears that
petitioner may be legally condemned to pay damages to the private respondents we respectfully
submit that it committed a reversible error when it dismissed petitioner's third party complaint
against private respondent Pioneer Stevedoring Corporation instead of compelling the latter to
reimburse the petitioner for whatever damages it may be compelled to pay to the private
respondents Vianas. 9

At threshold, it is to be observed that both the trial court and respondent Court of Appeals found the victim Anacleto
Viana guilty of contributory negligence, but holding that it was the negligence of Aboitiz in prematurely turning
over the vessel to the arrastre operator for the unloading of cargoes which was the direct, immediate and proximate
cause of the victim's death.

I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana disembarked from
the vessel and that he was given more than ample opportunity to unload his cargoes prior to the operation of the
crane, his presence on the vessel was no longer reasonable e and he consequently ceased to be a passenger.
Corollarily, it insists that the doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to the case at
bar.

The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of
destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily
terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had
a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time
after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay
within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his
baggage and prepare for his departure. 12 The carrier-passenger relationship is not terminated merely by the fact that
the person transported has been carried to his destination if, for example, such person remains in the carrier's
premises to claim his baggage. 13

It was in accordance with this rationale that the doctrine in the aforesaid case of La Mallorca was enunciated, to wit:

It has been recognized as a rule that the relation of carrier and passenger does not cease at the
moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the
point of destination, but continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay
within this rule is to be determined from all the circumstances. Thus, a person who, after alighting
from a train, walks along the station platform is considered still a passenger. So also, where a
passenger has alighted at his destination and is proceeding by the usual way to leave the
company's premises, but before actually doing so is halted by the report that his brother, a fellow
passenger, has been shot, and he in good faith and without intent of engaging in the difficulty,
returns to relieve his brother, he is deemed reasonably and necessarily delayed and thus continues
to be a passenger entitled as such to the protection of the railroad company and its agents.

In the present case, the father returned to the bus to get one of his baggages which was not
unloaded when they alighted from the bus. Racquel, the child that she was, must have followed the
father. However, although the father was still on the running board of the bus waiting for the
conductor to hand him the bag or bayong, the bus started to run, so that even he (the father) had to
jump down from the moving vehicle. It was at this instance that the child, who must be near the
bus, was run over and killed. In the circumstances, it cannot be claimed that the carrier's agent had
exercised the 'utmost diligence' of a 'very cautious person' required by Article 1755 of the Civil
Code to be observed by a common carrier in the discharge of its obligation to transport safely its
passengers. ... The presence of said passengers near the bus was not unreasonable and they are,
therefore, to be considered still as passengers of the carrier, entitled to the protection under their
contract of carriage. 14

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It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the
passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to depend
on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the
customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking
into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no
appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an
interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the
existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We
believe there exists such a justifiable cause.

It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are
allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus.
With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of
accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a
ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage
whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily,
petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting
the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to
apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto
Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of
unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty
bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim
their baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked from the vessel.
Petitioner failed to prove this. What is clear to us is that at the time the victim was taking his cargoes, the vessel had
already docked an hour earlier. In consonance with common shipping procedure as to the minimum time of one (1)
hour allowed for the passengers to disembark, it may be presumed that the victim had just gotten off the vessel when
he went to retrieve his baggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioner's
premises was not without cause. The victim had to claim his baggage which was possible only one (1) hour after the
vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the unloading
operations shall start only after that time. Consequently, under the foregoing circumstances, the victim Anacleto
Viana is still deemed a passenger of said carrier at the time of his tragic death.

II. Under the law, common carriers are, from the nature of their business and for reasons of public policy, bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case. 15 More particularly, a common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances. 16 Thus, where a passenger dies or is injured, the common
carrier is presumed to have been at fault or to have acted negligently. 17 This gives rise to an action for breach of
contract of carriage where all that is required of plaintiff is to prove the existence of the contract of carriage and its
non-performance by the carrier, that is, the failure of the carrier to carry the passenger safely to his
destination, 18 which, in the instant case, necessarily includes its failure to safeguard its passenger with extraordinary
diligence while such relation subsists.

