Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

GR No L-10134             June 29, 1957

SABINA EXCONDE, plaintiff-appellant, vsDELFIN CAPUNO and DANTE CAPUNO, defendants-appellees

Magno T Bueser for appellantAlver Law Offices and Edon B Brion and Vencedor A Alimario for appellees

BAUTISTA ANGELO, J:

Dante Capuno, son of Delfin Capuno, was accused of double homicide through reckless imprudence for the death of Isidoro Caperina and Amado Ticzon on March 31, 1949 in the Court of First Instance of Laguna (Criminal Case No 15001) During the trial, Sabina Exconde, as mother of the deceased Isidoro Caperina, reserved her right to bring a separate civil action for damages against the accused After trial, Dante Capuno was found guilty of the crime charged and, on appeal, the Court Appeals affirmed the decision Dante Capuno was only (15) years old when he committed the crime

In line with her reservation, Sabina Exconde filed the present action against Delfin Capuno and his son Dante Capuno asking for damages in the aggregate amount of P2,95900 for the death of her son Isidoro Caperiña Defendants set up the defense that if any one should be held liable for the death of Isidoro Caperina, he is Dante Capuno and not his father Delfin because at the time of the accident, the former was not under the control, supervision and custody, of the latter This defense was sustained by the lower court and, as a consequence it only convicted Dante Capuno to pay the damages claimed in the complaint From decision, plaintiff appealed to the Court of Appeals but the case was certified to us on the ground that the appeal only involves questions of law

It appears that Dante Capuno was a member of the Boy Scouts Organization and a student of the Bilintawak Elementary School situated in a barrio in the City of San Pablo and on March 31, 1949 he attended a parade in honor of Dr Jose Rizal in said city upon instruction of the city school's supervisor From the school Dante, with other students, boarded a jeep and when the same started to run, he took hold of the wheel and drove it while the driver sat on his left side They have not gone far when the jeep turned turtle and two of its passengers, Amado Ticzon and Isidore Caperiña, died as a consequence It further appears that Delfin Capuno, father of Dante, was not with his son at the time of the accident, nor did he know that his son was going to attend a parade He only came to know it when his son told him after the accident that he attended the parade upon instruction of his teacher

The only issue involved in this appeal is whether defendant Delfin Capuno can be held civilly liable, jointly and severally with his son Dante, for damages resulting from the death of Isidoro Caperiña caused by the negligent act of minor Dante Capuno

The case comes under Article 1903 of the Spanish Civil Code, paragraph 1 and 5, which provides:

ART 1903 The obligation impossed by the next preceding articles is enforceable not only for personal acts and omissions, but also for those of persons for whom another is responsible

The father, and, in case of his death or incapacity, the mother, are liable for any damages caused by the minor children who live with them

x x x           x x x           x x x

Finally, teachers or directors of arts and trades are liable for any damages caused by their pupils or apprentices while they are under their custody

Plaintiff contends that defendant Delfin Capuno is liable for the damages in question jointly and severally with his son Dante because at the time the latter committed the negligent act which resulted in the death of the victim, he was a minor and was then living with his father, and inasmuch as these facts are not disputed, the civil liability of the father is evident And so, plaintiff contends, the lower court erred in relieving the father from liability

We find merit in this claim It is true that under the law above quoted, "teachers or directors of arts and trades are liable for any damages caused by their pupils or apprentices while they are under their custody", but this provision only applies to an institution of arts and trades and not to any academic educational institution (Padilla, Civil Law, 1953, Ed, Vol IV, p 841; See 12 Manresa, 4th Ed, p 557) Here Dante capuno was then a student of the Balintawak Elementary School and as part of his extra-curricular activity, he attended the parade in honor of Dr Jose Rizal upon instruction of the city school's supervisor And it was in connection with that parade that Dante boarded a jeep with some companions and while driving it, the accident occurred In the circumstances, it is clear that neither the head of that school, nor the city school's supervisor, could be held liable for the negligent act of Dante because he was not then a student of an institute of arts and trades as provided by law

The civil liability which the law impose upon the father, and, in case of his death or incapacity, the mother, for any damages that may be caused by the minor children who live with them, is obvious This is necessary consequence of the parental authority they exercise over them which imposes upon the parents the "duty of supporting them, keeping them in their company, educating them and instructing them in proportion to their means", while, on the other hand, gives them the "right to correct and punish them in moderation" (Articles 154 and 155, Spanish Civil Code) The only way by which they can relieve themselves of this liability is if they prove that they exercised all the diligence of a good father of a family to prevent the damage(Article 1903, last paragraph, Spanish Civil Code) This defendants failed to prove

WHEREFORE, the decision appealed from is modified in the sense that defendants Delfin Capuno and Dante Capuno shall pay to plaintiff, jointly and severally, the sum of P2,95900 as damages, and the costs of action

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

GR No L-24101 September 30, 1970

MARIA TERESA Y CUADRA, minor represented by her father ULISES P CUADRA, ET AL, plaintiffs-appellees, vsALFONSO MONFORT, defendant-appellant

Rodolfo J Herman for plaintiffs-appellees

Luis G Torres and Abraham E Tionko for defendant-appellant

 

MAKALINTAL, J:

This is an action for damages based on quasi-delict, decided by the Court of First Instance of Negros Occidental favorably to the plaintiffs and appealed by the defendant to the Court of Appeals, which certified the same to us since the facts are not in issue

Maria Teresa Cuadra, 12, and Maria Teresa Monfort, 13, were classmates in Grade Six at the Mabini Elementary School in Bacolod City On July 9, 1962 their teacher assigned them, together with three other classmates, to weed the grass in the school premises While thus engaged Maria Teresa Monfort found a plastic headband, an ornamental object commonly worn by young girls over their hair Jokingly she said aloud that she had found an earthworm and, evidently to frighten the Cuadra girl, tossed the object at her At that precise moment the latter turned around to face her friend, and the object hit her right eye Smarting from the pain, she rubbed the injured part and treated it with some powder The next day, July 10, the eye became swollen and it was then that the girl related the incident to her parents, who thereupon took her to a doctor for treatment She underwent surgical operation twice, first on July 20 and again on August 4, 1962, and stayed in the hospital for a total of twenty-three days, for all of which the parents spent the sum of P1,70375 Despite the medical efforts, however, Maria Teresa Cuadra completely lost the sight of her right eye

In the civil suit subsequently instituted by the parents in behalf of their minor daughter against Alfonso Monfort, Maria Teresa Monfort's father, the defendant was ordered to pay P1,70300 as actual damages; P20,00000 as moral damages; and P2,00000 as attorney's fees, plus the costs of the suit

The legal issue posed in this appeal is the liability of a parent for an act of his minor child which causes damage to another under the specific facts related above and the applicable provisions of the Civil Code, particularly Articles 2176 and 2180 thereof, which read:

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

ART 2180 The obligation imposed by Article 2176 is demandable not only for one's 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 are responsible for the damages caused by the minor children who live in their company

xxx xxx xxx

The responsibility treated of in this Article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage

The underlying basis of the liability imposed by Article 2176 is the fault or negligence accompanying the act or the omission, there being no willfulness or intent to cause damage thereby When the act or omission is that of one person for whom another is responsible, the latter then becomes himself liable under Article 2180, in the different cases enumerated therein, such as that of the father or the mother under the circumstances above quoted The basis of this vicarious, although primary, liability is, as in Article 2176, fault or negligence, which is presumed from that which accompanied the causative act or omission The presumption is merely prima facie and may therefore be rebutted This is the clear and logical inference that may be drawn from the last paragraph of Article 2180, which states "that the responsibility treated of in this Article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage"

Since the fact thus required to be proven is a matter of defense, the burden of proof necessarily rests on the defendant But what is the exact degree of diligence contemplated, and how does a parent prove it in connection with a particular act or omission of a minor child, especially when it takes place in his absence or outside his immediate company? Obviously there can be no meticulously calibrated measure applicable; and when the law simply refers to "all the diligence of a good father of the family to prevent damage," it implies a consideration of the attendant circumstances in every individual case, to determine whether or not by the exercise of such diligence the damage could have been prevented

In the present case there is nothing from which it may be inferred that the defendant could have prevented the damage by the observance of due care, or that he was in any way remiss in the exercise of his parental authority in failing to foresee such damage, or the act which caused it On the contrary, his child was at school, where it was his duty to send her and where she was, as he had the right to expect her to be, under the care and supervision of the teacher And as far as the act which caused the injury was concerned, it was an innocent prank not unusual among children at play and which no parent, however careful, would have any special reason to anticipate much less guard against Nor did it reveal any mischievous propensity, or indeed any trait in the child's character which would reflect unfavorably on her upbringing and for which the blame could be attributed to her parents

The victim, no doubt, deserves no little commiseration and sympathy for the tragedy that befell her But if the defendant is at all obligated to compensate her suffering, the obligation has no legal sanction enforceable in court, but only the moral compulsion of good conscience

The decision appealed from is reversed, and the complaint is dismissed, without pronouncement as to costs

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

GR No 75112 August 17, 1992

FILAMER CHRISTIAN INSTITUTE, petitioner, vsHON INTERMEDIATE APPELLATE COURT, HON ENRIQUE P SUPLICO, in his capacity as Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN, SR, respondents

Bedona & Bedona Law Office for petitioner

Rhodora G Kapunan for private respondents

 

GUTIERREZ, JR, J:

The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision rendered by this Court on October 16, 1990 (Filamer Christian Institute v Court of Appeals, 190 SCRA 477) reviewing the appellate court's conclusion that there exists an employer-employee relationship between the petitioner and its co-defendant Funtecha The Court ruled that the petitioner is not liable for the injuries caused by Funtecha on the grounds that the latter was not an authorized driver for whose acts the petitioner shall be directly and primarily answerable, and that Funtecha was merely a working scholar who, under Section 14, Rule X, Book III of the Rules and Regulations Implementing the Labor Code is not considered an employee of the petitioner

The private respondents assert that the circumstances obtaining in the present case call for the application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of the petitioner The private respondents maintain that under Article 2180 an injured party shall have recourse against the servant as well as the petitioner for whom, at the time of the incident, the servant was performing an act in furtherance of the interest and for the benefit of the petitioner Funtecha allegedly did not steal the school jeep nor use it for a joy ride without the knowledge of the school authorities

After a re-examination of the laws relevant to the facts found by the trial court and the appellate court, the Court reconsiders its decision We reinstate the Court of Appeals' decision penned by the late Justice Desiderio Jurado and concurred in by Justices Jose C Campos, Jr and Serafin E Camilon Applying Civil Code provisions, the appellate court affirmed the trial court decision which ordered the payment of the P20,00000 liability in the Zenith Insurance Corporation policy, P10,00000 moral damages, P4,00000 litigation and actual expenses, and P3,00000 attorney's fees

It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of petitioner Filamer He was, in relation to the school, an employee even if he was assigned to clean the school premises for only two (2) hours in the morning of each school day

Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to take over the vehicle while the latter was on his way home one late afternoon It is significant to note that the place where Allan lives is also the house of his father, the school president, Agustin Masa Moreover, it is also the house where Funtecha was allowed free board while he was a student of Filamer Christian Institute

Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp dangerous curb, and viewing that the road was clear (TSN, April 4, 1983, pp 78-79) According to Allan's testimony, a fast moving truck with glaring lights nearly hit them so that they had to swerve to the right to avoid a collision Upon swerving, they heard a sound as if something had bumped against the vehicle, but they did not stop to check Actually, the Pinoy jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane in the direction against vehicular traffic, and hit him Allan affirmed that Funtecha followed his advise to swerve to the right ( Ibid, p 79) At the time of the incident (6:30 PM) in Roxas City, the jeep had only one functioning headlight

Allan testified that he was the driver and at the same time a security guard of the petitioner-school He further said that there was no specific time for him to be off-duty and that after driving the students home at 5:00 in the afternoon, he still had to go back to school and then drive home using the same vehicle

Driving the vehicle to and from the house of the school president where both Allan and Funtecha reside is an act in furtherance of the interest of the petitioner-school Allan's job demands that he drive home the school jeep so he can use it to fetch students in the morning of the next school day

It is indubitable under the circumstances that the school president had knowledge that the jeep was routinely driven home for the said purpose Moreover, it is not improbable that the school president also had knowledge of Funtecha's possession of a student driver's license and his desire to undergo driving lessons during the time that he was not in his classrooms

In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha definitely was not having a joy ride Funtecha was not driving for the purpose of his enjoyment or for a "frolic of his own" but ultimately, for the service for which the jeep was intended by the petitioner school (See L Battistoni v Thomas, Can SC 144, 1 DLR 577, 80 ALR 722 [1932]; See also Association of Baptists for World Evangelism, Inc v Fieldmen's Insurance Co, Inc 124 SCRA 618 [1983]) Therefore, the Court is constrained to conclude that the act of Funtecha in taking over the steering wheel was one done for and in behalf of his employer for which act the petitioner-school cannot deny any responsibility by arguing that it was done beyond the scope of his janitorial duties The clause "within the scope of their assigned tasks" for purposes of raising the presumption of liability of an employer, includes any act done by an employee, in furtherance of the interests of the employer or for the account of the employer at the time of the infliction of the injury or damage (Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the employee driving the vehicle derived some benefit from the act, the existence of a presumptive liability of the employer is determined by answering the question of whether or not the servant was at the time of the accident performing any act in furtherance of his master's business (Kohlman v Hyland, 210 NW 643, 50 ALR 1437 [1926]; Jameson v Gavett, 71 P 2d 937 [1937])

Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner anchors its defense, was promulgated by the Secretary of Labor and Employment only for the purpose of administering and enforcing the provisions of the Labor Code on conditions of employment Particularly, Rule X of Book III provides guidelines on the manner by which the powers of the Labor Secretary shall be exercised; on what records should be kept; maintained and preserved; on payroll; and on the exclusion of working scholars from, and inclusion of resident physicians in the employment coverage as far as compliance with the substantive labor provisions on working conditions, rest periods, and wages, is concerned

In other words, Rule X is merely a guide to the enforcement of the substantive law on labor The Court, thus, makes the distinction and so holds that Section 14, Rule X, Book III of the Rules is not the decisive law in a civil suit for damages instituted by an injured person during a vehicular accident against a working student of a school and against the school itself

The present case does not deal with a labor dispute on conditions of employment between an alleged employee and an alleged employer It invokes a claim brought by one for damages for injury caused by the patently negligent acts of a person, against both doer-employee and his employer Hence, the reliance on the implementing rule on labor to disregard the primary liability of an employer under Article 2180 of the Civil Code is misplaced An implementing rule on labor cannot be used by an employer as a shield to avoid liability under the substantive provisions of the Civil Code

There is evidence to show that there exists in the present case an extra-contractual obligation arising from the negligence or reckless imprudence of a person "whose acts or omissions are imputable, by a legal fiction, to other(s) who are in a position to exercise an absolute or limited control over (him)" (Bahia v Litonjua and Leynes, 30 Phil 624 [1915])

Funtecha is an employee of petitioner Filamer He need not have an official appointment for a driver's position in order that the petitioner may be held responsible for his grossly negligent act, it being sufficient that the act of driving at the time of the incident was for the benefit of the petitioner Hence, the fact that Funtecha was not the school driver or was not acting within the scope of his janitorial duties does not relieve the petitioner of the burden of rebutting the presumption  juris tantum that there was negligence on its part either in the selection of a servant or employee, or in the supervision over him The petitioner has failed to show proof of its having exercised the required diligence of a good father of a family over its employees Funtecha and Allan

The Court reiterates that supervision includes the formulation of suitable rules and regulations for the guidance of its employees and the issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his employees (Bahia v Litonjua and Leynes, supra, at p 628; Phoenix Construction, v Intermediate Appellate Court, 148 SCRA 353 [1987])

An employer is expected to impose upon its employees the necessary discipline called for in the performance of any act indispensable to the business and beneficial to their employer

In the present case, the petitioner has not shown that it has set forth such rules and guidelines as would prohibit any one of its employees from taking control over its vehicles if one is not the official driver or prohibiting the driver and son of the Filamer president from authorizing another employee to drive the school vehicle Furthermore, the petitioner has failed to prove that it had imposed sanctions or warned its employees against the use of its vehicles by persons other than the driver

The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by which Funtecha drove the vehicle (Cangco v Manila Railroad Co, 38 Phil 768, 772 [1918]) In the absence of evidence that the petitioner had exercised the diligence of a good father of a family in the supervision of its employees, the law imposes upon it the vicarious liability for acts or omissions of its employees (Umali v Bacani, 69 SCRA 263 [1976]; Poblete v Fabros, 93 SCRA 200 [1979]; Kapalaran Bus Liner v Coronado, 176 SCRA 792 [1989]; Franco v Intermediate Appellate Court, 178 SCRA 331 [1989]; Pantranco North Express, Inc v Baesa, 179 SCRA 384 [1989]) The liability of the employer is, under Article 2180, primary and solidary However, the employer shall have recourse against the negligent employee for whatever damages are paid to the heirs of the plaintiff

It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party defendant in the civil case for damages This is quite understandable considering that as far as the injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who was the one driving the vehicle and presumably was one authorized by the school to drive The plaintiff and his heirs should not now be left to suffer without simultaneous recourse against the petitioner for the consequent injury caused by a janitor doing a driving chore for the petitioner even for a short while For the purpose of recovering damages under the prevailing circumstances, it is enough that the plaintiff and the private respondent heirs were able to establish the existence of employer-employee relationship between Funtecha and petitioner Filamer and the fact that Funtecha was engaged in an act not for an independent purpose of his own but in furtherance of the business of his employer A position of responsibility on the part of the petitioner has thus been satisfactorily demonstrated

WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby GRANTED The decision of the respondent appellate court affirming the trial court decision is REINSTATED

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

GR No 66207 May 18, 1992

MAXIMINO SOLIMAN, JR, represented by his judicial guardian VIRGINIA C SOLIMAN, petitioner, vsHON JUDGE RAMON TUAZON, Presiding Judge of Branch LXI, Regional Trial Court of Region III, Angeles City, and the REPUBLIC CENTRAL COLLEGES, represented by its President, respondents

Mariano Y Navarro for Republic Central Colleges

R E S O L U T I O N

 

FELICIANO, J:

On 22 March 1983, petitioner Soliman, Jr filed a civil complaint for damages against private respondent Republic Central Colleges ("Colleges"), the RL Security Agency Inc and one Jimmy B Solomon, a security guard, as defendants The complaint alleged that:

on 13 August 1982, in the morning thereof, while the plaintiff was in the campus ground and premises of the defendant, REPUBLIC CENTRAL COLLEGES, as he was and is still a regular enrolled student of said school taking his morning classes, the defendant, JIMMY B SOLOMON, who was on said date and hour in the premises of said school performing his duties and obligations as a duly appointed security guard under the employment, supervision and control of his employer-defendant RL SECURITY AGENCY, INC, headed by Mr Benjamin Serrano, without any provocation, in a wanton, fraudulent, reckless, oppressive or malevolent manner, with intent to kill, attack, assault, strike and shoot the plaintiff on the abdomen with a 38 Caliber Revolver, a deadly weapon, which ordinarily such wound sustained would have caused plaintiff's death were it not for the timely medical assistance given to him The plaintiff was treated and confined at Angeles Medical Center, Angeles City, and, as per doctor's opinion, the plaintiff may not be able to attend to his regular classes and will be incapacitated in the performance of his usual work for a duration of from three to four months before his wounds would be completely healed 1

Private respondent Colleges filed a motion to dismiss, contending that the complaint stated no cause of action against it Private respondent argued that it is free from any liability for the injuries sustained by petitioner student for the reason that private respondent school was not the employer of the security guard charged, Jimmy Solomon, and hence was not responsible for any wrongful act of Solomon Private respondent school further argued that Article 2180, 7th paragraph, of the Civil Code did not apply, since said paragraph holds teachers and heads of establishment of arts and trades liable for damages caused by their pupils and students or apprentices, while security guard Jimmy Solomon was not a pupil, student or apprentice of the school

In an order dated 29 November 1983, respondent Judge granted private respondent school's motion to dismiss, holding that security guard Jimmy Solomon was not an employee of the school which accordingly could not be held liable for his acts or omissions Petitioner moved for reconsideration, without success

In this Petition for Certiorari and Prohibition, it is contended that respondent trial judge committed a grave abuse of discretion when he refused to apply the provisions of Article 2180, as well as those of Articles 349, 350 and 352, of the Civil Code and granted the school's motion to dismiss

Under Article 2180 of the Civil Code, the obligation to respond for damage inflicted by one against another by fault or negligence exists not only for one's own act or omission, but also for acts or omissions of a person for whom one is by law responsible Among the persons held vicariously responsible for acts or omissions of another person are the following:

xxx xxx xxx

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry

xxx xxx xxx

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils, their students or apprentices, so long as they remain in their custody

xxx xxx xxx

The first paragraph quoted above offers no basis for holding the Colleges liable for the alleged wrongful acts of security guard Jimmy B Solomon inflicted upon petitioner Soliman, Jr Private respondent school was not the employer of Jimmy Solomon The employer of Jimmy Solomon was the RL Security Agency Inc, while the school was the client or customer of the RL Security Agency Inc It is settled that where the security agency, as here, recruits, hires and assigns the work of its watchmen or security guards, the agency is the employer of such guards or watchmen 2 Liability for illegal or harmful acts committed by the security guards attaches to the employer agency, and not to the clients or customers of such agency 3 As a general rule, a client or customer of a security agency has no hand in selecting who among the pool of security guards or watchmen employed by the agency shall be assigned to it; the duty to observe the diligence of a good father of a family in the selection of the guards cannot, in the ordinary course of events, be demanded from the client whose premises or property are protected by the security guards The fact that a client company may give instructions or directions to the security guards assigned to it, does not, by itself, render the client responsible as an employer of the security guards concerned and liable for their wrongful acts or omissions Those instructions or directions are ordinarily no more than requests commonly envisaged in the contract for services entered into with the security agency There being no employer-employee relationship between the Colleges and Jimmy Solomon, petitioner student cannot impose vicarious liability upon the Colleges for the acts of security guard Solomon

Since there is no question that Jimmy Solomon was not a pupil or student or an apprentice of the Colleges, he being in fact an employee of the RL Security Agency Inc, the other above-quoted paragraph of Article 2180 of the Civil Code is similarly not available for imposing liability upon the Republic Central Colleges for the acts or omissions of Jimmy Solomon

The relevant portions of the other Articles of the Civil Code invoked by petitioner are as follows:

Art 349 The following persons shall exercise substitute parental authority:

xxx xxx xxx

(2) Teachers and professors;xxx xxx xxx

(4) Directors of trade establishments with regard to apprentices;xxx xxx xxx

Art 350 The persons named in the preceding article shall exercise reasonable supervision over the conduct of the child

xxx xxx xxx

Art 352 The relations between teacher and pupil, professor and student are fixed by government regulations and those of each school or institution In no case shall corporal punishment be countenanced The teacher or professor shall cultivate the best potentialities of the heart and mind of the pupil or student

In Palisoc v Brillantes, 4 invoked by petitioner, the Court held the owner and president of a school of arts and trades known as the "Manila Technical Institute," Quezon Blvd, Manila, responsible in damages for the death of Dominador Palisoc, a student of Institute, which resulted from fist blows delivered by Virgilio L Daffon,another student of the Institute It will be seen that the facts of Palisoc v Brillantes brought it expressly within the 7th paragraph of Article 2180, quoted above; but those facts are entirely different from the facts existing in the instant case

Persons exercising substitute parental authority are made responsible for damage inflicted upon a third person by the child or person subject to such substitute parental authority In the instant case, as already noted, Jimmy Solomon who committed allegedly tortious acts resulting in injury to petitioner, was not a pupil, student or apprentice of the Republic Central Colleges; the school had no substitute parental authority over Solomon

Clearly, within the confines of its limited logic, ie, treating the petitioner's claim as one based wholly and exclusively on Article 2180 of the Civil Code, the order of the respondent trial judge was correct Does it follow, however, that respondent Colleges could not be held liable upon any other basis in law, for or in respect of the injury sustained by petitioner, so as to entitle respondent school to dismissal of petitioner's complaint in respect of itself?

The very recent case of the Philippine School of Business Administration (PSBA) v Court of Appeals, 5 requires us to give a negative answer to that question

In PSBA, the Court held that Article 2180 of the Civil Code was not applicable where a student had been injured by one who was an outsider or by one over whom the school did not exercise any custody or control or supervision At the same time, however, the Court stressed that an implied contract may be held to be established between a school which accepts students for enrollment, on the one hand, and the students who are enrolled, on the other hand, which contract results in obligations for both parties:

When an academic institution accepts students for enrollment, there is established a contract between them, resulting in bilateral obligations which parties are bound to comply with For its part, the school undertakes to provide the student with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or a profession On the other hand, the student covenants to abide by the school's academic requirements and observe its rules and regulations

Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the realm of the arts and other sciences when bullets are flying or grenades exploding in the air or where there looms around the school premises a constant threat to life and limb Necessarily, the school must ensure that adequate steps are taken to maintain peace and order within the campus premises and to prevent the breakdown thereof 6

In that case, the Court was careful to point out that:

In the circumstances obtaining in the case at bar, however, there is, as yet, no finding that the contract between the school and Bautista had been breached thru the former's negligence in providing proper security measures This would be for the trial court to determine And, even if there be a finding of negligence, the same could give rise generally to a breach of contractual obligation only Using the test of Cangco, supra, the negligence of the school would not be relevant absent a contract In fact, that negligence becomes material only because of the contractual relation between PSBA and Bautista In other words, a contractual relation is a condition sine qua nonto the school's liability The negligence of the school cannot exist independently of the contract, unless the negligence occurs under the circumstances set out in Article 21 of the Civil Code

The Court is not unmindful of the attendant difficulties posed by the obligation of schools, above-mentioned, for conceptually a school, like a common carrier, cannot be an insurer of its students against all risks This is specially true in the populous student communities of the so-called "university belt" in Manila where there have been reported several incidents ranging from gang wars to other forms of hooliganism It would not be equitable to expect of schools to anticipate all types of violent trespass upon their premises, for notwithstanding the security measures installed, the same may still fail against an individual or group determined to carry out a nefarious deed inside school premises and environs Should this be the case, the school may still avoid liability by proving that the breach of its contractual obligation to the students was not due to its negligence, here statutorily defined to be the omission of that degree of diligence which is required by the nature of obligation and corresponding to the circumstances of person, time and place 7

In the PSBA case, the trial court had denied the school's motion to dismiss the complaint against it, and both the Court of Appeals and this Court affirmed the trial court's order In the case at bar, the court a quo granted the motion to dismiss filed by respondent Colleges, upon the assumption that petitioner's cause of action was based, and could have been based, only on Article 2180 of the Civil Code As PSBA, however, states, acts which are tortious or allegedly tortious in character may at the same time constitute breach of a contractual, or other legal, obligation Respondent trial judge was in serious error when he supposed that petitioner could have no cause of action other than one based on Article 2180 of the Civil Code Respondent trial judge should not have granted the motion to dismiss but rather should have, in the interest of justice, allowed petitioner to prove acts constituting breach of an obligation  ex contractu or ex lege on the part of respondent Colleges

In line, therefore, with the most recent jurisprudence of this Court, and in order to avoid a possible substantial miscarriage of justice, and putting aside technical considerations, we consider that respondent trial judge committed serious error correctible by this Court in the instant case

ACCORDINGLY, the Court Resolved to GRANT DUE COURSE to the Petition, to TREAT the comment of respondent Colleges as its answer, and to REVERSE and SET ASIDE the Order dated 29 November 1983 This case is REMANDED to the court a quo for further proceedings consistent with this Resolution

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

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

GR No L-11154            March 21, 1916

E MERRITT, plaintiff-appellant, vsGOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant

Crossfield and O'Brien for plaintiffAttorney-General Avanceña for defendant

TRENT, J:

This is an appeal by both parties from a judgment of the Court of First Instance of the city of Manila in favor of the plaintiff for the sum of P14,741, together with the costs of the cause

Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general damages which the plaintiff suffered to P5,000, instead of P25,000 as claimed in the complaint," and (2) "in limiting the time when plaintiff was entirely disabled to two months and twenty-one days and fixing the damage accordingly in the sum of P2,666, instead of P6,000 as claimed by plaintiff in his complaint"

The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding that the collision between the plaintiff's motorcycle and the ambulance of the General Hospital was due to the negligence of the chauffeur; (b) in holding that the Government of the Philippine Islands is liable for the damages sustained by the plaintiff as a result of the collision, even if it be true that the collision was due to the negligence of the chauffeur; and (c) in rendering judgment against the defendant for the sum of P14,741

The trial court's findings of fact, which are fully supported by the record, are as follows:

It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a motorcycle, was going toward the western part of Calle Padre Faura, passing along the west side thereof at a speed of ten to twelve miles an hour, upon crossing Taft Avenue and when he was ten feet from the southwestern intersection of said streets, the General Hospital ambulance, upon reaching said avenue, instead of turning toward the south, after passing the center thereof, so that it would be on the left side of said avenue, as is prescribed by the ordinance and the Motor Vehicle Act, turned suddenly and unexpectedly and long before reaching the center of the street, into the right side of Taft Avenue, without having sounded any whistle or horn, by which movement it struck the plaintiff, who was already six feet from the southwestern point or from the post place there

By reason of the resulting collision, the plaintiff was so severely injured that, according to Dr Saleeby, who examined him on the very same day that he was taken to the General Hospital, he was suffering from a depression in the left parietal region, a would in the same place and in the back part of his head, while blood issued from his nose and he was entirely unconscious

The marks revealed that he had one or more fractures of the skull and that the grey matter and brain was had suffered material injury At ten o'clock of the night in question, which was the time set for performing the operation, his pulse was so weak and so irregular that, in his opinion, there was little hope that he would live His right leg was broken in such a way that the fracture extended to the outer skin in such manner that it might be regarded as double and the would be exposed to infection, for which reason it was of the most serious nature

At another examination six days before the day of the trial, Dr Saleeby noticed that the plaintiff's leg showed a contraction of an inch and a half and a curvature that made his leg very weak and painful at the point of the fracture Examination of his head revealed a notable readjustment of the functions of the brain and nerves The patient apparently was slightly deaf, had a light weakness in his eyes and in his mental condition This latter weakness was always noticed when the plaintiff had to do any difficult mental labor, especially when he attempted to use his money for mathematical calculations

According to the various merchants who testified as witnesses, the plaintiff's mental and physical condition prior to the accident was excellent, and that after having received the injuries that have been discussed, his physical condition had undergone a noticeable depreciation, for he had lost the agility, energy, and ability that he had constantly displayed before the accident as one of the best constructors of wooden buildings and he could not now earn even a half of the income that he had secured for his work because he had lost 50 per cent of his efficiency As a contractor, he could no longer, as he had before done, climb up ladders and scaffoldings to reach the highest parts of the building

As a consequence of the loss the plaintiff suffered in the efficiency of his work as a contractor, he had to dissolved the partnership he had formed with the engineer Wilson, because he was incapacitated from making mathematical calculations on account of the condition of his leg and of his mental faculties, and he had to give up a contract he had for the construction of the Uy Chaco building"

We may say at the outset that we are in full accord with the trial court to the effect that the collision between the plaintiff's motorcycle and the ambulance of the General Hospital was due solely to the negligence of the chauffeur

The two items which constitute a part of the P14,741 and which are drawn in question by the plaintiff are (a) P5,000, the award awarded for permanent injuries, and (b) the P2,666, the amount allowed for the loss of wages during the time the plaintiff was incapacitated from pursuing his occupation We find nothing in the record which would justify us in increasing the amount of the first As to the second, the record shows, and the trial court so found, that the plaintiff's services as a contractor were worth P1,000 per month The court, however, limited the time to two months and twenty-one days, which the plaintiff was actually confined in the hospital In this we think there was error, because it was clearly established that the plaintiff was wholly incapacitated for a period of six months The mere fact that he remained in the hospital only two months and twenty-one days while the remainder of the six months was spent in his home, would not prevent recovery for the whole time We, therefore, find that the amount of damages sustained by the plaintiff, without any fault on his part, is P18,075

As the negligence which caused the collision is a tort committed by an agent or employee of the Government, the inquiry at once arises whether the Government is legally-liable for the damages resulting therefrom

Act No 2457, effective February 3, 1915, reads:

An Act authorizing E Merritt to bring suit against the Government of the Philippine Islands and authorizing the Attorney-General of said Islands to appear in said suit

Whereas a claim has been filed against the Government of the Philippine Islands by Mr E Merritt, of Manila, for damages resulting from a collision between his motorcycle and the ambulance of the General Hospital on March twenty-fifth, nineteen hundred and thirteen;

Whereas it is not known who is responsible for the accident nor is it possible to determine the amount of damages, if any, to which the claimant is entitled; and

Whereas the Director of Public Works and the Attorney-General recommended that an Act be passed by the Legislature authorizing Mr E Merritt to bring suit in the courts against the Government, in order that said questions may be decided: Now, therefore,

By authority of the United States, be it enacted by the Philippine Legislature, that:

SECTION 1 E Merritt is hereby authorized to bring suit in the Court of First Instance of the city of Manila against the Government of the Philippine Islands in order to fix the responsibility for the collision between his motorcycle and the ambulance of the General Hospital, and to determine the amount of the damages, if any, to which Mr E Merritt is entitled on account of said collision, and the Attorney-General of the Philippine Islands is hereby authorized and directed to appear at the trial on the behalf of the Government of said Islands, to defendant said Government at the same

SEC 2 This Act shall take effect on its passage

Enacted, February 3, 1915

Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did it also concede its liability to the plaintiff? If only the former, then it cannot be held that the Act created any new cause of action in favor of the plaintiff or extended the defendant's liability to any case not previously recognized

All admit that the Insular Government (the defendant) cannot be sued by an individual without its consent It is also admitted that the instant case is one against the Government As the consent of the Government to be sued by the plaintiff was entirely voluntary on its part, it is our duty to look carefully into the terms of the consent, and render judgment accordingly

The plaintiff was authorized to bring this action against the Government "in order to fix the responsibility for the collision between his motorcycle and the ambulance of the General Hospital and to determine the amount of the damages, if any, to which Mr E Merritt is entitled on account of said collision, " These were the two questions submitted to the court for determination The Act was passed "in order that said questions may be decided" We have "decided" that the accident was due solely to the negligence of the chauffeur, who was at the time an employee of the defendant, and we have also fixed the amount of damages sustained by the plaintiff as a result of the collision Does the Act authorize us to hold that the Government is legally liable for that amount? If not, we must look elsewhere for such authority, if it exists

The Government of the Philippine Islands having been "modeled after the Federal and State Governments in the United States," we may look to the decisions of the high courts of that country for aid in determining the purpose and scope of Act No 2457

In the United States the rule that the state is not liable for the torts committed by its officers or agents whom it employs, except when expressly made so by legislative enactment, is well settled "The Government," says Justice Story, "does not undertake to guarantee to any person the fidelity of the officers or agents whom it employs, since that would involve it in all its operations in endless embarrassments, difficulties and losses, which would be subversive of the public interest" (Claussen vs City of Luverne, 103 Minn, 491, citing U S vs Kirkpatrick, 9 Wheat, 720; 6 L Ed, 199; and Beers vs States, 20 How, 527; 15 L Ed, 991)

In the case of Melvin vs State (121 Cal, 16), the plaintiff sought to recover damages from the state for personal injuries received on account of the negligence of the state officers at the state fair, a state institution created by the legislature for the purpose of improving agricultural and kindred industries; to disseminate information calculated to educate and benefit the industrial classes; and to advance by such means the material interests of the state, being objects similar to those sought by the public school system In passing upon the question of the state's liability for the negligent acts of its officers or agents, the court said:

No claim arises against any government is favor of an individual, by reason of the misfeasance, laches, or unauthorized exercise of powers by its officers or agents (Citing Gibbons vs U S, 8 Wall, 269; Clodfelter vs State, 86 N C, 51, 53; 41 Am Rep, 440; Chapman vs State, 104 Cal, 690; 43 Am St Rep, 158; Green vs State, 73 Cal, 29; Bourn vs Hart, 93 Cal, 321; 27 Am St Rep, 203; Story on Agency, sec 319)

As to the scope of legislative enactments permitting individuals to sue the state where the cause of action arises out of either fort or contract, the rule is stated in 36 Cyc, 915, thus:

By consenting to be sued a state simply waives its immunity from suit It does not thereby concede its liability to plaintiff, or create any cause of action in his favor, or extend its liability to any cause not previously recognized It merely gives a remedy to enforce a preexisting liability and submits itself to the jurisdiction of the court, subject to its right to interpose any lawful defense

In Apfelbacher vs State (152 N W, 144, advanced sheets), decided April 16, 1915, the Act of 1913, which authorized the bringing of this suit, read:

SECTION 1 Authority is hereby given to George Apfelbacher, of the town of Summit, Waukesha County, Wisconsin, to bring suit in such court or courts and in such form or forms as he may be advised for the purpose of settling and determining all controversies which he may now have with the State of Wisconsin, or its duly authorized officers and agents, relative to the mill property of said George Apfelbacher, the fish hatchery of the State of Wisconsin on the Bark River, and the mill property of Evan Humphrey at the lower end of Nagawicka Lake, and relative to the use of the waters of said Bark River and Nagawicka Lake, all in the county of Waukesha, Wisconsin

In determining the scope of this act, the court said:

Plaintiff claims that by the enactment of this law the legislature admitted liability on the part of the state for the acts of its officers, and that the suit now stands just as it would stand between private parties It is difficult to see how the act does, or was intended to do, more than remove the state's immunity from suit It simply gives authority to commence suit for the purpose of settling plaintiff's controversies with the estate Nowhere in the act is there a whisper or suggestion that the court or courts in the disposition of the suit shall depart from well established principles of law, or that the amount of damages is the only question to be settled The act opened the door of the court to the plaintiff It did not pass upon the question of liability, but left the suit just where it would be in the absence of the state's immunity from suit If the Legislature had intended to change the rule that obtained in this state so long and to declare liability on the part of the state, it would not have left so important a matter to mere inference, but would have done so in express terms (Murdock Grate Co vs Commonwealth, 152 Mass, 28; 24 NE, 854; 8 L R A, 399)

In Denning vs State (123 Cal, 316), the provisions of the Act of 1893, relied upon and considered, are as follows:

All persons who have, or shall hereafter have, claims on contract or for negligence against the state not allowed by the state board of examiners, are hereby authorized, on the terms and conditions herein contained, to bring suit thereon against the state in any of the courts of this state of competent jurisdiction, and prosecute the same to final judgment The rules of practice in civil cases shall apply to such suits, except as herein otherwise provided

And the court said:

This statute has been considered by this court in at least two cases, arising under different facts, and in both it was held that said statute did not create any liability or cause of action against the state where none existed before, but merely gave an additional remedy to enforce such liability as would have existed if the statute had not been enacted (Chapman vs State, 104 Cal, 690; 43 Am St Rep, 158; Melvin vs State, 121 Cal, 16)

A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of all claims against the commonwealth, whether at law or in equity," with an exception not necessary to be here mentioned In construing this statute the court, in Murdock Grate Co vs Commonwealth (152 Mass, 28), said:

The statute we are discussing disclose no intention to create against the state a new and heretofore unrecognized class of liabilities, but only an intention to provide a judicial tribunal where well recognized existing liabilities can be adjudicated

In Sipple vs State (99 N Y, 284), where the board of the canal claims had, by the terms of the statute of New York, jurisdiction of claims for damages for injuries in the management of the canals such as the plaintiff had sustained, Chief Justice Ruger remarks: "It must be conceded that the state can be made liable for injuries arising from the negligence of its agents or servants, only by force of some positive statute assuming such liability"

It being quite clear that Act No 2457 does not operate to extend the Government's liability to any cause not previously recognized, we will now examine the substantive law touching the defendant's liability for the negligent acts of its officers, agents, and employees Paragraph 5 of article 1903 of the Civil Code reads:

The state is liable in this sense when it acts through a special agent, but not when the damage should have been caused by the official to whom properly it pertained to do the act performed, in which case the provisions of the preceding article shall be applicable

The supreme court of Spain in defining the scope of this paragraph said:

That the obligation to indemnify for damages which a third person causes to another by his fault or negligence is based, as is evidenced by the same Law 3, Title 15, Partida 7, on that the person obligated, by his own fault or negligence, takes part in the act or omission of the third party who caused the damage It follows therefrom that the state, by virtue of such provisions of law, is not responsible for the damages suffered by private individuals in consequence of acts performed by its employees in the discharge of the functions pertaining to their office, because neither fault nor even negligence can be presumed on the part of the state in the organization of branches of public service and in the appointment of its agents; on the contrary, we must presuppose all foresight humanly possible on its part in order that each branch of service serves the general weal an that of private persons interested in its operation Between these latter and the state, therefore, no relations of a private nature governed by the civil law can arise except in a case where the state acts as a judicial person capable of acquiring rights and contracting obligations (Supreme Court of Spain, January 7, 1898; 83 Jur Civ, 24)

That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which arise out of fault or negligence; and whereas in the first article thereof No 1902, where the general principle is laid down that where a person who by an act or omission causes damage to another through fault or negligence, shall be obliged to repair the damage so done, reference is made to acts or omissions of the persons who directly or indirectly cause the damage, the following articles refers to this persons and imposes an identical obligation upon those who maintain fixed relations of authority and superiority over the authors of the damage, because the law presumes that in consequence of such relations the evil caused by their own fault or negligence is imputable to them This legal presumption gives way to proof, however, because, as held in the last paragraph of article 1903, responsibility for acts of third persons ceases when the persons mentioned in said article prove that they employed all the diligence of a good father of a family to avoid the damage, and among these persons, called upon to answer in a direct and not a subsidiary manner, are found, in addition to the mother or the father in a proper case, guardians and owners or directors of an establishment or enterprise, the state, but not always, except when it acts through the agency of a special agent, doubtless because and only in this case, the fault or negligence, which is the original basis of this kind of objections, must be presumed to lie with the state