The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the
vessel was at fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut
the same. This is in consonance with the avowed policy of the State to afford full protection to the passengers of
common carriers which can be carried out only by imposing a stringent statutory obligation upon the latter.
Concomitantly, this Court has likewise adopted a rigid posture in the application of the law by exacting the highest
degree of care and diligence from common carriers, bearing utmost in mind the welfare of the passengers who often
become hapless victims of indifferent and profit-oriented carriers. We cannot in reason deny that petitioner failed to
rebut the presumption against it. Under the facts obtaining in the present case, it cannot be gainsaid that petitioner
had inadequately complied with the required degree of diligence to prevent the accident from happening.

95
As found by the Court of Appeals, the evidence does not show that there was a cordon of drums around the
perimeter of the crane, as claimed by petitioner. It also adverted to the fact that the alleged presence of visible
warning signs in the vicinity was disputable and not indubitably established. Thus, we are not inclined to accept
petitioner's explanation that the victim and other passengers were sufficiently warned that merely venturing into the
area in question was fraught with serious peril. Definitely, even assuming the existence of the supposed cordon of
drums loosely placed around the unloading area and the guard's admonitions against entry therein, these were at
most insufficient precautions which pale into insignificance if considered vis-a-vis the gravity of the danger to
which the deceased was exposed. There is no showing that petitioner was extraordinarily diligent in requiring or
seeing to it that said precautionary measures were strictly and actually enforced to subserve their purpose of
preventing entry into the forbidden area. By no stretch of liberal evaluation can such perfunctory acts approximate
the "utmost diligence of very cautious persons" to be exercised "as far as human care and foresight can provide"
which is required by law of common carriers with respect to their passengers.

While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary
diligence was the proximate and direct cause of, because it could definitely have prevented, the former's death.
Moreover, in paragraph 5.6 of its petition, at bar, 19 petitioner has expressly conceded the factual finding of
respondent Court of Appeals that petitioner did not present sufficient evidence in support of its submission that the
deceased Anacleto Viana was guilty of gross negligence. Petitioner cannot now be heard to claim otherwise.

No excepting circumstance being present, we are likewise bound by respondent court's declaration that there was no
negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the trial court's finding to that effect,
hence our conformity to Pioneer's being absolved of any liability.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence of the victim,
hence its present contention that the death of the passenger was due to the negligence of the crane operator cannot be
sustained both on grounds, of estoppel and for lack of evidence on its present theory. Even in its answer filed in the
court below it readily alleged that Pioneer had taken the necessary safeguards insofar as its unloading operations
were concerned, a fact which appears to have been accepted by the plaintiff therein by not impleading Pioneer as a
defendant, and likewise inceptively by Aboitiz by filing its third-party complaint only after ten (10) months from the
institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule on extraordinary diligence
required of, and the corresponding presumption of negligence foisted on, common carriers like Aboitiz. This, of
course, does not detract from what we have said that no negligence can be imputed to Pioneer but, that on the
contrary, the failure of Aboitiz to exercise extraordinary diligence for the safety of its passenger is the rationale for
our finding on its liability.

WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in toto.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

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 SECOND DIVISION

[G.R. No. 122039. May 31, 2000]

VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and
FRANCISCO SALVA, respondents.

D E C I S I ON

MENDOZA, J.:

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

The facts, as found by the Court of Appeals, are as follows:

At 10 oclock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college
freshman majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated
by petitioner Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the
conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle. Sclaw

On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated
at the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven
by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga
was injured. She sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the underlying
skin." Closed reduction of the fracture, long leg circular casting, and case wedging were done under sedation. Her
confinement in the hospital lasted from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V.
Oligario, an orthopedic surgeon, certified she would remain on a cast for a period of three months and would have to
ambulate in crutches during said period.

On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the contract of
carriage by the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other
hand, filed a third-party complaint against Francisco Salva, the owner of the Isuzu truck. Korte

The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding
that it was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case
(Civil Case No. 3490), filed by Calalas against Salva and Verena, for quasi-delict, in which Branch 37 of the same
court held Salva and his driver Verena jointly liable to Calalas for the damage to his jeepney. Rtcspped

On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sungas cause of
action was based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the
diligence required under the Civil Code. The appellate court dismissed the third-party complaint against Salva and
adjudged Calalas liable for damages to Sunga. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another
one is entered ordering defendant-appellee Vicente Calalas to pay plaintiff-appellant:

(1) P50,000.00 as actual and compensatory damages;

(2) P50,000.00 as moral damages;

(3) P10,000.00 as attorneys fees; and

97
 (4) P1,000.00 as expenses of litigation; and

(5) to pay the costs.