That although in some cases the state might by virtue of the general principle set forth in article 1902 respond for all the damage that is occasioned to private parties by orders or resolutions which by fault or negligence are made by branches of the central administration acting in the name and representation of the state itself and as an external expression of its sovereignty in the exercise of its executive powers, yet said article is not applicable in the case of damages said to have been occasioned to the petitioners by an executive official, acting in the exercise of his powers, in proceedings to enforce the collections of certain property taxes owing by the owner of the property which they hold in sublease

That the responsibility of the state is limited by article 1903 to the case wherein it acts through a special agent (and a special agent, in the sense in which these words are employed, is one who receives a definite and fixed order or commission, foreign to the exercise of the duties of his office if he is a special official) so that in representation of the state and being bound to act as an agent thereof, he executes the trust confided to him This concept does not apply to any executive agent who is an employee of the acting administration and who on his own responsibility performs the functions which are inherent in and naturally pertain to his office and which are regulated by law and the regulations" (Supreme Court of Spain, May 18, 1904; 98 Jur Civ, 389, 390)

That according to paragraph 5 of article 1903 of the Civil Code and the principle laid down in a decision, among others, of the 18th of May, 1904, in a damage case, the responsibility of the state is limited to that which it contracts through a special agent, duly empowered by a definite order or commission to perform some act or charged with some definite purpose which gives rise to the claim, and not where the claim is based on acts or omissions imputable to a public official charged with some administrative or technical office who can be held to the proper responsibility in the manner laid down by the law of civil responsibility Consequently, the trial court in not so deciding and in sentencing the said entity to the payment of damages, caused by an official of the second class referred to, has by erroneous interpretation infringed the provisions of articles 1902 and 1903 of the Civil Code (Supreme Court of Spain, July 30, 1911; 122 Jur Civ, 146)

It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable, according to the above quoted decisions of the Supreme Court of Spain, for the acts of its agents, officers and employees when they act as special agents within the meaning of paragraph 5 of article 1903, supra, and that the chauffeur of the ambulance of the General Hospital was not such an agent

For the foregoing reasons, the judgment appealed from must be reversed, without costs in this instance Whether the Government intends to make itself legally liable for the amount of damages above set forth, which the plaintiff has sustained by reason of the negligent acts of one of its employees, by legislative enactment and by appropriating sufficient funds therefor, we are not called upon to determine This matter rests solely with the Legislature and not with the courts

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

GR No L-55963 December 1, 1989

SPOUSES JOSE FONTANILLA AND VIRGINIA FONTANILLA, petitioners, vsHONORABLE INOCENCIO D MALIAMAN and NATIONAL IRRIGATION ADMINISTRATION, respondents

GR No L-61045 December 1, 1989

NATIONAL IRRIGATION ADMINISTRATION, appellant, vsSPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees

Cecilio V Suarez, Jr for Spouses Fontanilla

Felicisimo C Villaflor for NIA

 

PARAS, J:

In GR No L-55963, the petition for review on certiorari seeks the affirmance of the decision dated March 20, 1980 of the then Court of First Instance of Nueva Ecija, Branch VIII, at San Jose City and its modification with respect to the denial of petitioner's claim for moral and exemplary damages and attorneys fees

In GR No 61045, respondent National Irrigation Administration seeks the reversal of the aforesaid decision of the lower court The original appeal of this case before the Court of Appeals was certified to this Court and in the resolution of July 7, 1982, it was docketed with the aforecited number And in the resolution of April 3, this case was consolidated with GR No 55963

It appears that on August 21, 1976 at about 6:30 PM, a pickup owned and operated by respondent National Irrigation Administration, a government agency bearing Plate No IN-651, then driven officially by Hugo Garcia, an employee of said agency as its regular driver, bumped a bicycle ridden by Francisco Fontanilla, son of herein petitioners, and Restituto Deligo, at Maasin, San Jose City along the Maharlika Highway As a result of the impact, Francisco Fontanilla and Restituto Deligo were injured and brought to the San Jose City Emergency Hospital for treatment Fontanilla was later transferred to the Cabanatuan Provincial Hospital where he died

Garcia was then a regular driver of respondent National Irrigation Administration who, at the time of the accident, was a licensed professional driver and who qualified for employment as such regular driver of respondent after having passed the written and oral examinations on traffic rules and maintenance of vehicles given by National Irrigation Administration authorities

The within petition is thus an off-shot of the action (Civil Case No SJC-56) instituted by petitioners-spouses on April 17, 1978 against respondent NIA before the then Court of First Instance of Nueva Ecija, Branch VIII at San Jose City, for damages in connection with the death of their son resulting from the aforestated accident

After trial, the trial court rendered judgment on March 20, 1980 which directed respondent National Irrigation Administration to pay damages (death benefits) and actual expenses to petitioners The dispositive portion of the decision reads thus:

Judgment is here rendered ordering the defendant National Irrigation Administration to pay to the heirs of the deceased P12,00000 for the death of Francisco Fontanilla; P3,38900 which the parents of the deceased had spent for the hospitalization and burial of the deceased Francisco Fontanilla; and to pay the costs (Brief for the petitioners spouses Fontanilla, p 4; Rollo, p 132)

Respondent National Irrigation Administration filed on April 21, 1980, its motion for reconsideration of the aforesaid decision which respondent trial court denied in its Order of June 13, 1980 Respondent National Irrigation Administration thus appealed said decision to the Court of Appeals (CA-GR No 67237- R) where it filed its brief for appellant in support of its position

Instead of filing the required brief in the aforecited Court of Appeals case, petitioners filed the instant petition with this Court

The sole issue for the resolution of the Court is: Whether or not the award of moral damages, exemplary damages and attorney's fees is legally proper in a complaint for damages based on quasi-delict which resulted in the death of the son of herein petitioners

Petitioners allege:

1 The award of moral damages is specifically allowable under paragraph 3 of Article 2206 of the New Civil Code which provides that the spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased Should moral damages be granted, the award should be made to each of petitioners-spouses individually and in varying amounts depending upon proof of mental and depth of intensity of the same, which should not be less than P50,00000 for each of them

2 The decision of the trial court had made an impression that respondent National Irrigation Administration acted with gross negligence because of the accident and the subsequent failure of the National Irrigation Administration personnel including the driver to stop in order to give assistance to the, victims Thus, by reason of the gross negligence of respondent, petitioners become entitled to exemplary damages under Arts 2231 and 2229 of the New Civil Code

3 Petitioners are entitled to an award of attorney's fees, the amount of which (20%) had been sufficiently established in the hearing of May 23, 1979

4 This petition has been filed only for the purpose of reviewing the findings of the lower court upon which the disallowance of moral damages, exemplary damages and attorney's fees was based and not for the purpose of disturbing the other findings of fact and conclusions of law

The Solicitor General, taking up the cudgels for public respondent National Irrigation Administration, contends thus:

1 The filing of the instant petition is rot proper in view of the appeal taken by respondent National Irrigation Administration to the Court of Appeals against the judgment sought to be reviewed The focal issue raised in respondent's appeal to the Court of Appeals involves the question as to whether or not the driver of the vehicle that bumped the victims was negligent in his operation of said vehicle It thus becomes necessary that before petitioners' claim for moral and exemplary damages could be resolved, there should first be a finding of negligence on the part of respondent's employee-driver In this regard, the Solicitor General alleges that the trial court decision does not categorically contain such finding

2 The filing of the "Appearance and Urgent Motion For Leave to File Plaintiff-Appellee's Brief" dated December 28, 1981 by petitioners in the appeal (CA-GR No 67237-R; and G R No61045) of the respondent National Irrigation Administration before the Court of Appeals, is an explicit admission of said petitioners that the herein petition, is not proper Inconsistent procedures are manifest because while petitioners question the findings of fact in the Court of Appeals, they present only the questions of law before this Court which posture confirms their admission of the facts

3 The fact that the parties failed to agree on whether or not negligence caused the vehicular accident involves a question of fact which petitioners should have brought to the Court of Appeals within the reglementary period Hence, the decision of the trial court has become final as to the petitioners and for this reason alone, the petition should be dismissed

4 Respondent Judge acted within his jurisdiction, sound discretion and in conformity with the law

5 Respondents do not assail petitioners' claim to moral and exemplary damages by reason of the shock and subsequent illness they suffered because of the death of their son Respondent National Irrigation Administration, however, avers that it cannot be held liable for the damages because it is an agency of the State performing governmental functions and driver Hugo Garcia was a regular driver of the vehicle, not a special agent who was performing a job or act foreign to his usual duties Hence, the liability for the tortious act should not be borne by respondent government agency but by driver Garcia who should answer for the consequences of his act

6 Even as the trial court touched on the failure or laxity of respondent National Irrigation Administration in exercising due diligence in the selection and supervision of its employee, the matter of due diligence is not an issue in this case since driver Garcia was not its special agent but a regular driver of the vehicle

The sole legal question on whether or not petitioners may be entitled to an award of moral and exemplary damages and attorney's fees can very well be answered with the application of Arts 2176 and 2180 of theNew Civil Code

Art 2176 thus provides:

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

Paragraphs 5 and 6 of Art 21 80 read as follows:

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even the though the former are not engaged in any business or industry

The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Art 2176 shall be applicable

The liability of the State has two aspects namely:

1 Its public or governmental aspects where it is liable for the tortious acts of special agents only

2 Its private or business aspects (as when it engages in private enterprises) where it becomes liable as an ordinary employer (p 961, Civil Code of the Philippines; Annotated, Paras; 1986 Ed )

In this jurisdiction, the State assumes a limited liability for the damage caused by the tortious acts or conduct of its special agent

Under the aforequoted paragrah 6 of Art 2180, the State has voluntarily assumed liability for acts done through special agents The State's agent, if a public official, must not only be specially commissioned to do a particular task but that such task must be foreign to said official's usual governmental functions If the State's agent is not a public official, and is commissioned to perform non-governmental functions, then the State assumes the role of an ordinary employer and will be held liable as such for its agent's tort Where the government commissions a private individual for a special governmental task, it is acting through a special agent within the meaning of the provision (Torts and Damages, Sangco, p 347, 1984 Ed)

Certain functions and activities, which can be performed only by the government, are more or less generally agreed to be "governmental" in character, and so the State is immune from tort liability On the other hand, a service which might as well be provided by a private corporation, and particularly when it collects revenues from it, the function is considered a "proprietary" one, as to which there may be liability for the torts of agents within the scope of their employment

The National Irrigation Administration is an agency of the government exercising proprietary functions, by express provision of Rep Act No 3601 Section 1 of said Act provides:

Section 1 Name and domicile-A body corporate is hereby created which shall be known as the National Irrigation Administration, hereinafter called the NIA for short, which shall be organized immediately after the approval of this Act It shall have its principal seat of business in the City of Manila and shall have representatives in all provinces for the proper conduct of its business

Section 2 of said law spells out some of the NIA's proprietary functions Thus-

Sec 2 Powers and objectives-The NIA shall have the following powers and objectives:

(a) x x x x x x x x x x x x x x x x x x

(b) x x x x x x x x x x x x x x x x x x

(c) To collect from the users of each irrigation system constructed by it such fees as may be necessary to finance the continuous operation of the system and reimburse within a certain period not less than twenty-five years cost of construction thereof; and

(d) To do all such other tthings and to transact all such business as are directly or indirectly necessary, incidental or conducive to the attainment of the above objectives

Indubitably, the NIA is a government corporation with juridical personality and not a mere agency of the government Since it is a corporate body performing non-governmental functions, it now becomes liable for the damage caused by the accident resulting from the tortious act of its driver-employee In this particular case, the NIA assumes the responsibility of an ordinary employer and as such, it becomes answerable for damages

This assumption of liability, however, is predicated upon the existence of negligence on the part of respondent NIA The negligence referred to here is the negligence of supervision

At this juncture, the matter of due diligence on the part of respondent NIA becomes a crucial issue in determining its liability since it has been established that respondent is a government agency performing proprietary functions and as such, it assumes the posture of an ordinary employer which, under Par 5 of Art 2180, is responsible for the damages caused by its employees provided that it has failed to observe or exercise due diligence in the selection and supervision of the driver

It will be noted from the assailed decision of the trial court that "as a result of the impact, Francisco Fontanilla wasthrown to a distance 50 meters away from the point of impact while Restituto Deligo was thrown a little bit further away The impact took place almost at the edge of the cemented portion of the road" (Emphasis supplied,) [page 26, Rollo]

The lower court further declared that "a speeding vehicle coming in contact with a person causes force and impact upon the vehicle that anyone in the vehicle cannot fail to notice As a matter of fact, the impact was so strong as shown by the fact that the vehicle suffered dents on the right side of the radiator guard, the hood, the fender and a crack on the radiator as shown by the investigation report (Exhibit "E") (Emphasis supplied) [page 29, Rollo]

It should be emphasized that the accident happened along the Maharlika National Road within the city limits of San Jose City, an urban area Considering the fact that the victim was thrown 50 meters away from the point of impact, there is a strong indication that driver Garcia was driving at a high speed This is confirmed by the fact that the pick-up suffered substantial and heavy damage as above-described and the fact that the NIA group was then "in a hurry to reach the campsite as early as possible", as shown by their not stopping to find out what they bumped as would have been their normal and initial reaction

Evidently, there was negligence in the supervision of the driver for the reason that they were travelling at a high speed within the city limits and yet the supervisor of the group, Ely Salonga, failed to caution and make the driver observe the proper and allowed speed limit within the city Under the situation, such negligence is further aggravated by their desire to reach their destination without even checking whether or not the vehicle suffered damage from the object it bumped, thus showing imprudence and reckelessness on the part of both the driver and the supervisor in the group

Significantly, this Court has ruled that even if the employer can prove the diligence in the selection and supervision (the latter aspect has not been established herein) of the employee, still if he ratifies the wrongful acts, or take no step to avert further damage, the employer would still be liable (Maxion vs Manila Railroad Co, 44 Phil 597)

Thus, too, in the case of Vda de Bonifacio vs BLT Bus Co (L-26810, August 31, 1970, 34 SCRA 618), this Court held that a driver should be especially watchful in anticipation of others who may be using the highway, and his failure to keep a proper look out for reasons and objects in the line to be traversed constitutes negligence

Considering the foregoing, respondent NIA is hereby directed to pay herein petitioners-spouses the amounts of P12,00000 for the death of Francisco Fontanilla; P3,38900 for hospitalization and burial expenses of the aforenamed deceased; P30,00000 as moral damages; P8,00000 as exemplary damages and attorney's fees of 20% of the total award

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

GR No L-47745 April 15, 1988

JOSE S AMADORA, LORETA A AMADORA, JOSE A AMADORA JR, NORMA A YLAYA PANTALEON A AMADORA, JOSE A AMADORA III, LUCY A AMADORA, ROSALINDA A AMADORA, PERFECTO A AMADORA, SERREC A AMADORA, VICENTE A AMADORA and MARIA TISCALINA A AMADORA,petitioners vsHONORABLE COURT OF APPEALS, COLEGIO DE SAN JOSE-RECOLETOS, VICTOR LLUCH SERGIO P DLMASO JR, CELESTINO DICON, ANIANO ABELLANA, PABLITO DAFFON thru his parents and natural guardians, MR and MRS NICANOR GUMBAN, and ROLANDO VALENCIA, thru his guardian, A FRANCISCO ALONSO, respondents

Jose S Amadora & Associates for petitioners

Padilla Law Office for respondents

 

CRUZ, J:

Like any prospective graduate, Alfredo Amadora was looking forward to the commencement exercises where he would ascend the stage and in the presence of his relatives and friends receive his high school diploma These ceremonies were scheduled on April 16, 1972 As it turned out, though, fate would intervene and deny him that awaited experience On April 13, 1972, while they were in the auditorium of their school, the Colegio de San Jose-Recoletos, a classmate, Pablito Damon, fired a gun that mortally hit Alfredo, ending all his expectations and his life as well The victim was only seventeen years old 1

Daffon was convicted of homicide thru reckless imprudence  2 Additionally, the herein petitioners, as the victim's parents, filed a civil action for damages under Article 2180 of the Civil Code against the Colegio de San Jose-Recoletos, its rector the high school principal, the dean of boys, and the physics teacher, together with Daffon and two other students, through their respective parents The complaint against the students was later dropped After trial, the Court of First Instance of Cebu held the remaining defendants liable to the plaintiffs in the sum of P294,98400, representing death compensation, loss of earning capacity, costs of litigation, funeral expenses, moral damages, exemplary damages, and attorney's fees  3 On appeal to the respondent court, however, the decision was reversed and all the defendants were completely absolved  4

In its decision, which is now the subject of this petition for certiorari under Rule 45 of the Rules of Court, the respondent court found that Article 2180 was not applicable as the Colegio de San Jose-Recoletos was not a school of arts and trades but an academic institution of learning It also held that the students were not in the custody of the school at the time of the incident as the semester had already ended, that there was no clear identification of the fatal gun and that in any event the defendant, had exercised the necessary diligence in preventing the injury 5

The basic undisputed facts are that Alfredo Amadora went to the San Jose-Recoletos on April 13, 1972, and while in its auditorium was shot to death by Pablito Daffon, a classmate On the implications and consequences of these facts, the parties sharply disagree

The petitioners contend that their son was in the school to show his physics experiment as a prerequisite to his graduation; hence, he was then under the custody of the private respondents The private respondents submit that Alfredo Amadora had gone to the school only for the purpose of submitting his physics report and that he was no longer in their custody because the semester had already ended

There is also the question of the identity of the gun used which the petitioners consider important because of an earlier incident which they claim underscores the negligence of the school and at least one of the private respondents It is not denied by the respondents that on April 7, 1972, Sergio Damaso, Jr, the dean of boys, confiscated from Jose Gumban an unlicensed pistol but later returned it to him without making a report to the principal or taking any further action  6 As Gumban was one of the companions of Daffon when the latter fired the gun that killed Alfredo, the petitioners contend that this was the same pistol that had been confiscated from Gumban and that their son would not have been killed if it had not been returned by Damaso The respondents say, however, that there is no proof that the gun was the same firearm that killed AlfredoResolution of all these disagreements will depend on the interpretation of Article 2180 which, as it happens, is invoked by both parties in support of their conflicting positions The pertinent part of this article reads as follows:

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices so long as they remain in their custody

Three cases have so far been decided by the Court in connection with the above-quoted provision, to wit: Exconde v Capuno 7 Mercado v Court of Appeals, 8 and Palisoc v Brillantes 9 These will be briefly reviewed in this opinion for a better resolution of the case at bar

In the Exconde Case, Dante Capuno, a student of the Balintawak Elementary School and a Boy Scout, attended a Rizal Day parade on instructions of the city school supervisor After the parade, the boy boarded a jeep, took over its wheel and drove it so recklessly that it turned turtle, resulting in the death of two of its passengers Dante was found guilty of double homicide with reckless imprudence In the separate civil action flied against them, his father was held solidarily liable with him in damages under Article 1903 (now Article 2180) of the Civil Code for the tort committed by the 15-year old boy

This decision, which was penned by Justice Bautista Angelo on June 29,1957, exculpated the school in an obiter dictum (as it was not a party to the case) on the ground that it was riot a school of arts and trades Justice JBL Reyes, with whom Justices Sabino Padilla and Alex Reyes concurred, dissented, arguing that it was the school authorities who should be held liable Liability under this rule, he said, was imposed on (1) teachers in general; and (2) heads of schools of arts and trades in particular The modifying clause "of establishments of arts and trades" should apply only to "heads" and not "teachers"

Exconde was reiterated in the Mercado Case, and with an elaboration A student cut a classmate with a razor blade during recess time at the Lourdes Catholic School in Quezon City, and the parents of the victim sued the culprits parents for damages Through Justice Labrador, the Court declared in another obiter (as the school itself had also not been sued that the school was not liable because it was not an establishment of arts and trades Moreover, the custody requirement had not been proved as this "contemplates a situation where the student lives and boards with the teacher, such that the control, direction and influences on the pupil supersede those of the parents" Justice JBL Reyes did not take part but the other members of the court concurred in this decision promulgated on May 30, 1960

In Palisoc vs Brillantes, decided on October 4, 1971, a 16-year old student was killed by a classmate with fist blows in the laboratory of the Manila Technical Institute Although the wrongdoer — who was already of age — was not boarding in the school, the head thereof and the teacher in charge were held solidarily liable with him The Court declared through Justice Teehankee:

The phrase used in the cited article — "so long as (the students) remain in their custody" — means the protective and supervisory custody that the school and its heads and teachers exercise over the pupils and students for as long as they are at attendance in the school, including recess time There is nothing in the law that requires that for such liability to attach, the pupil or student who commits the tortious act must live and board in the school, as erroneously held by the lower court, and the dicta in Mercado (as well as in Exconde) on which it relied, must now be deemed to have been set aside by the present decision

This decision was concurred in by five other members, 10 including Justice JBL Reyes, who stressed, in answer to the dissenting opinion, that even students already of age were covered by the provision since they were equally in the custody of the school and subject to its discipline Dissenting with three others,  11 Justice Makalintal was for retaining the custody interpretation in Mercado and submitted that the rule should apply only to torts committed by students not yet of age as the school would be acting only in loco parentisIn a footnote, Justice Teehankee said he agreed with Justice Reyes' dissent in the Exconde Case but added that "since the school involved at bar is a non-academic school, the question as to the applicability of the cited codal provision to academic institutions will have to await another case wherein it may properly be raised"This is the caseUnlike in Exconde and Mercado, the Colegio de San Jose-Recoletos has been directly impleaded and is sought to be held liable under Article 2180; and unlike in Palisoc, it is not a school of arts and trades but an academic institution of learning The parties herein have also directly raised the question of whether or not Article 2180 covers even establishments which are technically not schools of arts and trades, and, if so, when the offending student is supposed to be "in its custody"After an exhaustive examination of the problem, the Court has come to the conclusion that the provision in question should apply to all schools, academic as well as non-academic Where the school is academic rather than technical or vocational in nature, responsibility for the tort committed by the student will attach to the teacher in charge of such student, following the first part of the provision This is the general rule In the case of establishments of arts and trades, it is the head thereof, and only he, who shall be held liable as an exception to the general rule In other words, teachers in general shall be liable for the acts of their students except where the school is technical in nature, in which case it is the head thereof who shall be answerable Following the canon ofreddendo singula singulis "teachers" should apply to the words "pupils and students" and "heads of establishments of arts and trades" to the word "apprentices"

The Court thus conforms to the dissenting opinion expressed by Justice JBL Reyes in Exconde where he said in part:

I can see no sound reason for limiting Art 1903 of the Old Civil Code to teachers of arts and trades and not to academic ones What substantial difference is there between them insofar as concerns the proper supervision and vice over their pupils? It cannot be seriously contended that an academic teacher is exempt from the duty of watching that his pupils do not commit a tort to the detriment of third Persons, so long as they are in a position to exercise authority and Supervision over the pupil In my opinion, in the phrase "teachers or heads of establishments of arts and trades" used in Art 1903 of the old Civil Code, the words "arts and trades" does not qualify "teachers" but only "heads of establishments" The phrase is only an updated version of the equivalent terms "preceptores y artesanos" used in the Italian and French Civil Codes

If, as conceded by all commentators, the basis of the presumption of negligence of Art 1903 in someculpa in vigilando that the parents, teachers, etc are supposed to have incurred in the exercise of their authority, it would seem clear that where the parent places the child under the effective authority of the teacher, the latter, and not the parent, should be the one answerable for the torts committed while under his custody, for the very reason/that the parent is not supposed to interfere with the discipline of the school nor with the authority and supervision of the teacher while the child is under instruction And if there is no authority, there can be no responsibility

There is really no substantial distinction between the academic and the non-academic schools insofar as torts committed by their students are concerned The same vigilance is expected from the teacher over the students under his control and supervision, whatever the nature of the school where he is teaching The suggestion in the Exconde and Mercado Cases is that the provision would make the teacher or even the head of the school of arts and trades liable for an injury caused by any student in its custody but if that same tort were committed in an academic school, no liability would attach to the teacher or the school head All other circumstances being the same, the teacher or the head of the academic school would be absolved whereas the teacher and the head of the non-academic school would be held liable, and simply because the latter is a school of arts and trades

The Court cannot see why different degrees of vigilance should be exercised by the school authorities on the basis only of the nature of their respective schools There does not seem to be any plausible reason for relaxing that vigilance simply because the school is academic in nature and for increasing such vigilance where the school is non-academic Notably, the injury subject of liability is caused by the student and not by the school itself nor is it a result of the operations of the school or its equipment The injury contemplated may be caused by any student regardless of the school where he is registered The teacher certainly should not be able to excuse himself by simply showing that he is teaching in an academic school where, on the other hand, the head would be held liable if the school were non-academic

These questions, though, may be asked: If the teacher of the academic school is to be held answerable for the torts committed by his students, why is it the head of the school only who is held liable where the injury is caused in a school of arts and trades? And in the case of the academic or non- technical school, why not apply the rule also to the head thereof instead of imposing the liability only on the teacher?

The reason for the disparity can be traced to the fact that historically the head of the school of arts and trades exercised a closer tutelage over his pupils than the head of the academic school The old schools of arts and trades were engaged in the training of artisans apprenticed to their master who personally and directly instructed them on the technique and secrets of their craft The head of the school of arts and trades was such a master and so was personally involved in the task of teaching his students, who usually even boarded with him and so came under his constant control, supervision and influence By contrast, the head of the academic school was not as involved with his students and exercised only administrative duties over the teachers who were the persons directly dealing with the students The head of the academic school had then (as now) only a vicarious relationship with the students Consequently, while he could not be directly faulted for the acts of the students, the head of the school of arts and trades, because of his closer ties with them, could be so blamed

It is conceded that the distinction no longer obtains at present in view of the expansion of the schools of arts and trades, the consequent increase in their enrollment, and the corresponding diminution of the direct and personal contract of their heads with the students Article 2180, however, remains unchanged In its present state, the provision must be interpreted by the Court according to its clear and original mandate until the legislature, taking into account the charges in the situation subject to be regulated, sees fit to enact the necessary amendment

The other matter to be resolved is the duration of the responsibility of the teacher or the head of the school of arts and trades over the students Is such responsibility co-extensive with the period when the student is actually undergoing studies during the school term, as contended by the respondents and impliedly admitted by the petitioners themselves?

From a reading of the provision under examination, it is clear that while the custody requirement, to repeatPalisoc v Brillantes, does not mean that the student must be boarding with the school authorities, it does signify that the student should be within the control and under the influence of the school authorities at the time of the occurrence of the injury This does not necessarily mean that such, custody be co-terminous with the semester, beginning with the start of classes and ending upon the close thereof, and excluding the time before or after such period, such as the period of registration, and in the case of graduating students, the period before the commencement exercises In the view of the Court, the student is in the custody of the school authorities as long as he is under the control and influence of the school and within its premises, whether the semester has not yet begun or has already ended

It is too tenuous to argue that the student comes under the discipline of the school only upon the start of classes notwithstanding that before that day he has already registered and thus placed himself under its rules Neither should such discipline be deemed ended upon the last day of classes notwithstanding that there may still be certain requisites to be satisfied for completion of the course, such as submission of reports, term papers, clearances and the like During such periods, the student is still subject to the disciplinary authority of the school and cannot consider himself released altogether from observance of its rules

As long as it can be shown that the student is in the school premises in pursuance of a legitimate student objective, in the exercise of a legitimate student right, and even in the enjoyment of a legitimate student right, and even in the enjoyment of a legitimate student privilege, the responsibility of the school authorities over the student continues Indeed, even if the student should be doing nothing more than relaxing in the campus in the company of his classmates and friends and enjoying the ambience and atmosphere of the school, he is still within the custody and subject to the discipline of the school authorities under the provisions of Article 2180

During all these occasions, it is obviously the teacher-in-charge who must answer for his students' torts, in practically the same way that the parents are responsible for the child when he is in their custody The teacher-in-charge is the one designated by the dean, principal, or other administrative superior to exercise supervision over the pupils in the specific classes or

sections to which they are assigned It is not necessary that at the time of the injury, the teacher be physically present and in a position to prevent it Custody does not connote immediate and actual physical control but refers more to the influence exerted on the child and the discipline instilled in him as a result of such influence Thus, for the injuries caused by the student, the teacher and not the parent shag be held responsible if the tort was committed within the premises of the school at any time when its authority could be validly exercised over him

In any event, it should be noted that the liability imposed by this article is supposed to fall directly on the teacher or the head of the school of arts and trades and not on the school itself If at all, the school, whatever its nature, may be held to answer for the acts of its teachers or even of the head thereof under the general principle of respondeat superior, but then it may exculpate itself from liability by proof that it had exercised the diligence of abonus paterfamilias

Such defense is, of course, also available to the teacher or the head of the school of arts and trades directly held to answer for the tort committed by the student As long as the defendant can show that he had taken the necessary precautions to prevent the injury complained of, he can exonerate himself from the liability imposed by Article 2180, which also states that:

The responsibility treated of in this article shall cease when the Persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damages

In this connection, it should be observed that the teacher will be held liable not only when he is acting in loco parentis for the law does not require that the offending student be of minority age Unlike the parent, who wig be liable only if his child is still a minor, the teacher is held answerable by the law for the act of the student under him regardless of the student's age Thus, in the Palisoc Case, liability attached to the teacher and the head of the technical school although the wrongdoer was already of age In this sense, Article 2180 treats the parent more favorably than the teacher

The Court is not unmindful of the apprehensions expressed by Justice Makalintal in his dissenting opinion in Palisoc that the school may be unduly exposed to liability under this article in view of the increasing activism among the students that is likely to cause violence and resulting injuries in the school premises That is a valid fear, to be sure Nevertheless, it should be repeated that, under the present ruling, it is not the school that will be held directly liable Moreover, the defense of due diligence is available to it in case it is sought to be held answerable as principal for the acts or omission of its head or the teacher in its employ

The school can show that it exercised proper measures in selecting the head or its teachers and the appropriate supervision over them in the custody and instruction of the pupils pursuant to its rules and regulations for the maintenance of discipline among them In almost all cases now, in fact, these measures are effected through the assistance of an adequate security force to help the teacher physically enforce those rules upon the students Ms should bolster the claim of the school that it has taken adequate steps to prevent any injury that may be committed by its students

A fortiori, the teacher himself may invoke this defense as it would otherwise be unfair to hold him directly answerable for the damage caused by his students as long as they are in the school premises and presumably under his influence In this respect, the Court is disposed not to expect from the teacher the same measure of responsibility imposed on the parent for their influence over the child is not equal in degree Obviously, the parent can expect more obedience from the child because the latter's dependence on him is greater than on the teacher It need not be stressed that such dependence includes the child's support and sustenance whereas submission to the teacher's influence, besides being coterminous with the period of custody is usually enforced only because of the students' desire to pass the course The parent can instill more las discipline on the child than the teacher and so should be held to a greater accountability than the teacher for the tort committed by the child

And if it is also considered that under the article in question, the teacher or the head of the school of arts and trades is responsible for the damage caused by the student or apprentice even if he is already of age — and therefore less tractable than the minor — then there should all the more be justification to require from the school authorities less accountability as long as they can prove reasonable diligence in preventing the injury After all, if the parent himself is no longer liable for the student's acts because he has reached majority age and so is no longer under the former's control, there is then all the more reason for leniency in assessing the teacher's responsibility for the acts of the student

Applying the foregoing considerations, the Court has arrived at the following conclusions:

1 At the time Alfredo Amadora was fatally shot, he was still in the custody of the authorities of Colegio de San Jose-Recoletos notwithstanding that the fourth year classes had formally ended It was immaterial if he was in the school auditorium to finish his physics experiment or merely to submit his physics report for what is important is that he was there for a legitimate purpose As previously observed, even the mere savoring of the company of his friends in the premises of the school is a legitimate purpose that would have also brought him in the custody of the school authorities

2 The rector, the high school principal and the dean of boys cannot be held liable because none of them was the teacher-in-charge as previously defined Each of them was exercising only a general authority over the student body and not the direct control and influence exerted by the teacher placed in charge of particular classes or sections and thus immediately involved in its discipline The evidence of the parties does not disclose who the teacher-in-charge of the offending student was The mere fact that Alfredo Amadora had gone to school that day in connection with his physics report did not necessarily make the physics teacher, respondent Celestino Dicon, the teacher-in-charge of Alfredo's killer

3 At any rate, assuming that he was the teacher-in-charge, there is no showing that Dicon was negligent in enforcing discipline upon Daffon or that he had waived observance of the rules and regulations of the school or condoned their non-observance His absence when the tragedy happened cannot be considered against him because he was not supposed or required to report to school on that day And while it is true that the offending student was still in the custody of the teacher-in-charge even if the latter was physically absent when the tort was committed, it has not been established that it was caused by his laxness in enforcing discipline upon the student On the contrary, the private respondents have proved that they had exercised due diligence, through the enforcement of the school regulations, in maintaining that discipline

4 In the absence of a teacher-in-charge, it is probably the dean of boys who should be held liable especially in view of the unrefuted evidence that he had earlier confiscated an unlicensed gun from one of the students and returned the same later to him without taking disciplinary action or reporting the matter to higher authorities While this was clearly negligence on his part, for which he deserves sanctions from the school, it does not necessarily link him to the shooting of Amador as it has not been shown that he confiscated and returned pistol was the gun that killed the petitioners' son

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

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

WHEREFORE, the petition is DENIED, without any pronouncement as to costs It is so ordered

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

GR No 70458 October 5, 1988

BENJAMIN SALVOSA and BAGUIO COLLEGES FOUNDATION, petitioners, vsTHE INTERMEDIATE APPELLATE COURT, EDUARDO B CASTRO, DIOMEDES B CASTRO, VIRGINIA B CASTRO and RODOLFO B CASTRO, respondents

Edilberto B Tenefrancia for petitionersLeonardo L Cocjin Jr for respondents PADILLA, J:

In this petition for review on certiorari, petitioners seek the reversal of the decision 1 of respondent Intermediate Appellate Court, dated 7 December 1984, in AC-GR No CV 69876, in so far as it affirmed the decision 2 of the Court of First Instance of Tarlac (hereinafter referred to as the Trial Court), which held, among others, petitioners solidarily hable with Jimmy B Abon, under Art 2180 of the Civil Code

The relevant facts, as found by the Trial Court and adopted by reference by the respondent Court, are:

Baguio Colleges Foundation (BCF, hereafter) is an academic institution [However], it is also an institution of arts and trade It has so advertised itself, as its own evidence shows Its brochure (Exh 2) shows that BCF has a full-fledged technical-vocational department offer Communication, Broadcast and Teletype Technician courses as well as Electronics Serviceman and Automotive Mechanics courses these courses divest BCF of the nature or character of being purely or exclusively an academic institution 3 Within the premises of the BCF is an ROTC Unit, the Baguio Colleges Foundation Reserve Officers Training Corps (ROTC) Unit, which is under the fifth control of the Armed Forces of the Philippines 4 The ROTC Unit, by way of accommodation to the Armed Forces of the Philippines (AFP), pursuant to Department Order No 14, Series of 1975 of the Department of Education and Culture,  5 is provided by the BCF an office and an armory located at the basement of its main building 6 The Baguio Colleges Foundation ROTC Unit had Jimmy B Abon as its duly appointed armorer 7 As armorer of the ROTC Unit, Jimmy B Abon received his appointment from the AFP Not being an employee of the BCF, he also received his salary from the AFP, 8 as well as orders from Captain Roberto C Ungos, the Commandant of the Baguio Colleges Foundation ROTC Unit, concurrent Commandant of other ROTC units in Baguio and an employee (officer) of the AFP 9Jimmy B Abon was also a commerce student of the BCF On 3 March 1977, at around 8:00 pm, in the parking space of BCF, Jimmy B Abon shot Napoleon Castro a student of the University of Baguio with an unlicensed firearm which the former took from the armory of the ROTC Unit of the BCF 11 As a result, Napoleon Castro died and Jimmy B Abon was prosecuted for, and convicted of the crime of Homicide by Military Commission No 30, AFP 12

Subsequently, the heirs of Napoleon Castro sued for damages, impleading Jimmy B Abon, Roberto C Ungos (ROTC Commandant Benjamin Salvosa (President and Chairman of the Board of BCF), Jesus Salvosa (Executive Vice President of BCF), Libertad D Quetolio (Dean of the College of Education and Executive Trustee of BCF) and the Baguio Colleges Foundation Inc as party defendants After hearing, the Trial Court rendered a decision, (1) sentencing defendants Jimmy B Abon, Benjamin Salvosa and Baguio Colleges Foundation, Inc, jointly and severally, to pay private respondents, as heirs of Napoleon Castro: a) P12,00000 for the death of Napoleon Castro, (b) P316,00000 as indemnity for the loss of earning capacity of the deceased, (c) P5,00000 as moral damages, (d) P6,00000 as actual damages, and (e) P5,00000 as attorney's fees, plus costs; (2) absolving the other defendants; and (3) dismissing the defendants' counterclaim for lack of merit 13 On appeal by petitioners, the respondent Court affirmed with modification the decision of the Trial Court The modification consisted in reducing the award for loss of earning capacity of the deceased from P316,00000 to P30,00000 by way of temperate damages, and increasing the indemnity for the death of Napoleon Castro from P12,00000 to P30,00000

Hence, this petition

The central issue in this case is whether or not petitioners can be held solidarity hable with Jimmy B Abon for damages under Article 2180 of the Civil Code, as a consequence of the tortious act of Jimmy B Abon

Under the penultimate paragraph of Art 2180 of the Civil Code, teachers or heads of establishments of arts and trades are hable for "damages caused by their pupils and students or apprentices, so long as they remain in their custody" The rationale of such liability is that so long as the student remains in the custody of a teacher, the latter "stands, to a certain extent, in loco parentis [as to the student] and [is] called upon to exercise reasonable supervision over the conduct of the [student]"  14 Likewise, "the phrase used in [Art 2180 — 'so long as (the students) remain in their custody means the protective and supervisory custody that the school and its heads and teachers exercise over the pupils and students for as long as they are  at attendance in the school, including recess time" 15

In the case at bar, in holding that Jimmy B Abon was stin in the protective and supervisory custody of the Baguio Colleges Foundation when he shot Napoleon Castro, the respondent Court ruled that:

it is true that Abon was not attending any class or school function at the time of the shooting incident, which was at about 8 o'clock in the evening; but considering that Abon was employed as an armorer and property custodian of the BCF ROTC unit, he must have been attending night classes and therefore that hour in the evening was just about dismissal time for him or soon thereafter The time interval is safely within the "recess time" that the trial court spoke of and envisioned by the Palisoc case, supra 16 (Emphasis supplied)

In line with the case of Palisoc, 17 a student not "at attendance in the school" cannot be in "recess" thereat A "recess," as the concept is embraced in the phrase "at attendance in the school," contemplates a situation of temporary adjournment of school activities where the student still remains within call of his mentor and is not permitted to leave the school premises, or the area within which the school activity is conducted Recess by its nature does not include dismissal 18Likewise, the mere fact of being enrolled or being in the premises of a school without more does not constitute "attending school" or being in the "protective and supervisory custody' of the school, as contemplated in the law

Upon the foregoing considerations, we hold that Jimmy B Abon cannot be considered to have been "at attendance in the school," or in the custody of BCF, when he shot Napoleon Castro Logically, therefore, petitioners cannot under Art 2180 of the Civil Code be held solidarity liable with Jimmy B Abon for damages resulting from his actsBesides, the record shows that before the shooting incident, Roberto B Ungos ROTC Unit Commandant, AFP, had instructed Jimmy B Abon "not to leave the office and [to keep the armory] well guarded" 19 Apart from negating a finding that Jimmy B Abon was under the custody of the school when he committed the act for which the petitioners are sought to be held liable, this circumstance shows that Jimmy B Abon was supposed to be working in the armory with definite instructions from his superior, the ROTC Commandant, when he shot Napoleon Castro

Petitioners also raise the issue that, under Art 2180 of the Civil Code, a school which offers both academic and technical/vocational courses cannot be held liable for a tort committed by a student enrolled only in its academic program; however, considering that Jimmy B Abon was not in the custody of BCF when he shot Napoleon Castro, the Court deems it unnecessary to pass upon such other issue 20

WHEREFORE, the decision appealed from is hereby REVERSED in so far as it holds petitioners solidarily liable with Jimmy B Abon for his tortious act in the killing of Napoleon Castro No costs

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

GR No 74431 November 6, 1989

PURITA MIRANDA VESTIL and AGUSTIN VESTIL, petitioners, vsINTERMEDIATE APPELLATE COURT, DAVID UY and TERESITA UY, respondents

Pablo P Garcia for petitioners

Roberto R Palmares for private respondents

 

CRUZ, J:

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

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

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

The respondent court arrived at a different conclusion when the case was appealed 5 It found that the Vestils were in possession of the house and the dog and so should be responsible under Article 2183 of the Civil Code for the injuries caused by the dog It also held that the child had died as a result of the dog bites and not for causes independent thereof as submitted by the appellees Accordingly, the Vestils were ordered to pay the Uys damages in the amount of P30,00000 for the death of Theness, P12,00000 for medical and hospitalization expenses, and P2,00000 as attorney's fees

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

Article 2183 reads as follows:

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

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

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

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

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

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

COURT: I think there was mention of rabies in the report in the second admission?

A: Now, the child was continuously vomiting just before I referred to Dr Co earlier in the morning and then the father, because the child was asking for water, the father tried to give the child water and this child went under the bed, she did not like to drink the water and there was fright in her eyeballs For this reason, because I was in danger there was rabies, I called Dr Co

Q: In other words, the child had hydrophobia?