SO ORDERED.

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

The petition has no merit.

The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of the truck
liable for quasi-delict ignores the fact that she was never a party to that case and, therefore, the principle of res
judicata does not apply. Missdaa

Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case No. 3490 was
whether Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioners jeepney. On
the other hand, the issue in this case is whether petitioner is liable on his contract of carriage. The first, quasi-delict,
also known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The
second, breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual
obligation.

Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the
action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract
and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his
destination.[2] In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers
are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary
diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the
burden of proof. Slxmis

There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena
liable for the damage to petitioners jeepney, should be binding on Sunga. It is immaterial that the proximate cause of
the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate
cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a
device for imputing liability to a person where there is no relation between him and another party. In such a case, the
obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the
parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus
created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting
the diligence required of common carriers with regard to the safety of passengers as well as the presumption of
negligence in cases of death or injury to passengers. It provides: Slxsc

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734,
1735, and 1746, Nos. 5,6, and 7, while the extraordinary diligence for the safety of the passengers
is further set forth in articles 1755 and 1756.

98
 Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all
the circumstances.

Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed by articles 1733 and 1755.

In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became
the duty of petitioner to prove that he had to observe extraordinary diligence in the care of his passengers. Scslx

Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the
utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We
do not think so. Several factors militate against petitioners contention. Slx

First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being exposed about
two meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. This
is a violation of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which provides:

Sec. 54. Obstruction of Traffic. - No person shall drive his motor vehicle in such a manner as to
obstruct or impede the passage of any vehicle, nor, while discharging or taking on passengers or
loading or unloading freight, obstruct the free passage of other vehicles on the highway.

Second, it is undisputed that petitioners driver took in more passengers than the allowed seating capacity of the
jeepney, a violation of 32(a) of the same law. It provides: Mesm

Exceeding registered capacity. - No person operating any motor vehicle shall allow more
passengers or more freight or cargo in his vehicle than its registered capacity.

The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other
passengers were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence
imposed on him for the injury sustained by Sunga, but also, the evidence shows he was actually negligent in
transporting passengers. Calrky

We find it hard to give serious thought to petitioners contention that Sungas taking an "extension seat" amounted to
an implied assumption of risk. It is akin to arguing that the injuries to the many victims of the tragedies in our seas
should not be compensated merely because those passengers assumed a greater risk of drowning by boarding an
overloaded ferry. This is also true of petitioners contention that the jeepney being bumped while it was improperly
parked constitutes caso fortuito. A caso fortuito is an event which could not be foreseen, or which, though foreseen,
was inevitable.[3] This requires that the following requirements be present: (a) the cause of the breach is independent
of the debtors will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render it impossible for
the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury to the
creditor.[4]Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters into
the highway. Kycalr

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

In awarding moral damages, the Court of Appeals stated: Kyle

Plaintiff-appellant at the time of the accident was a first-year college student in that school year
1989-1990 at the Silliman University, majoring in Physical Education. Because of the injury, she
was not able to enroll in the second semester of that school year. She testified that she had no

99
 more intention of continuing with her schooling, because she could not walk and decided not to
pursue her degree, major in Physical Education "because of my leg which has a defect already."

Plaintiff-appellant likewise testified that even while she was under confinement, she cried in pain
because of her injured left foot. As a result of her injury, the Orthopedic Surgeon also certified that
she has "residual bowing of the fracture side." She likewise decided not to further pursue Physical
Education as her major subject, because "my left leg x x x has a defect already."

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

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it
is not one of the items enumerated under Art. 2219 of the Civil Code.[5] As an exception, such damages are
recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation
to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided
in Art. 2220.[6]

In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate
court that petitioner acted in bad faith in the performance of the contract of carriage. Sungas contention that
petitioners admission in open court that the driver of the jeepney failed to assist her in going to a nearby hospital
cannot be construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to
the hospital does not imply that petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is
merely implied recognition by Verena that he was the one at fault for the accident. Exsm

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

SO ORDERED.

Bellosillo, (Chairman), and Buena, JJ., concur.

Quisumbing, and De Leon, Jr., JJ., on leave.

100