A: Yes, sir 18

As for the link between rabies and broncho-pneumonia, the doctor had the following to say under oath:

A: Now, as 1 said before, broncho-pneumonia can result from physical, chemical and bacterial means It can be the result of infection, now, so if you have any other disease which can lower your resistance you can also get pneumonia

xxx xxx xxx

Q: Would you say that a person who has rabies may die of complication which is broncho-pneumonia?

A: Yes

Q: For the record, I am manifesting that this book shown the witness is know as CURRENT DIANOSIS & TREATMENT, 1968 by Henry Brainerd, Sheldon Margen and Milton Chaton Now, I invite your attention, doctor, to page 751 of this book under the title "Rabies" There is on this page, "Prognosis" as a result of rabies and it says: Once the symptoms, have appeared death inevitably occurs after 2-3 days as a result of cardiac or respiratory failure or generalized paralysis After a positive diagnosis of rabies or after a bite by a suspected animal if the animal cannot be observed or if the bite is on the head, give rabies vaccine (duck embryo) Do you believe in this statement?

A: Yes

Q: Would you say therefore that persons who have rabies may die of respiratory failure which leave in the form of bronco-pneumonia?

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

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

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

According to Manresa the obligation imposed by Article 2183 of the Civil Code is not based on the negligence or on the presumed lack of vigilance of the possessor or user of the animal causing the damage It is based on natural equity and on the principle of social interest that he who possesses animals for his utility, pleasure or service must answer for the damage which such animal may cause 21

We sustain the findings of the Court of Appeals and approve the monetary awards except only as to the medical and hospitalization expenses, which are reduced to P2,02669, as prayed for in the complaint While there is no recompense that can bring back to the private respondents the child they have lost, their pain should at least be assuaged by the civil damages to which they are entitled

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

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

G R No 91378 June 9, 1992

FIRST MALAYAN LEASING AND FINANCE CORPORATION, petitioner, vsTHE HON COURT OF APPEALS, CRISOSTOMO B VITUG and ESTATE OF VICENTE TRINIDAD, Represented by Widow GLORIA D TRINIDAD, respondents

 

GRIÑO-AQUINO J:

This case brings to the fore the importance of motor vehicle registration in determining who should be liable for the death or injuries suffered by passengers or third persons as a consequence of the operation of a motor vehicle On June 26, 1984, Crisostomo B Vitug filed Civil Case No 84-25186 in the Regional Trial Court of Manila Branch XLIII, against the defendant First Malayan Leasing and Finance Corporation (FMLFC for short), to recover damages for physical injuries, loss of personal effects, and the wreck of his car as a result of a three-vehicle collision on December 14, 1983 involving his car, another car, and an Isuzu cargo truck registered in the name of FMLFC and driven by one Crispin Sicat The evidence shows that while Vitug's car was at a full stop at the intersection of New York Street and Epifanio delos Santos Avenue (EDSA) in Cubao, Quezon City, northward-bound, the on-coming Isuzu cargo truck bumped, a Ford Granada car behind him with such force that the Ford car was thrown on top of Vitug's car crushing its roof The cargo truck thereafter struck Vitug's car in the rear causing the gas tank to explode and setting the car ablaze Stunned by the impact Vitug was fortunately extricated from his car by solicitous bystanders before the vehicle exploded However, two of his passengers were burned to death Vitug's car, valued at P70,000, was a total loss

When he regained consciousness in the hospital, Vitug discovered that he had lost various personal articles valued at P48,950, namely a necklace with a diamond pendant, a GP watch, a pair of Christian Dior eyeglasses a gold Cross pen and a pair of Bally shoes Vitug also suffered injuries producing recurring pains in his neck and back Upon his physician's advice, he received further medical treatment in the United States which cost him US$2,37364 for his first trip, and US$5,59664 for the second At the time of the accident on December 14, 1983, the Isuzu cargo truck was registered in the name of the First Malayan Leasing and Finance Corporation (FMLFC)

However, FMLFC denied any liability, alleging that it was not the owner of the truck neither the employer of the driver Crispin Sicat, because it had sold the truck to Vicente Trinidad on September 24 1980, after the latter had paid all his monthly amortizations under the financing lease agreement between FMLFC and Trinidad On FMLFC's motion, the lower court granted FMLFC's leave to file a third-party complaint against Trinidad and admitted the third-party complaint filed therewith Answering the third-party complaint the Estate of Vicente Trinidad admitted that the truck was operated by the deceased during his lifetime Nevertheless it raised the defense that the estate of Vicente Trinidad was no longer existing because the same had long been settled and partitioned extra judicially by his heirs On August 25, 1986, the trial court rendered a decision sentencing FMLFC to pay Vitug the sum of P133,950 with interest at the legal rate from the filing of the complaint until fully paid, plus the sum of P10,000 as attorneys fees and costs

FMLFC appealed in due time to the Court of Appeals which rendered a decision on November 27, 1989 modifying the appealed judgment by ordering the third-party defendant-appellee (Estate of Vicente Trinidad) to indemnify the appellant, FMLFC, for whatever amount the latter may pay Vitug under the judgment In all other respects, the trial court's decision was affirmed

FMLFC has filed this petition for review on certiorari praying that the decision of the appellate court be reversed and set aside

On February 14, 1990, the Court dismissed the petition for insufficiency in form and substance, having failed to comply with the Rules of Court and Circular 1-88 requiring the submission of (1) proof of service of the petition on the adverse party, and (2) a certified true copy of the decision of the Court of Appeals Moreover, the petition was filed late on February 1, 1990, the due date being January 27, 1990

The petitioner filed a motion for reconsideration On April 16, 1990 we granted the same and reinstated the petition Without giving it due course, we required the respondents to comment

After deliberating on the petition, the comments of the private respondents and the petitioner's reply thereto, we find the petition to be bereft of merit, hence, resolved to deny itIn the first place, the factual finding of the trial court and the Court of Appeals that the Isuzu vehicle which figured in the mishap was still registered in the name of FMLFC at the time of the accident is not reviewable by this Court in a petition for certiorari under Rule 45 of Rules of Court

This Court has consistently ruled that regardless of who the actual owner of a motor vehicle might be, the registered owner is the operator of the same with respect to the public and third persons, and as such, directly and primarily responsible for the consequences of its operation In contemplation of law, the owner/operator  of record is the employer of the driver, the actual operator and employer being considered merely as his agent (MYC-Agro-Industrial Corporation vs Vda de Caldo, 132 SCRA 10 citing Vargas vs Langcay 6 SCRA 174; Tamayo vs Aquino 105 Phil 949)

We believe that it is immaterial whether or not the driver was actually employed by the operator of record It is even not necessary to prove who the actual owner of the vehicle and the employer of the driver is Granting that, in this case, the father of the driver is the actual owner and that he is the actual employer, following the well-settled principle that the operator of record continues to be the operator of the vehicle in contemplation of law, as regards the public and third persons, and as such is responsible for the consequences incident to its operation we must hold and consider such owner-operator of record as the employer, in contemplation of law, of the driver And, to give effect to this policy of law as enunciated in the above cited decisions of this Court, we must now extend the same and consider the actual operator and employer as the agent of the operator of record" (Vargas vs Langcay, 6 SCRA 178; citing Montoya vs Ignacio, GR No L-5868, Dec 29, 1953; Timbol vs Osias, GR No L-7547, April 30, 1955; Vda de Medina vs Cresencia, GR No L-8194, July 11, 1956; Necesito vs Paras, GR No L10605, June 30, 1955)

Were the registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done (Erezo vs Jepte, 102 Phil 103)

The registered owner or operator of record is the one liable for damages caused by a vehicle regardless of any alleged sale or lease made thereon" (MYC-Agro- Industrial Corp vs Vda de Caldo, 132 SCRA 11)

In order for a transfer of ownership of a motor vehicle to be valid against third persons it must be recorded in the Land Transportation Office For, although valid between the parties, the sale cannot affect third persons who rely on the public registration of the motor vehicle as conclusive evidence of ownership In law, FMLFC was the owner and operator of the Izusu cargo truck, hence, fully liable to third parties injured by its operation due to the fault or negligence of the driver thereof

WHEREFORE, the petition for review is DENIED for lack of merit Costs against the petitioner

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

GR No L-23052           January 29, 1968

CITY OF MANILA, petitioner, vsGENARO N TEOTICO and COURT OF APPEALS, respondents

City Fiscal Manuel T Reyes for petitionerSevilla, Daza and Associates for respondents

CONCEPCION, CJ:

Appeal by certiorari from a decision of the Court of Appeals

On January 27, 1958, at about 8:00 pm, Genaro N Teotico was at the corner of the Old Luneta and P Burgos Avenue, Manila, within a "loading and unloading" zone, waiting for a jeepney to take him down town After waiting for about five minutes, he managed to hail a jeepney that came along to a stop As he stepped down from the curb to board the jeepney, and took a few steps, he fell inside an uncovered and unlighted catch basin or manhole on P Burgos Avenue Due to the fall, his head hit the rim of the manhole breaking his eyeglasses and causing broken pieces thereof to pierce his left eyelid As blood flowed therefrom, impairing his vision, several persons came to his assistance and pulled him out of the manhole One of them brought Teotico to the Philippine General Hospital, where his injuries were treated, after which he was taken home In addition to the lacerated wound in his left upper eyelid, Teotico suffered contusions on the left thigh, the left upper arm, the right leg and the upper lip apart from an abrasion on the right infra-patella region These injuries and the allergic eruption caused by anti-tetanus injections administered to him in the hospital, required further medical treatment by a private practitioner who charged therefor P1,40000

As a consequence of the foregoing occurrence, Teotico filed, with the Court of First Instance of Manila, a complaint — which was, subsequently, amended — for damages against the City of Manila, its mayor, city engineer, city health officer, city treasurer and chief of police As stated in the decision of the trial court, and quoted with approval by the Court of Appeals,

At the time of the incident, plaintiff was a practicing public accountant, a businessman and a professor at the University of the East He held responsible positions in various business firms like the Philippine Merchandising Co, the AU Valencia and Co, the Silver Swan Manufacturing Company and the Sincere Packing Corporation He was also associated with several civic organizations such as the Wack Wack Golf Club, the Chamber of Commerce of the Philippines, Y's Men Club of Manila and the Knights of Rizal As a result of the incident, plaintiff was prevented from engaging in his customary occupation for twenty days Plaintiff has lost a daily income of about P5000 during his incapacity to work Because of the incident, he was subjected to humiliation and ridicule by his business associates and friends During the period of his treatment, plaintiff was under constant fear and anxiety for the welfare of his minor children since he was their only support Due to the filing of this case, plaintiff has obligated himself to pay his counsel the sum of P2,00000

On the other hand, the defense presented evidence, oral and documentary, to prove that the Storm Drain Section, Office of the City Engineer of Manila, received a report of the uncovered condition of a catchbasin at the corner of P Burgos and Old Luneta Streets, Manila, on January 24, 1958, but the same was covered on the same day (Exhibit 4); that again the iron cover of the same catch basin was reported missing on January 30, 1958, but the said cover was replaced the next day (Exhibit 5); that the Office of the City Engineer never received any report to the effect that the catchbasin in question was not covered between January 25 and 29, 1968; that it has always been a policy of the said office, which is charged with the duty of installation, repair and care of storm drains in the City of Manila, that whenever a report is received from whatever source of the loss of a catchbasin cover, the matter is immediately attended to, either by immediately replacing the missing cover or covering the catchbasin with steel matting that because of the lucrative scrap iron business then prevailing, stealing of iron catchbasin covers was rampant; that the Office of the City Engineer has filed complaints in court resulting from theft of said iron covers; that in order to prevent such thefts, the city government has changed the position and layout of catchbasins in the City by constructing them under the sidewalks with concrete cement covers and openings on the side of the gutter; and that these changes had been undertaken by the city from time to time whenever funds were available

After appropriate proceedings the Court of First Instance of Manila rendered the aforementioned decision sustaining the theory of the defendants and dismissing the amended complaint, without costs

On appeal taken by plaintiff, this decision was affirmed by the Court of Appeals, except insofar as the City of Manila is concerned, which was sentenced to pay damages in the aggregate sum of P6,75000 1 Hence, this appeal by the City of Manila

The first issue raised by the latter is whether the present case is governed by Section 4 of Republic Act No 409 (Charter of the City of Manila) reading:

The city shall not be liable or held for damages or injuries to persons or property arising from the failure of the Mayor, the Municipal Board, or any other city officer, to enforce the provisions of this chapter, or any other law or ordinance, or from negligence of said Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions

or by Article 2189 of the Civil Code of the Philippines which provides:

Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by, any person by reason of defective conditions of road, streets, bridges, public buildings, and other public works under their control or supervision

Manila maintains that the former provision should prevail over the latter, because Republic Act 409, is a special law, intended exclusively for the City of Manila, whereas the Civil Code is a general law, applicable to the entire Philippines

The Court of Appeals, however, applied the Civil Code, and, we think, correctly It is true that, insofar as its territorial application is concerned, Republic Act No 409 is a special law and the Civil Code a general legislation; but, as regards the subject-matter of the provisions above quoted, Section 4 of Republic Act 409 establishes a general rule regulating the liability of the City of Manila for: "damages or injury to persons or property arising from the failure of" city officers "to enforce the provisions of" said Act "or any other law or ordinance, or from negligence" of the city "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions" Upon the other hand, Article 2189 of the Civil Code constitutes a particular prescription making "provinces, cities and municipalities liable for damages for the death of, or injury suffered by any person by reason" — specifically — "of the  defective condition of roads, streets, bridges, public buildings, and other-public works under their control or supervision" In other words, said section 4 refers to liability arising from negligence, in

general, regardless of the object thereof, whereas Article 2189 governs liability due to "defective streets," in particular Since the present action is based upon the alleged defective condition of a road, said Article 2189 is decisive thereon

It is urged that the City of Manila cannot be held liable to Teotico for damages: 1) because the accident involving him took place in a national highway; and 2) because the City of Manila has not been negligent in connection therewith

As regards the first issue, we note that it is based upon an allegation of fact not made in the answer of the City Moreover, Teotico alleged in his complaint, as well as in his amended complaint, that his injuries were due to the defective condition of a street which is "under the supervision and control" of the City In its answer to the amended complaint, the City, in turn, alleged that "the streets aforementioned were and have been constantly kept in good condition and regularly inspected and the storm drains and manholes thereof covered by the defendant City and the officers concerned" who "have been ever vigilant and zealous in the performance of their respective functions and duties as imposed upon them by law"  Thus, the City had, in effect, admitted that P Burgos Avenue was and is under its control and supervision

Moreover, the assertion to the effect that said Avenue is a national highway was made, for the first time, in its motion for reconsideration of the decision of the Court of Appeals Such assertion raised, therefore, a question of fact, which had not been put in issue in the trial court, and cannot be set up, for the first time, on appeal, much less after the rendition of the decision of the appellate court, in a motion for the reconsideration thereof

At any rate, under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach that the defective roads or streets belong to the province, city or municipality from which responsibility is exacted What said article requires is that the province, city or municipality have either "control or supervision" over said street or road Even if P Burgos Avenue were, therefore, a national highway, this circumstance would not necessarily detract from its "control or supervision" by the City of Manila, under Republic Act 409 In fact Section 18(x) thereof provides:

Sec 18 Legislative powers — The Municipal Board shall have the following legislative powers:

x x x           x x x           x x x

(x) Subject to the provisions of existing law to provide for the laying out, construction and improvement, and to regulate the use of streets, avenues, alleys, sidewalks, wharves, piers, parks, cemeteries, and other public places; to provide for lighting, cleaning, and sprinkling of streets and public places;  to provide for the inspection of, fix the license fees for and regulate the openings in the same for the laying of gas, water, sewer and other pipes, the building and repair of tunnels, sewers, and drains, and all structures in and under the same and the erecting of poles and the stringing of wires therein; to provide for and regulate cross-works, curbs, and gutters therein,   to regulate traffic and sales upon the streets and other public places; to provide for the abatement of nuisances in the same and punish the authors or owners thereof; to provide for the construction and maintenance, and regulate the use, of bridges, viaducts and culverts; to prohibit and regulate ball playing, kite-flying, hoop rolling, and other amusements which may annoy persons using the streets and public places, or frighten horses or other animals; to regulate the speed of horses and other animals, motor and other vehicles, cars, and locomotives within the limits of the city; to regulate the lights used on all vehicles, cars, and locomotives; to provide for and change the location, grade, and crossing of railroads, and compel any such railroad to raise or lower its tracks to conform to such provisions or changes; and to require railroad companies to fence their property, or any part thereof, to provide suitable protection against injury to persons or property, and to construct and repair ditches, drains, sewers, and culverts along and under their tracks, so that the natural drainage of the streets and adjacent property shall not be obstructed

This authority has been neither withdrawn nor restricted by Republic Act No 917 and Executive Order No 113, dated May 2, 1955, upon which the City relies Said Act governs the disposition or appropriation of the highway funds and the giving of aid to provinces, chartered cities and municipalities in the construction of roads and streets within their respective boundaries, and Executive Order No 113 merely implements the provisions of said Republic Act No 917, concerning the disposition and appropriation of the highway funds Moreover, it provides that "the construction, maintenance and improvement of national primary, national secondary and national aid provincial and city roads shall be accomplished by the Highway District Engineers and Highway City Engineers under the supervision of the Commissioner of Public Highways and shall be financed from such appropriations as may be authorized by the Republic of the Philippines in annual or special appropriation Acts"

Then, again, the determination of whether or not P Burgos Avenue is under the control or supervision of the City of Manila and whether the latter is guilty of negligence, in connection with the maintenance of said road, which were decided by the Court of Appeals in the affirmative, is one of fact, and the findings of said Court thereon are not subject to our review

WHEREFORE, the decision appealed from should be as it is hereby affirmed, with costs against the City of Manila It is so ordered1äwphï1ñët

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

GR No 61516 March 21, 1989

FLORENTINA A GUILATCO, petitioner, vsCITY OF DAGUPAN, and the HONORABLE COURT OF APPEALS, respondents

Nolan R Evangelista for petitioner

The City Legal Officer for respondents

 

SARMIENTO, J:

In a civil action 1 for recovery of damages filed by the petitioner Florentina A Guilatco, the following judgment was rendered against the respondent City of Dagupan:

x x x

(1) Ordering defendant City of Dagupan to pay plaintiff actual damages in the amount of P 15,924 (namely P8,05400 as hospital, medical and other expenses [Exhs H to H-60], P 7,42000 as lost income for one (1) year [Exh F] and P 45000 as bonus) P 150,00000 as moral damages, P 50,00000 as exemplary damages, and P 3,00000 as attorney's fees, and litigation expenses, plus costs and to appropriate through its Sangguniang Panglunsod (City Council) said amounts for said purpose;

(2) Dismissing plaintiffs complaint as against defendant City Engr Alfredo G Tangco; and

(3) Dismissing the counterclaims of defendant City of Dagupan and defendant City Engr Alfredo G Tangco, for lack of merit 2

The facts found by the trial court are as follows: 3

It would appear from the evidences that on July 25, 1978, herein plaintiff, a Court Interpreter of Branch III, CFI--Dagupan City, while she was about to board a motorized tricycle at a sidewalk located at Perez Blvd (a National Road, under the control and supervision of the City of Dagupan) accidentally fell into a manhole located on said sidewalk, thereby causing her right leg to be fractured As a result thereof, she had to be hospitalized, operated on, confined, at first at the Pangasinan Provincial Hospital, from July 25 to August 3, 1978 (or for a period of 16 days) She also incurred hospitalization, medication and other expenses to the tune of P 8,05365 (Exh H to H-60) or a total of P 10,00000 in all, as other receipts were either lost or misplaced; during the period of her confinement in said two hospitals, plaintiff suffered severe or excruciating pain not only on her right leg which was fractured but also on all parts of her body; the pain has persisted even after her discharge from the Medical City General Hospital on October 9, 1978, to the present Despite her discharge from the Hospital plaintiff is presently still wearing crutches and the Court has actually observed that she has difficulty in locomotion From the time of the mishap on July 25, 1978 up to the present, plaintiff has not yet reported for duty as court interpreter, as she has difficulty of locomotion in going up the stairs of her office, located near the city hall in Dagupan City She earns at least P 72000 a month consisting of her monthly salary and other means of income, but since July 25, 1978 up to the present she has been deprived of said income as she has already consumed her accrued leaves in the government service She has lost several pounds as a result of the accident and she is no longer her former jovial self, she has been unable to perform her religious, social, and other activities which she used to do prior to the incident

Dr Norberto Felix and Dr Dominado Manzano of the Provincial Hospital, as well as Dr Antonio Sison of the Medical City General Hospital in Mandaluyong Rizal (Exh I; see also Exhs F, G, G-1 to G-19) have confirmed beyond shadow of any doubt the extent of the fracture and injuries sustained by the plaintiff as a result of the mishap On the other hand, Patrolman Claveria, De Asis and Cerezo corroborated the testimony of the plaintiff regarding the mishap and they have confirmed the existence of the manhole (Exhs A, B, C and sub-exhibits) on the sidewalk along Perez Blvd, at the time of the incident on July 25, 1978 which was partially covered by a concrete flower pot by leaving gaping hole about 2 ft long by 1 1/2 feet wide or 42 cms wide by 75 cms long by 150 cms deep (see Exhs D and D-1)

Defendant Alfredo Tangco, City Engineer of Dagupan City and admittedly ex-officio Highway Engineer, City Engineer of the Public Works and Building Official for Dagupan City, admitted the existence of said manhole along the sidewalk in Perez Blvd, admittedly a National Road in front of the Luzon Colleges He also admitted that said manhole (there are at least 11 in all in Perez Blvd) is owned by the National Government and the sidewalk on which they are found along Perez Blvd are also owned by the National Government But as City Engineer of Dagupan City, he supervises the maintenance of said manholes or drainage system and sees to it that they are properly covered, and the job is specifically done by his subordinates, Mr Santiago de Vera (Maintenance Foreman) and Engr Ernesto Solermo also a maintenance Engineer In his answer defendant Tangco expressly admitted in par 7-1 thereof, that in his capacity as ex-officio Highway Engineer for Dagupan City he exercises supervision and control over National roads, including the Perez Blvd where the incident happened

On appeal by the respondent City of Dagupan, the appellate court 4 reversed the lower court findings on the ground that no evidence was presented by the plaintiff- appellee to prove that the City of Dagupan had "control or supervision" over Perez Boulevard 

The city contends that Perez Boulevard, where the fatal drainage hole is located, is a national road that is not under the control or supervision of the City of Dagupan Hence, no liability should attach to the city It submits that it is actually the Ministry of Public Highways that has control or supervision through the Highway Engineer which, by mere coincidence, is held concurrently by the same person who is also the City Engineer of Dagupan

After examination of the findings and conclusions of the trial court and those of the appellate court, as well as the arguments presented by the parties, we agree with those of the trial court and of the petitioner Hence, we grant the petition

In this review on certiorari, we have simplified the errors assigned by the petitioner to a single issue: whether or not control or supervision over a national road by the City of Dagupan exists, in effect binding the city to answer for damages in accordance with article 2189 of the Civil Code

The liability of public corporations for damages arising from injuries suffered by pedestrians from the defective condition of roads is expressed in the Civil Code as follows:

Article 2189 Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by, any person by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision

It is not even necessary for the defective road or street to belong to the province, city or municipality for liability to attach The article only requires that either control or supervision is exercised over the defective road or street 

In the case at bar, this control or supervision is provided for in the charter of Dagupan and is exercised through the City Engineer who has the following duties:

Sec 22 The City Engineer--His powers, duties and compensation-There shall be a city engineer, who shall be in charge of the department of Engineering and Public Works He shall receive a salary of not exceeding three thousand pesos per annum He shall have the following duties:

x x x(j) He shall have the care and custody of the public system of waterworks and sewers, and all sources of water supply, and shall control, maintain and regulate the use of the same, in accordance with the ordinance relating thereto; shall inspect and regulate the use of all private systems for supplying water to the city and its inhabitants, and all private sewers, and their connection with the public sewer system

x x xThe same charter of Dagupan also provides that the laying out, construction and improvement of streets, avenues and alleys and sidewalks, and regulation of the use thereof, may be legislated by the Municipal Board  Thus the charter clearly indicates that the city indeed has supervision and control over the sidewalk where the open drainage hole is located

The express provision in the charter holding the city not liable for damages or injuries sustained by persons or property due to the failure of any city officer to enforce the provisions of the charter, can not be used to exempt the city, as in the case at bar

The charter only lays down general rules regulating the liability of the city On the other hand article 2189 applies in particular to the liability arising from "defective streets, public buildings and other public works" 

The City Engineer, Mr Alfredo G Tangco, admits that he exercises control or supervision over the said road But the city can not be excused from liability by the argument that the duty of the City Engineer to supervise or control the said provincial road belongs more to his functions as an ex-officio Highway Engineer of the Ministry of Public Highway than as a city officer This is because while he is entitled to an honorarium from the Ministry of Public Highways, his salary from the city government substantially exceeds the honorarium

We do not agree

Alfredo G Tangco "(i)n his official capacity as City Engineer of Dagupan, as Ex- Officio Highway Engineer, as Ex-Officio City Engineer of the Bureau of Public Works, and, last but not the least, as Building Official for Dagupan City, receives the following monthly compensation: P 1,81066 from Dagupan City; P 20000 from the Ministry of Public Highways; P 10000 from the Bureau of Public Works and P 50000 by virtue of PD 1096, respectively" 10This function of supervision over streets, public buildings, and other public works pertaining to the City Engineer is coursed through a Maintenance Foreman and a Maintenance Engineer11 Although these last two officials are employees of the National Government, they are detailed with the City of Dagupan and hence receive instruction and supervision from the city through the City Engineer

There is, therefore, no doubt that the City Engineer exercises control or supervision over the public works in question Hence, the liability of the city to the petitioner under article 2198 of the Civil Code is clear

Be all that as it may, the actual damages awarded to the petitioner in the amount of P 10,00000 should be reduced to the proven expenses of P 8,05365 only The trial court should not have rounded off the amount In determining actual damages, the court can not rely on "speculation, conjecture or guess work" as to the amount Without the actual proof of loss, the award of actual damages becomes erroneous 

On the other hand, moral damages may be awarded even without proof of pecuniary loss, inasmuch as the determination of the amount is discretionary on the court13 Though incapable of pecuniary estimation, moral damages are in the nature of an award to compensate the claimant for actual injury suffered but which for some reason can not be proven However, in awarding moral damages, the following should be taken into consideration:

(1) First, the proximate cause of the injury must be the claimee's acts(2) Second, there must be compensatory or actual damages as satisfactory proof of the factual basis for damages(3) Third, the award of moral damages must be predicated on any of the cases enumerated in the Civil Code 

In the case at bar, the physical suffering and mental anguish suffered by the petitioner were proven Witnesses from the petitioner's place of work testified to the degeneration in her disposition-from being jovial to depressed She refrained from attending social and civic activities

Nevertheless the award of moral damages at P 150,00000 is excessive Her handicap was not permanent and disabled her only during her treatment which lasted for one year Though evidence of moral loss and anguish existed to warrant the award of damages, the moderating hand of the law is called for The Court has time and again called attention to the reprehensible propensity of trial judges to award damages without basis, resulting in exhorbitant amounts

Although the assessment of the amount is better left to the discretion of the trial court under preceding jurisprudence, the amount of moral damages should be reduced to P 20,00000As for the award of exemplary damages, the trial court correctly pointed out the basis:

To serve as an example for the public good, it is high time that the Court, through this case, should serve warning to the city or cities concerned to be more conscious of their duty and responsibility to their constituents, especially when they are engaged in construction work or when there are manholes on their sidewalks or streets which are uncovered, to immediately cover the same, in order to minimize or prevent accidents to the poor pedestrians

Too often in the zeal to put up "public impact" projects such as beautification drives, the end is more important than the manner in which the work is carried out Because of this obsession for showing off, such trivial details as misplaced flower pots betray the careless execution of the projects, causing public inconvenience and inviting accidents

Pending appeal by the respondent City of Dagupan from the trial court to the appellate court, the petitioner was able to secure an order for garnishment of the funds of the City deposited with the Philippine National Bank, from the then presiding judge, Hon Willelmo Fortun This order for garnishment was revoked subsequently by the succeeding presiding judge, Hon Romeo D Magat, and became the basis for the petitioner's motion for reconsideration which was also denied

We rule that the execution of the judgment of the trial court pending appeal was premature We do not find any good reason to justify the issuance of an order of execution even before the expiration of the time to appeal

WHEREFORE, the petition is GRANTED The assailed decision and resolution of the respondent Court of Appeals are hereby REVERSED and SET ASIDE and the decision of the trial court, dated March 12, 1979 and amended on March 13, 1979, is hereby REINSTATED with the indicated modifications as regards the amounts awarded:

(1) Ordering the defendant City of Dagupan to pay the plaintiff actual damages in the amount of P 15,924 (namely P 8,05400 as hospital, medical and other expenses; P 7,42000 as lost income for one (1) year and P 45000 as bonus); P 20,00000 as moral damages and P 10,00000 as exemplary damages

The attorney's fees of P 3,00000 remain the same

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

GR No L-47851 October 3, 1986

JUAN F NAKPIL & SONS, and JUAN F NAKPIL, petitioners, vsTHE COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC, JUAN J CARLOS, and the PHILIPPINE BAR ASSOCIATION, respondents

GR No L-47863 October 3, 1986

THE UNITED CONSTRUCTION CO, INC, petitioner, vsCOURT OF APPEALS, ET AL, respondents

GR No L-47896 October 3, 1986

PHILIPPINE BAR ASSOCIATION, ET AL, petitioners, vsCOURT OF APPEALS, ET AL, respondents

 

PARAS, J:

These are petitions for review on certiorari of the November 28, 1977 decision of the Court of Appeals in CA-GR No 51771-R modifying the decision of the Court of First Instance of Manila, Branch V, in Civil Case No 74958 dated September 21, 1971 as modified by the Order of the lower court dated December 8, 1971 The Court of Appeals in modifying the decision of the lower court included an award of an additional amount of P200,00000 to the Philippine Bar Association to be paid jointly and severally by the defendant United Construction Co and by the third-party defendants Juan F Nakpil and Sons and Juan F Nakpil

The dispositive portion of the modified decision of the lower court reads:

WHEREFORE, judgment is hereby rendered:

(a) Ordering defendant United Construction Co, Inc and third-party defendants (except Roman Ozaeta) to pay the plaintiff, jointly and severally, the sum of P989,33568 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment;(b) Dismissing the complaint with respect to defendant Juan J Carlos;(c) Dismissing the third-party complaint;(d) Dismissing the defendant's and third-party defendants' counterclaims for lack of merit;(e) Ordering defendant United Construction Co, Inc and third-party defendants (except Roman Ozaeta) to pay the costs in equal sharesSO ORDERED (Record on Appeal p 521; Rollo, L- 47851, p 169)

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, the judgment appealed from is modified to include an award of P200,00000 in favor of plaintiff-appellant Philippine Bar Association, with interest at the legal rate from November 29, 1968 until full payment to be paid jointly and severally by defendant United Construction Co, Inc and third party defendants (except Roman Ozaeta) In all other respects, the judgment dated September 21, 1971 as modified in the December 8, 1971 Order of the lower court is hereby affirmed with COSTS to be paid by the defendant and third party defendant (except Roman Ozaeta) in equal shares

SO ORDERED

Petitioners Juan F Nakpil & Sons in L-47851 and United Construction Co, Inc and Juan J Carlos in L-47863 seek the reversal of the decision of the Court of Appeals, among other things, for exoneration from liability while petitioner Philippine Bar Association in L-47896 seeks the modification of aforesaid decision to obtain an award of P1,830,00000 for the loss of the PBA building plus four (4) times such amount as damages resulting in increased cost of the building, P100,00000 as exemplary damages; and P100,00000 as attorney's fees

These petitions arising from the same case filed in the Court of First Instance of Manila were consolidated by this Court in the resolution of May 10, 1978 requiring the respective respondents to comment (Rollo, L-47851, p 172)

The facts as found by the lower court (Decision, CC No 74958; Record on Appeal, pp 269-348; pp 520-521; Rollo, L-47851, p 169) and affirmed by the Court of Appeals are as follows:

The plaintiff, Philippine Bar Association, a civic-non-profit association, incorporated under the Corporation Law, decided to construct an office building on its 840 square meters lot located at the comer of Aduana and Arzobispo Streets, Intramuros, Manila The construction was undertaken by the United Construction, Inc on an "administration" basis, on the suggestion of Juan J Carlos, the president and general manager of said corporation The proposal was approved by plaintiff's board of directors and signed by its president Roman Ozaeta, a third-party defendant in this case The plans and specifications for the building were prepared by the other third-party defendants Juan F Nakpil & Sons The building was completed in June, 1966

In the early morning of August 2, 1968 an unusually strong earthquake hit Manila and its environs and the building in question sustained major damage The front columns of the building buckled, causing the building to tilt forward dangerously The tenants vacated the building in view of its precarious condition As a temporary remedial measure, the building was shored up by United Construction, Inc at the cost of P13,66128

On November 29, 1968, the plaintiff commenced this action for the recovery of damages arising from the partial collapse of the building against United Construction, Inc and its President and General Manager Juan J Carlos as defendants Plaintiff alleges that the collapse of the building was accused by defects in the construction, the failure of the contractors to follow plans and specifications and violations by the defendants of the terms of the contract Defendants in turn filed a third-party complaint against the architects who prepared the plans and specifications, alleging in essence that the collapse of the building was due to the defects in the said plans and specifications Roman Ozaeta, the then president of the plaintiff Bar Association was included as a third-party defendant for damages for having included Juan J Carlos, President of the United Construction Co, Inc as party defendant

On March 3, 1969, the plaintiff and third-party defendants Juan F Nakpil & Sons and Juan F Nakpil presented a written stipulation which reads:

1 That in relation to defendants' answer with counterclaims and third- party complaints and the third-party defendants Nakpil & Sons' answer thereto, the plaintiff need not amend its complaint by including the said Juan F Nakpil & Sons and Juan F Nakpil personally as parties defendant

2 That in the event (unexpected by the undersigned) that the Court should find after the trial that the above-named defendants Juan J Carlos and United Construction Co, Inc are free from any blame and liability for the collapse of the PBA Building, and should further find that the collapse of said building was due to defects and/or inadequacy of the plans, designs, and specifications p by the third-party defendants, or in the event that the Court may find Juan F Nakpil and Sons and/or Juan F Nakpil contributorily negligent or in any way jointly and solidarily liable with the defendants, judgment may be rendered in whole or in part as the case may be, against Juan F Nakpil & Sons and/or Juan F Nakpil in favor of the plaintiff to all intents and purposes as if plaintiff's complaint has been duly amended by including the said Juan F Nakpil & Sons and Juan F Nakpil as parties defendant and by alleging causes of action against them including, among others, the defects or inadequacy of the plans, designs, and specifications prepared by them and/or failure in the performance of their contract with plaintiff

3 Both parties hereby jointly petition this Honorable Court to approve this stipulation (Record on Appeal, pp 274-275; Rollo, L-47851,p169)

Upon the issues being joined, a pre-trial was conducted on March 7, 1969, during which among others, the parties agreed to refer the technical issues involved in the case to a Commissioner Mr Andres O Hizon, who was ultimately appointed by the trial court, assumed his office as Commissioner, charged with the duty to try the following issues:

1 Whether the damage sustained by the PBA building during the August 2, 1968 earthquake had been caused, directly or indirectly, by:

(a) The inadequacies or defects in the plans and specifications prepared by third-party defendants;(b) The deviations, if any, made by the defendants from said plans and specifications and how said deviations contributed to the damage sustained;(c) The alleged failure of defendants to observe the requisite quality of materials and workmanship in the construction of the building;(d) The alleged failure to exercise the requisite degree of supervision expected of the architect, the contractor and/or the owner of the building;(e) An act of God or a fortuitous event; and(f) Any other cause not herein above specified

2 If the cause of the damage suffered by the building arose from a combination of the above-enumerated factors, the degree or proportion in which each individual factor contributed to the damage sustained;

3 Whether the building is now a total loss and should be completely demolished or whether it may still be repaired and restored to a tenantable condition In the latter case, the determination of the cost of such restoration or repair, and the value of any remaining construction, such as the foundation, which may still be utilized or availed of (Record on Appeal, pp 275-276; Rollo, L-47851, p 169)

Thus, the issues of this case were divided into technical issues and non-technical issues As aforestated the technical issues were referred to the Commissioner The non-technical issues were tried by the Court

Meanwhile, plaintiff moved twice for the demolition of the building on the ground that it may topple down in case of a strong earthquake The motions were opposed by the defendants and the matter was referred to the Commissioner Finally, on April 30, 1979 the building was authorized to be demolished at the expense of the plaintiff, but not another earthquake of high intensity on April 7, 1970 followed by other strong earthquakes on April 9, and 12, 1970, caused further damage to the property The actual demolition was undertaken by the buyer of the damaged building (Record on Appeal, pp 278-280; Ibid) After the protracted hearings, the Commissioner eventually submitted his report on September 25, 1970 with the findings that while the damage sustained by the PBA building was caused directly by the August 2, 1968 earthquake whose magnitude was estimated at 73 they were also caused by the defects in the plans and specifications prepared by the third-party defendants' architects, deviations from said plans and specifications by the defendant contractors and failure of the latter to observe the requisite workmanship in the construction of the building and of the contractors, architects and even the owners to exercise the requisite degree of supervision in the construction of subject building

All the parties registered their objections to aforesaid findings which in turn were answered by the Commissioner

The trial court agreed with the findings of the Commissioner except as to the holding that the owner is charged with full nine supervision of the construction The Court sees no legal or contractual basis for such conclusion (Record on Appeal, pp 309-328; Ibid) Thus, on September 21, 1971, the lower court rendered the assailed decision which was modified by the Intermediate Appellate Court on November 28, 1977

All the parties herein appealed from the decision of the Intermediate Appellate Court Hence, these petitions

On May 11, 1978, the United Architects of the Philippines, the Association of Civil Engineers, and the Philippine Institute of Architects filed with the Court a motion to intervene as  amicus curiae They proposed to present a position paper on the liability of architects when a building collapses and to submit likewise a critical analysis with computations on the divergent views on the design and plans as submitted by the experts procured by the parties The motion having been granted, the amicus curiaewere granted a period of 60 days within which to submit their position

After the parties had all filed their comments, We gave due course to the petitions in Our Resolution of July 21, 1978 The position papers of the amicus curiae (submitted on November 24, 1978) were duly noted The amicus curiae gave the opinion that the plans and specifications of the Nakpils were not defective But the Commissioner, when asked by Us to comment, reiterated his conclusion that the defects in the plans and specifications indeed existed

Using the same authorities availed of by the amicus curiae such as the Manila Code (Ord No 4131) and the 1966 Asep Code, the Commissioner added that even if it can be proved that the defects in theconstruction alone (and not in the plans and design) caused the damage to the building, still the deficiency in the original design and jack of specific provisions against torsion in the original plans and the overload on the ground floor columns (found by an the experts including the original designer) certainly contributed to the damage which occurred (Ibid, p 174)

In their respective briefs petitioners, among others, raised the following assignments of errors: Philippine Bar Association claimed that the measure of damages should not be limited to P1,100,00000 as estimated cost of repairs or to the period of six (6) months for loss of rentals while United Construction Co, Inc and the Nakpils claimed that it was an act of God that

caused the failure of the building which should exempt them from responsibility and not the defective construction, poor workmanship, deviations from plans and specifications and other imperfections in the case of United Construction Co, Inc or the deficiencies in the design, plans and specifications prepared by petitioners in the case of the Nakpils Both UCCI and the Nakpils object to the payment of the additional amount of P200,00000 imposed by the Court of Appeals UCCI also claimed that it should be reimbursed the expenses of shoring the building in the amount of P13,66128 while the Nakpils opposed the payment of damages jointly and solidarity with UCCI

The pivotal issue in this case is whether or not an act of God-an unusually strong earthquake-which caused the failure of the building, exempts from liability, parties who are otherwise liable because of their negligence

The applicable law governing the rights and liabilities of the parties herein is Article 1723 of the New Civil Code, which provides:

Art 1723 The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground The contractor is likewise responsible for the damage if the edifice fags within the same period on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor

Acceptance of the building, after completion, does not imply waiver of any of the causes of action by reason of any defect mentioned in the preceding paragraph

The action must be brought within ten years following the collapse of the building

On the other hand, the general rule is that no person shall be responsible for events which could not be foreseen or which though foreseen, were inevitable (Article 1174, New Civil Code)

An act of God has been defined as an accident, due directly and exclusively to natural causes without human intervention, which by no amount of foresight, pains or care, reasonably to have been expected, could have been prevented (1 Corpus Juris 1174)

There is no dispute that the earthquake of August 2, 1968 is a fortuitous event or an act of God

To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an "act of God," the following must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor (Vasquez v Court of Appeals, 138 SCRA 553; Estrada v Consolacion, 71 SCRA 423; Austria v Court of Appeals, 39 SCRA 527; Republic of the Phil v Luzon Stevedoring Corp, 21 SCRA 279; Lasam v Smith, 45 Phil 657)Thus, if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided for in Article 1170 of the Civil Code, which results in loss or damage, the obligor cannot escape liability

The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature and all human agencies are to be excluded from creating or entering into the cause of the mischief When the effect, the cause of which is to be considered, is found to be in part the result of the participation of man, whether it be from active intervention or neglect, or failure to act, the whole occurrence is thereby humanized, as it were, and removed from the rules applicable to the acts of God (1 Corpus Juris, pp 1174-1175)

Thus it has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God To be exempt from liability for loss because of an act of God, he must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned (Fish & Elective Co v Phil Motors, 55 Phil 129; Tucker v Milan, 49 OG 4379; Limpangco & Sons v Yangco Steamship Co, 34 Phil 594, 604; Lasam v Smith, 45 Phil 657)

The negligence of the defendant and the third-party defendants petitioners was established beyond dispute both in the lower court and in the Intermediate Appellate Court Defendant United Construction Co, Inc was found to have made substantial deviations from the plans and specifications and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite degree of supervision; while the third-party defendants were found to have inadequacies or defects in the plans and specifications prepared by them As correctly assessed by both courts, the defects in the construction and in the plans and specifications were the proximate causes that rendered the PBA building unable to withstand the earthquake of August 2, 1968 For this reason the defendant and third-party defendants cannot claim exemption from liability (Decision, Court of Appeals, pp 30-31)

It is well settled that the findings of facts of the Court of Appeals are conclusive on the parties and on this court (cases cited in Tolentino vs de Jesus, 56 SCRA 67; Cesar vs Sandiganbayan, January 17, 1985, 134 SCRA 105, 121), unless (1) the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; (5) the findings of fact are conflicting , (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees (Ramos vs Pepsi-Cola Bottling Co, February 8, 1967, 19 SCRA 289, 291-292; Roque vs Buan, Oct 31, 1967, 21 SCRA 648, 651); (7) the findings of facts of the Court of Appeals are contrary to those of the trial court; (8) said findings of facts are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents (Garcia vs CA, June 30, 1970, 33 SCRA 622; Alsua-Bett vs Court of Appeals, July 30, 1979, 92 SCRA 322, 366); (10) the finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by evidence on record (Salazar vs Gutierrez, May 29, 1970, 33 SCRA 243, 247; Cited in GR No 66497-98, Sacay v Sandiganbayan, July 10, 1986)

It is evident that the case at bar does not fall under any of the exceptions above-mentioned On the contrary, the records show that the lower court spared no effort in arriving at the correct appreciation of facts by the referral of technical issues to a Commissioner chosen by the parties whose findings and conclusions remained convincingly unrebutted by the intervenors/amicus curiae who were allowed to intervene in the Supreme Court

In any event, the relevant and logical observations of the trial court as affirmed by the Court of Appeals that "while it is not possible to state with certainty that the building would not have collapsed were those defects not present, the fact remains that several buildings in the same area withstood the earthquake to which the building of the plaintiff was similarly subjected," cannot be ignored

The next issue to be resolved is the amount of damages to be awarded to the PBA for the partial collapse (and eventual complete collapse) of its building

The Court of Appeals affirmed the finding of the trial court based on the report of the Commissioner that the total amount required to repair the PBA building and to restore it to tenantable condition was P900,00000 inasmuch as it was not initially a total loss However, while the trial court awarded the PBA said amount as damages, plus unrealized rental income for one-half year, the Court of Appeals modified the amount by awarding in favor of PBA an additional sum of P200,00000 representing the damage suffered by the PBA building as a result of another earthquake that occurred on April 7, 1970 (L-47896, Vol I, p 92)

The PBA in its brief insists that the proper award should be P1,830,00000 representing the total value of the building (L-47896, PBA's No 1 Assignment of Error, p 19), while both the NAKPILS and UNITED question the additional award of P200,00000 in favor of the PBA (L- 47851, NAKPIL's Brief as Petitioner, p 6, UNITED's Brief as Petitioner, p 25) The PBA further urges that the unrealized rental income awarded to it should not be limited to a period of one-half year but should be computed on a continuing basis at the rate of P178,67176 a year until the judgment for the principal amount shall have been satisfied L- 47896, PBA's No 11 Assignment of Errors, p 19)

The collapse of the PBA building as a result of the August 2, 1968 earthquake was only partial and it is undisputed that the building could then still be repaired and restored to its tenantable condition The PBA, however, in view of its lack of needed funding, was unable, thru no fault of its own, to have the building repaired UNITED, on the other hand, spent P13,66128 to shore up the building after the August 2, 1968 earthquake (L-47896, CA Decision, p 46) Because of the earthquake on April 7, 1970, the trial court after the needed consultations, authorized the total demolition of the building (L-47896, Vol 1, pp 53-54)

There should be no question that the NAKPILS and UNITED are liable for the damage resulting from the partial and eventual collapse of the PBA building as a result of the earthquakes

We quote with approval the following from the erudite decision penned by Justice Hugo E Gutierrez (now an Associate Justice of the Supreme Court) while still an Associate Justice of the Court of Appeals:

There is no question that an earthquake and other forces of nature such as cyclones, drought, floods, lightning, and perils of the sea are acts of God It does not necessarily follow, however, that specific losses and suffering resulting from the occurrence of these natural force are also acts of God We are not convinced on the basis of the evidence on record that from the thousands of structures in Manila, God singled out the blameless PBA building in Intramuros and around six or seven other buildings in various parts of the city for collapse or severe damage and that God alone was responsible for the damages and losses thus suffered

The record is replete with evidence of defects and deficiencies in the designs and plans, defective construction, poor workmanship, deviation from plans and specifications and other imperfections These deficiencies are attributable to negligent men and not to a perfect God

The act-of-God arguments of the defendants- appellants and third party defendants-appellants presented in their briefs are premised on legal generalizations or speculations and on theological fatalism both of which ignore the plain facts The lengthy discussion of United on ordinary earthquakes and unusually strong earthquakes and on ordinary fortuitous events and extraordinary fortuitous events leads to its argument that the August 2, 1968 earthquake was of such an overwhelming and destructive character that by its own force and independent of the particular negligence alleged, the injury would have been produced If we follow this line of speculative reasoning, we will be forced to conclude that under such a situation scores of buildings in the vicinity and in other parts of Manila would have toppled down Following the same line of reasoning, Nakpil and Sons alleges that the designs were adequate in accordance with pre-August 2, 1968 knowledge and appear inadequate only in the light of engineering information acquired after the earthquake If this were so, hundreds of ancient buildings which survived the earthquake better than the two-year old PBA building must have been designed and constructed by architects and contractors whose knowledge and foresight were unexplainably auspicious and prophetic Fortunately, the facts on record allow a more down to earth explanation of the collapse The failure of the PBA building, as a unique and distinct construction with no reference or comparison to other buildings, to weather the severe earthquake forces was traced to design deficiencies and defective construction, factors which are neither mysterious nor esoteric The theological allusion of appellant United that God acts in mysterious ways His wonders to perform impresses us to be inappropriate The evidence reveals defects and deficiencies in design and construction There is no mystery about these acts of negligence The collapse of the PBA building was no wonder performed by God It was a result of the imperfections in the work of the architects and the people in the construction company More relevant to our mind is the lesson from the parable of the wise man in the Sermon on the Mount "which built his house upon a rock; and the rain descended and the floods came and the winds blew and beat upon that house; and it fen not; for it was founded upon a rock" and of the "foolish upon the sand And the rain descended and man which built his house the floods came, and the winds blew, and beat upon that house; and it fell and great was the fall of it (St Matthew 7: 24-27)" The requirement that a building should withstand rains, floods, winds, earthquakes, and natural forces is precisely the reason why we have professional experts like architects, and engineers Designs and constructions vary under varying circumstances and conditions but the requirement to design and build well does not change

The findings of the lower Court on the cause of the collapse are more rational and accurate Instead of laying the blame solely on the motions and forces generated by the earthquake, it also examined the ability of the PBA building, as designed and constructed, to withstand and successfully weather those forces

The evidence sufficiently supports a conclusion that the negligence and fault of both United and Nakpil and Sons, not a mysterious act of an inscrutable God, were responsible for the damages The Report of the Commissioner, Plaintiff's Objections to the Report, Third Party Defendants' Objections to the Report, Defendants' Objections to the Report, Commissioner's Answer to the various Objections, Plaintiffs' Reply to the Commissioner's Answer, Defendants' Reply to the Commissioner's Answer, Counter-Reply to Defendants' Reply, and Third-Party Defendants' Reply to the Commissioner's Report not to mention the exhibits and the testimonies show that the main arguments raised on appeal were already raised during the trial and fully considered by the lower Court A reiteration of these same arguments on appeal fails to convince us that we should reverse or disturb the lower Court's factual findings and its conclusions drawn from the facts, among them:

The Commissioner also found merit in the allegations of the defendants as to the physical evidence before and after the earthquake showing the inadequacy of design, to wit:

Physical evidence before the earthquake providing (sic) inadequacy of design;

1 inadequate design was the cause of the failure of the building2 Sun-baffles on the two sides and in front of the building;a Increase the inertia forces that move the building laterally toward the Manila Fire Departmentb Create another stiffness imbalance3 The embedded 4" diameter cast iron down spout on all exterior columns reduces the cross-sectional area of each of the columns and the strength thereof4 Two front corners, A7 and D7 columns were very much less reinforcedPhysical Evidence After the Earthquake, Proving Inadequacy of design;1 Column A7 suffered the severest fracture and maximum sagging Also D72 There are more damages in the front part of the building than towards the rear, not only in columns but also in slabs3 Building leaned and sagged more on the front part of the building4 Floors showed maximum sagging on the sides and toward the front corner parts of the building5 There was a lateral displacement of the building of about 8", Maximum sagging occurs at the column A7 where the floor is lower by 80 cm than the highest slab level6 Slab at the corner column D7 sagged by 38 cm

The Commissioner concluded that there were deficiencies or defects in the design, plans and specifications of the PBA building which involved appreciable risks with respect to the accidental forces which may result from earthquake shocks He conceded, however, that the fact that those deficiencies or defects may have arisen from an obsolete or not too conservative code or even a code that does not require a design for earthquake forces mitigates in a large measure the responsibility or liability of the architect and engineer designer

The Third-party defendants, who are the most concerned with this portion of the Commissioner's report, voiced opposition to the same on the grounds that (a) the finding is based on a basic erroneous conception as to the design concept of the building, to wit, that the design is essentially that of a heavy rectangular box on stilts with shear wan at one end; (b) the finding that there were defects and a deficiency in the design of the building would at best be based on an approximation and, therefore, rightly belonged to the realm of speculation, rather than of certainty and could very possibly be outright error; (c) the Commissioner has failed to back up or support his finding with extensive, complex and highly specialized computations and analyzes which he himself emphasizes are necessary in the determination of such a highly technical question; and (d) the Commissioner has analyzed the design of the PBA building not in the light of existing and available earthquake engineering knowledge at the time of the preparation of the design, but in the light of recent and current standards

The Commissioner answered the said objections alleging that third-party defendants' objections were based on estimates or exhibits not presented during the hearing that the resort to engineering references posterior to the date of the preparation of the plans was induced by the third-party defendants themselves who submitted computations of the third-party defendants are erroneous

The issue presently considered is admittedly a technical one of the highest degree It involves questions not within the ordinary competence of the bench and the bar to resolve by themselves Counsel for the third-party defendants has aptly remarked that "engineering, although dealing in mathematics, is not an exact science and that the present knowledge as to the nature of earthquakes and the behaviour of forces generated by them still leaves much to be desired; so much so "that the experts of the different parties, who are all

engineers, cannot agree on what equation to use, as to what earthquake co-efficients are, on the codes to be used and even as to the type of structure that the PBA building (is) was (p 29, Memo, of third- party defendants before the Commissioner)

The difficulty expected by the Court if tills technical matter were to be tried and inquired into by the Court itself, coupled with the intrinsic nature of the questions involved therein, constituted the reason for the reference of the said issues to a Commissioner whose qualifications and experience have eminently qualified him for the task, and whose competence had not been questioned by the parties until he submitted his report Within the pardonable limit of the Court's ability to comprehend the meaning of the Commissioner's report on this issue, and the objections voiced to the same, the Court sees no compelling reasons to disturb the findings of the Commissioner that there were defects and deficiencies in the design, plans and specifications prepared by third-party defendants, and that said defects and deficiencies involved appreciable risks with respect to the accidental forces which may result from earthquake shocks

(2) (a) The deviations, if any, made by the defendants from the plans and specifications, and how said deviations contributed to the damage sustained by the building(b) The alleged failure of defendants to observe the requisite quality of materials and workmanship in the construction of the buildingThese two issues, being interrelated with each other, will be discussed togetherThe findings of the Commissioner on these issues were as follows:We now turn to the construction of the PBA Building and the alleged deficiencies or defects in the construction and violations or deviations from the plans and specifications All these may be summarized as follows:a Summary of alleged defects as reported by Engineer Mario M Bundalian(1) Wrongful and defective placing of reinforcing bars(2) Absence of effective and desirable integration of the 3 bars in the cluster(3) Oversize coarse aggregates: 1-1/4 to 2" were used Specification requires no larger than 1 inch(4) Reinforcement assembly is not concentric with the column, eccentricity being 3" off when on one face the main bars are only 1 1/2' from the surface(5) Prevalence of honeycombs,(6) Contraband construction joints,(7) Absence, or omission, or over spacing of spiral hoops,(8) Deliberate severance of spirals into semi-circles in noted on Col A-5, ground floor,(9) Defective construction joints in Columns A-3, C-7, D-7 and D-4, ground floor,(10) Undergraduate concrete is evident,(11) Big cavity in core of Column 2A-4, second floor,(12) Columns buckled at different planes Columns buckled worst where there are no spirals or where spirals are cut Columns suffered worst displacement where the eccentricity of the columnar reinforcement assembly is more acuteb Summary of alleged defects as reported by Engr Antonio AvecillaColumns are first (or ground) floor, unless otherwise stated(1) Column D4 — Spacing of spiral is changed from 2" to 5" on centers,(2) Column D5 — No spiral up to a height of 22" from the ground floor,(3) Column D6 — Spacing of spiral over 4 l/2,(4) Column D7 — Lack of lateral ties,(5) Column C7 — Absence of spiral to a height of 20" from the ground level, Spirals are at 2" from the exterior column face and 6" from the inner column face,(6) Column B6 — Lack of spiral on 2 feet below the floor beams,(7) Column B5 — Lack of spirals at a distance of 26' below the beam,(8) Column B7 — Spirals not tied to vertical reinforcing bars, Spirals are uneven 2" to 4",(9) Column A3 — Lack of lateral ties,(10) Column A4 — Spirals cut off and welded to two separate clustered vertical bars,(11) Column A4 — (second floor Column is completely hollow to a height of 30"(12) Column A5 — Spirals were cut from the floor level to the bottom of the spandrel beam to a height of 6 feet,(13) Column A6 — No spirals up to a height of 30' above the ground floor level,(14) Column A7— Lack of lateralties or spirals,c Summary of alleged defects as reported by the experts of the Third-Party defendantsGround floor columns(1) Column A4 — Spirals are cut,(2) Column A5 — Spirals are cut,(3) Column A6 — At lower 18" spirals are absent,(4) Column A7 — Ties are too far apart,(5) Column B5 — At upper fourth of column spirals are either absent or improperly spliced,(6) Column B6 — At upper 2 feet spirals are absent,(7) Column B7 — At upper fourth of column spirals missing or improperly spliced(8) Column C7— Spirals are absent at lowest 18"(9) Column D5 — At lowest 2 feet spirals are absent,(10) Column D6 — Spirals are too far apart and apparently improperly spliced,(11) Column D7 — Lateral ties are too far apart, spaced 16" on centers

There is merit in many of these allegations The explanations given by the engineering experts for the defendants are either contrary to general principles of engineering design for reinforced concrete or not applicable to the requirements for ductility and strength of reinforced concrete in earthquake-resistant design and construction

We shall first classify and consider defects which may have appreciable bearing or relation to' the earthquake-resistant property of the building

As heretofore mentioned, details which insure ductility at or near the connections between columns and girders are desirable in earthquake resistant design and construction The omission of spirals and ties or hoops at the bottom and/or tops of columns contributed greatly to the loss of earthquake-resistant strength The plans and specifications required that these spirals and ties be carried from the floor level to the bottom reinforcement of the deeper beam (p 1, Specifications, p 970, Reference 11) There were several clear evidences where this was not done especially in some of the ground floor columns which failed

There were also unmistakable evidences that the spacings of the spirals and ties in the columns were in many cases greater than those called for in the plans and specifications resulting again in loss of earthquake-resistant strength The assertion of the engineering experts for the defendants that the improper spacings and the cutting of the spirals did not result in loss of strength in the column cannot be maintained and is certainly contrary to the general principles of column design and construction And even granting that there be no loss in strength at the yield point (an assumption which is very doubtful) the cutting or improper spacings of spirals will certainly result in the loss of the plastic range or ductility in the column and it is precisely this plastic range or ductility which is desirable and needed for earthquake-resistant strength

There is no excuse for the cavity or hollow portion in the column A4, second floor, and although this column did not fail, this is certainly an evidence on the part of the contractor of poor construction

The effect of eccentricities in the columns which were measured at about 2 1/2 inches maximum may be approximated in relation to column loads and column and beam moments The main effect of eccentricity is to change the beam or girder span The effect on the measured eccentricity of 2 inches, therefore, is to increase or diminish the column load by a maximum of about 1% and to increase or diminish the column or beam movements by about a maximum of 2% While these can certainly be absorbed within the factor of safety, they nevertheless diminish said factor of safety The cutting of the spirals in column A5, ground floor is the subject of great contention between the parties and deserves special consideration

The proper placing of the main reinforcements and spirals in column A5, ground floor, is the responsibility of the general contractor which is the UCCI The burden of proof, therefore, that this cutting was done by others is upon the defendants Other than a strong allegation and assertion that it is the plumber or his men who may have done the cutting (and this was flatly denied by the plumber) no conclusive proof was presented The engineering experts for the defendants asserted that they could have no motivation for cutting the bar because they can simply replace the spirals by wrapping around a new set of spirals This is not quite correct There is evidence to show that the pouring of concrete for columns was sometimes done through the beam and girder reinforcements which were already in place as in the case of column A4 second floor If the reinforcement for the girder and column is to subsequently wrap around the spirals, this would not do for the elasticity of steel would prevent the making of tight column spirals and loose or improper spirals would result The proper way is to produce correct spirals down from the top of the main column bars, a procedure which can not be done if either the beam or girder reinforcement is already in place The engineering experts for the defendants strongly assert and apparently believe that the cutting of the spirals did not materially diminish the strength of the column This belief together with the difficulty of slipping the spirals on the top of the column once the beam reinforcement is in place may be a sufficient motivation for the cutting of the spirals themselves The defendants, therefore, should be held responsible for the consequences arising from the loss of strength or ductility in column A5 which may have contributed to the damages sustained by the building

The lack of proper length of splicing of spirals was also proven in the visible spirals of the columns where spalling of the concrete cover had taken place This lack of proper splicing contributed in a small measure to the loss of strength

The effects of all the other proven and visible defects although nor can certainly be accumulated so that they can contribute to an appreciable loss in earthquake-resistant strength The engineering experts for the defendants submitted an estimate on some of these defects in the amount of a few percent If accumulated, therefore, including the effect of eccentricity in the column the loss in strength due to these minor defects may run to as much as ten percent

To recapitulate: the omission or lack of spirals and ties at the bottom and/or at the top of some of the ground floor columns contributed greatly to the collapse of the PBA building since it is at these points where the greater part of the failure occurred The liability for the cutting of the spirals in column A5, ground floor, in the considered opinion of the Commissioner rests on the shoulders of the defendants and the loss of strength in this column contributed to the damage which occurred

It is reasonable to conclude, therefore, that the proven defects, deficiencies and violations of the plans and specifications of the PBA building contributed to the damages which resulted during the earthquake of August 2, 1968 and the vice of these defects and deficiencies is that they not only increase but also aggravate the weakness mentioned in the design of the structure In other words, these defects and deficiencies not only tend to add but also to multiply the effects of the shortcomings in the design of the building We may say, therefore, that the defects and deficiencies in the construction contributed greatly to the damage which occurred

Since the execution and supervision of the construction work in the hands of the contractor is direct and positive, the presence of existence of all the major defects and deficiencies noted and proven manifests an element of negligence which may amount to imprudence in the construction work (pp 42-49, Commissioners Report)

As the parties most directly concerned with this portion of the Commissioner's report, the defendants voiced their objections to the same on the grounds that the Commissioner should have specified the defects found by him to be "meritorious"; that the Commissioner failed to indicate the number of cases where the spirals and ties were not carried from the floor level to the bottom reinforcement of the deeper beam, or where the spacing of the spirals and ties in the columns were greater than that called for in the specifications; that the hollow in column A4, second floor, the eccentricities in the columns, the lack of proper length of splicing of spirals, and the cut in the spirals in column A5, ground floor, did not aggravate or contribute to the damage suffered by the building; that the defects in the construction were within the tolerable margin of safety; and that the cutting of the spirals in column A5, ground floor, was done by the plumber or his men, and not by the defendants

Answering the said objections, the Commissioner stated that, since many of the defects were minor only the totality of the defects was considered As regards the objection as to failure to state the number of cases where the spirals and ties were not carried from the floor level to the bottom reinforcement, the Commissioner specified groundfloor columns B-6 and C-5 the first one without spirals for 03 inches at the top, and in the latter, there were no spirals for 10 inches at the bottom The Commissioner likewise specified the first storey columns where the spacings were greater than that called for in the specifications to be columns B-5, B-6, C-7, C-6, C-5, D-5 and B-7 The objection to the failure of the Commissioner to specify the number of columns where there was lack of proper length of splicing of spirals, the Commissioner mentioned groundfloor columns B-6 and B-5 where all the splices were less than 1-1/2 turns and were not welded, resulting in some loss of strength which could be critical near the ends of the columns He answered the supposition of the defendants that the spirals and the ties must have been looted, by calling attention to the fact that the missing spirals and ties were only in two out of the 25 columns, which rendered said supposition to be improbable

The Commissioner conceded that the hollow in column A-4, second floor, did not aggravate or contribute to the damage, but averred that it is "evidence of poor construction" On the claim that the eccentricity could be absorbed within the factor of safety, the Commissioner answered that, while the same may be true, it also contributed to or aggravated the damage suffered by the building

The objection regarding the cutting of the spirals in Column A-5, groundfloor, was answered by the Commissioner by reiterating the observation in his report that irrespective of who did the cutting of the spirals, the defendants should be held liable for the same as the general contractor of the building The Commissioner further stated that the loss of strength of the cut spirals and inelastic deflections of the supposed lattice work defeated the purpose of the spiral containment in the column and resulted in the loss of strength, as evidenced by the actual failure of this column Again, the Court concurs in the findings of the Commissioner on these issues and fails to find any sufficient cause to disregard or modify the same As found by the Commissioner, the "deviations made by the defendants from the plans and specifications caused indirectly the damage sustained and that those deviations not only added but also aggravated the damage caused by the defects in the plans and specifications prepared by third-party defendants (Rollo, Vol I, pp 128-142)

The afore-mentioned facts clearly indicate the wanton negligence of both the defendant and the third-party defendants in effecting the plans, designs, specifications, and construction of the PBA building and We hold such negligence as equivalent to bad faith in the performance of their respective tasks

Relative thereto, the ruling of the Supreme Court in Tucker v Milan (49 OG 4379, 4380) which may be in point in this case reads:

One who negligently creates a dangerous condition cannot escape liability for the natural and probable consequences thereof, although the act of a third person, or an act of God for which he is not responsible, intervenes to precipitate the loss As already discussed, the destruction was not purely an act of God Truth to tell hundreds of ancient buildings in the vicinity were hardly affected by the earthquake Only one thing spells out the fatal difference; gross negligence and evident bad faith, without which the damage would not have occurred

WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, We deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art 1723, Civil Code, Supra, p 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,00000) Pesos to cover all damages (with the exception of attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,00000) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon afore-mentioned amounts from finality until paid Solidary costs against the defendant and third-party defendants (except Roman Ozaeta)

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

GR No 103372 June 22, 1992

EPG CONSTRUCTION COMPANY, INC, and EMMANUEL P DE GUZMAN, petitioner, vsHONARABLE COURT OF APPEALS (17th Division), ( Republic of the Philippines), UNIVERSITY OF THE PHILIPPINES, respondents

 

CRUZ, J:

Petitioner EPG Construction Co, Inc and the University of the Philippines, herein private respondent, entered into a contract for the construction of the UP Law Library Building for the stipulated price of P7,545,00000 The agreement included the following provision:

ARTICLE XI

GUARANTEE

CONTRACTOR guarantees that the work completed under the contract and any change order, thereto, shall be in accordance with the plans and specification prepared by ARCHITECT, and shall conform to the specific requirements, performances, and capacities required by the contract, and shall be free from imperfect workmanship or materials CONTRACTOR shall repair at his own cost and expenses for a period of one (1) year from date of substantial completion and acceptance of the work by the OWNER, all the work covered under the contract and change orders that may prove defective except maintenance works The CONTRACTOR shall be liable in accordance with Art 1723 of the Civil Code in case, within 15 years from completion of the project, the building collapses on account of defects in the construction or the use of materials of inferior quality furnished by him or due to any violation of the terms of contract

Upon its completion, the building was formally turned over by EPG to the private respondent UP issued a certification of acceptance dated January 13, 1983, reading as follows:

This is to certify that the General Construction Work of the College of Law Library Annex Building, University of the Philippines, Diliman, Quezon City, has been satisfactorily completed as per plans and specifications as of January 11, 1983 without any defects whatsoever and therefore accepted

Release of the 10% retention is hereby recommended in favor of EPG Construction, Inc

Sometime in July, 1983, the private respondent complained to the petitioner that 6 air-conditioning units on the third floor of the building were not cooling properly After inspection of the equipment, EPG agreed to shoulder the expenses for their repair, including labor and materials, in the amount of P3800000

For whatever reason, the repair was never undertaken UP repeated its complaints to EPG, which again sent its representatives to assess the defects Finally, it made UP a written offer to repair the system for P194,00000

UP insisted that EPG was obligated to repair the defects at its own expense under the guarantee provision in their contract EPG demurred UP then contracted with another company, which repaired the defects for P190,00000

The private respondent subsequently demanded from EPG reimbursement of the said amount plus an equal sum as liquidated damages When the demand was rejected, UP sued EPG and its president, Emmanuel P de Guzman, in the Regional Trial Court of Quezon City De Guzman moved to dismiss the complaint as to him for lack of a cause of action, but the motion was denied

After trial, judgment was rendered by Judge Antonio P Solano requiring both defendants jointly and severally to pay the plaintiff P190,00000 as actual damages, P50,00000 as liquidated damages, P10,00000 as attorney's fees, and costs

The petitioners appealed to the Court of Appeals, which sustained the trial court 1 They then came to this Court to fault the respondent court for not holding that: 1) UP was estopped by its certificate of acceptance from imputing liability to EPG for the defects; 2) the defects were due to force majeure or fortuitous event; and 3) Emmanuel de Guzman has a separate personality from that of EPG Construction Co, Inc

The petitioners argue that by issuing the certificate of acceptance, UP waived the guarantee provision and is now estopped from invoking it The argument is absurd All UP certified to was that the building was in good condition at the time it was turned over to it on January 13, 1983 It did not thereby relieve the petitioners of liability for any defect that might arise or be discovered later during the one-year period of the guarantee Any other interpretation would make the guarantee provision useless to begin with as it would have automatically become functus officio with the turn-over of the construction

The petitioners bolster their argument by quoting Article 1719 of the Civil Code thus, "Acceptance of the work by the employer relieves the contractor of liability "  and stopping there The Article reads in full as follows:

Art 1719 Acceptance of the work by the employer relieves the contractor of liability for any defect in the work, unless:

(1) The defect is hidden and the employer is not, by his special knowledge, expected to recognize the same; or

(2) The employer expressly reserves his rights against the contractor by reason of the defect

The exceptions were omitted by the petitioners for obvious reasons The defects complained against were hidden and the employer was not expected to recognize them at the time the work was accepted Moreover, there was an express reservation by UP of its right to hold the contractor liable for the defects during a period of one year

The petitioners' contention that the defects were caused by force majeure or fortuitous event as a result of the frequent brown-outs in Metro Manila is not meritorious The Court is not prepared to accept that the recurrent power cut-offs can be classified as force majeure or a fortuitous event, We agree that the real cause of the problem, according to the petitioners' own subcontractor, was poor workmanship, as discovered upon inspection of the cooling system, Among the detects noted were improper interlocking of the entire electrical system in all the six units; wrong specification of the time delay relay, also in all the six units; incorrect wiring connections on the oil pressure switches; improper setting of the Hi and Lo pressure switches; and many missing parts like bolts and screws of panels, and the compressor terminal insulation, and the terminal screws of a circuit breaker 2

Curiously, it has not been shown that the cooling system in buildings within the same area have been similarly damaged by the power cut-offs The brown-outs have become an intolerable annoyance, but they cannot excuse all contractual irregularities, including the petitioners' shortcomings

The petitioners also claim that the breakdown of the cooling system was caused by the failure of UP to do maintenance work thereon We do not see how mere maintenance work could have corrected the above-mentioned defects At any rate, whether the repairs in the air-conditioning system can be considered mere maintenance work is a factual issue The resolution thereof by the lower courts is binding upon this Court in the absence of a clear showing that it comes under the accepted exceptions to the rule There is no such showing here

The final point of the petition is that Emmanuel P de Guzman has a separate legal personality from EPG Construction Co, Inc and should not be held solidarity liable with it He stresses that the acts of the company are its own responsibility and there is no reason why any liability arising from such acts should be ascribed to him Thus:

It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity to be considered as separate and apart from the individual stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members 3

The trial court did not explain why Emmanuel de Guzman was held solidarity liable with EPG Construction Co, Inc, and neither did the respondent court when it affirmed the appealed decision, In its Comment on the present petition, UP also did not refute the petitioners' argument and simply passed upon it  sub silentio although the matter was squarely raised and discussed in the petition

Notably, when Emmanuel de Guzman moved to dismiss the complaint as to him, UP said in its opposition to the motion that it was suing him "in his  official capacity and not in his personal capacity" His inclusion as President of the company was therefore superfluous, as De Guzman correctly contended, because his acts as such were corporate acts imputable to EPG itself as his principal It is settled that;

A corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other entity to which it may be related Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality The general manager of a corporation therefore should not be made personally answerable for the payment of the employee's backwages unless he had acted maliciously or in bad faith in terminating the services of the employee 4

The exception noted is where the official "had acted maliciously or in bad faith," in which event he may be made personally liable for his own act That exception is not applicable in the case at bar, because it has not been proved that De Guzman acted maliciously or in bad faith when, as President of EPG, he sought to protect its interests and resisted UP's claims Whatever damage was caused to UP as a result of his acts is the sole responsibility of EPG even though De Guzman was its principal officer and controlling stockholder

In sum, we hold that the lower court did not err in holding EPG liable for the repair of the air-conditioning system at its expense pursuant to the guarantee provision in the construction contract with UP However, Emmanuel de Guzman is not solidarily liable with it, having acted on its behalf within the scope of his authority and without any demonstrated malice or bad faith

WHEREFORE, the appealed decision is AFFIRMED but with the modification that EPG Construction Co, Inc shall be solely liable for the damages awarded in favor of the University of the Philippines It is so ordered

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

GR No L-30212 September 30, 1987

BIENVENIDO GELISAN, petitioner, vsBENITO ALDAY, respondent

 

PADILLA, J:

Review on certiorari of the judgment * rendered by the Court of Appeals, dated 11 October 1968, as amended by its resolution, dated 11 February 1969, in CA-GR No 32670-R, entitled: "Benito Alday, plaintiff-appellant, vs Roberto Espiritu and Bienvenido Gelisan, defendants-appellees," which ordered the herein petitioner Bienvenido Gelisan to pay, jointly and severally, with Roberto Espiritu, the respondent Benito Alday the amount of P5,39730, with legal interest thereon from the filing of the complaint, and the costs of suit; and for the said Roberto Espiritu to pay or refund the petitioner Bienvenido Gelisan whatever amount the latter may have paid to the respondent Benito Alday by virtue of the judgment

The uncontroverted facts of the case are, as follows:

Defendant Bienvenido Gelisan is the owner of a freight truck bearing plate No TH-2377 On January 31, 1962, defendant Bienvenido Gelisan and Roberto Espiritu entered into a contract marked Exhibit 3-Gelisan under which Espiritu hired the same freight truck of Gelisan for the purpose of hauling rice, sugar, flour and fertilizer at an agreed price of P1800 per trip within the limits of the City of Manila provided the loads shall not exceed 200 sacks It is also agreed that Espiritu shall bear and pay all losses and damages attending the carriage of the goods to be hauled by him The truck was taken by a driver of Roberto Espiritu on February 1, 1962 Plaintiff Benito Alday, a trucking operator, and who owns about 15 freight trucks, had known the defendant Roberto Espiritu since 1948 as a truck operator Plaintiff had a contract to haul the fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in Mandaluyong Alday met Espiritu at the gate of Pier 4 and the latter offered the use of his truck with the driver and helper at 9 centavos per bag of fertilizer The offer was accepted by plaintiff Alday and he instructed his checker Celso Henson to let Roberto Espiritu haul the fertilizer Espiritu made two hauls of 200 bags of fertilizer per trip The fertilizer was delivered to the driver and helper of Espiritu with the necessary way bill receipts, Exhibits A and B Espiritu, however, did not deliver the fertilizer to the Atlas Fertolizer bodega at Mandaluyong The signatures appearing in the way bill receipts Exhibits A and B of the Alday Transportation admittedly not the signature of any representative or employee of the Atlas Fertilizer Corporation Roberto Espiritu could not be found, and plaintiff reported the loss to the Manila Police Department Roberto Espiritu was later arrested and booked for theft

Subsequently, plaintiff Aiday saw the truck in question on Sto Cristo St and he notified the Manila Police Department, and it was impounded by the police It was claimed by Bienvenido Gelisan from the Police Department after he had been notified by his employees that the truck had been impounded by the police; but as he could not produce at the time the registration papers, the police would not release the truck to Gelisan As a result of the impounding of the truck according to Gelisan, and that for the release of the truck he paid the premium of P300 to the surety company1

Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the amount of P5,39733, to Atlas Fertilizer Corporation so that, on 12 February 1962, he (Alday) filed a complaint against Roberto Espiritu and Bienvenido Gelisan with the Court of First Instance of Manila, docketed therein as Civil Case No 49603, for the recovery of damages suffered by him thru the criminal acts committed by the defendants

The defendant, Roberto Espiritu failed to file an answer and was, accordingly, declared in default

The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility He claimed that he had no contractual relations with the plaintiff Benito Alday as regards the hauling and/or delivery of the 400 bags of fertilizer mentioned in the complaint; that the alleged misappropriation or nondelivery by defendant Roberto Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's) control and knowledge, and which fact became known to him, for the first time, on 8 February 1962 when his freight truck, with plate No TH-2377, was impounded by the Manila Police Department, at the instance of the plaintiff; and that in his written contract of hire with Roberto Espiritu, it was expressly provided that the latter will bear and pay all loss and damages attending the carriage of goods to be hauled by said Roberto Espiritu

After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone was liable to Benito Alday, since Bienvenido Gelisan was not privy to the contract between Espiritu and Alday The dispositive portion of the decision reads, as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Roberto Espiritu for the sum of P6,000 with interest at the legal rate from the time of the filing of the complaint, and the costs of the suit Plantiff's complaint is dismissed with respect to defendant Bienvenido Gelisan, and judgment is rendered in favor of defendant Bienvenido Gelisan and against the plaintiff for the sum of P350 2

On appeal, however, the Court of Appeals, citing the case of Montoya vs Ignacio, 3 found that Bienvenido Gelisan is likewise liable for being the registered owner of the truck; and that the lease contract, executed by and between Bienvenido Gelisan and Roberto Espiritu, is not binding upon Benito Alday for not having been previously approved by the Public Service Commission Accordingly, it sentenced Bienvenido Gelisan to pay, jointly and severally with Roberto Espiritu, Benito Alday the amount of P5,39730, with legal interest thereon from the filing of the complaint; and to pay the costs Roberto Espiritu, in turn, was ordered to pay or refund Bienvenido Gelisan whatever amount the latter may have paid to Benito Alday by virtue of the judgment 4

Hence, the present recourse by Bienvenido Gelisan

The petition is without merit The judgment rendered by the Court of Appeals, which is sought to be reviewed, is in accord with the facts and the law on the case and we find no cogent reason to disturb the same The Court has invariably held in several decisions that the registered owner of a public service vehicle is responsible for damages that may arise from consequences incident to its operation or that may be caused to any of the passengers therein 5 The claim of the petitioner that he is not hable in view of the lease contract executed by and between him and Roberto Espiritu which exempts him from liability to third persons, cannot be sustained because it appears that the lease contract, adverted to, had not been approved by the Public Service Commission It is settled in our jurisprudence that if the property covered by a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding upon the public and third persons 6

We also find no merit in the petitioner's argument that the rule requiring the previous approval by the Public Service Commission, of the transfer or lease of the motor vehicle, may be applied only in cases where there is no positive Identification of the owner or driver, or where there are very scant means of Identification, but not in those instances where the person responsible for damages has been fixed or determined beforehand, as in the case at bar The reason for the rule we reiterate in the present case, was explained by the Court in  Montoya vs Ignacio, 7thus:

There is merit in this contention The law really 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 The reason is obvious Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter mav 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 Such being the reason and philosophy behind this requirement, it follows that if the property covered by the franchise is transferred, or leased to another without obtaining the requisite approval, the transfer is not binding against the Public Service Commission and in contemplation of law the grantee continues to be responsible under the franchise in relation to the Commission and to the Public Since the lease of the jeepney in question was made without such approval the only conclusion that can be drawn is that Marcelino Ignacio still continues to be its operator in contemplation of law, and as such is responsible for the consequences incident to its operation, one of them being the collision under consideration

Bienvenido Gelisan, the registered owner, is not however without recourse He has a right to be indemnified by Roberto Espiritu for the amount titat he may be required to pay as damages for the injury caused to Benito Alday, since the lease contract in question, although not effective against the public for not having been approved by the Public Service Commission, is valid and binding between the contracting parties 8

We also find no merit in the petitioner's contention that his liability is only subsidiary The Court has consistently considered the registered owner/operator of a public service vehicle to be jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries sustained in the operation of said vehicles Thus, in the case of Vargas vs Langcay, 9 the Court said:

We hold that the Court of Appeals erred in considering appellant-petitioner Diwata Vargas only subsidiarily liable under Article 103 of the Revised Penal Code This court, in previous decisions, has always considered the registered owner/operator of a passenger vehicle, jointly and severally liable with the driver, for damages incurred by passengers or third persons as a consequence of injuries (or death) sustained in the operation of said vehicles (Montoya vs Ignacio, 94 Phil, 182; Timbol vs Osias, GR No L-7547, April 30, 1955; Vda de Medina vs Cresencia, 99 Phil, 506; Necesito vs Paras, 104 Phil, 75; Erezo vs Jepte, 102 Phil, 103; Tamayo vs Aquino and Rayos vs Tamayo, 105 Phil, 949; 56 Off Gaz [36] 5617) In the case of Erezo vs Jepte, Supra, We held:

* * * In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused * * * (Emphasis supplied)

In the case of Tamayo vs Aquino, supra, We said:

* * * As Tamayo is the registered owner of the truck, his responsibffity to the public or to any passenger riding in the vehicle or truck must be direct * * * (Emphasis supplied)

WHEREFORE, the petition is hereby DENIED With costs against the petitioner

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

SPECIAL FIRST DIVISION

GR No 90856             February 1, 1996

ARTURO DE GUZMAN, petitioner, vsNATIONAL LABOR RELATIONS COMMISSION, (2ND DIVISION), LABOR ARBITER MA LOURDES A SALES, AVELINO D VALLES-TEROL, ALEJANDRO Q FRIAS, LINDA DELA CRUZ, CORAZON M DELA FUENTE, LILIA F FLORO, and MARIO F JAYME, respondents

R E S O L U T I O N

FRANCISCO, R, J:

This is a motion filed by petitioner Arturo de Guzman seeking the reconsideration of the decision of this Court, promulgated on July 23, 1992, 1 which modified the decisions of the Labor Arbiter and the National Labor Relations Commission in NLRC-NCR Case No 7-2739-86 and ordered as follows:

WHEREFORE, the questioned decision is AFFIRMED but with modification that the petitioner shall not be held jointly and severally liable with AMAL for the private respondents' money claims against the latter However, for his bad faith in arrogating to himself AMAL's properties to the prejudice of the private respondents, the petitioner is ordered: 1) to pay the private respondents moral damages in the sum of P20,00000 and exemplary damages in the sum of P20,00000; and 2) to return the assets of AMAL that he has appropriated, or the value thereof, with legal interest thereon from the date of the appropriation until they are actually restored, these amounts to be proportionately distributed among private respondents in satisfaction of the judgment rendered in their favor against AMAL2

Petitioner was the general manager of the Manila Office of Affiliated Machineries Agency, Ltd (AMAL) and among the respondents in a complaint for illegal dismissal and non-payment of statutory benefits filed by herein respondents who were former employees of AMAL Respondent employees initiated the complaint following AMAL's refusal to pay the former's monetary claims after AMAL decided to cease its operations in 1986 Petitioner was impleaded for allegedly selling part of AMAL's assets and applying the proceeds of the same, as well as the remaining assets, to satisfy his own claims against the company He also formed a new company named Susarco, Inc and engaged in the same line of business with the former clients of AMAL

On September 30, 1987, the Labor Arbiter rendered judgment and held petitioner jointly and severally liable with AMAL for respondent employees' claims 3 Upon appeal to the National Labor Relations Commission, the decision was affirmed in toto4 Not satisfied, petitioner proceeded to this Court on certiorari assailing the aforementioned decision and claiming grave abuse of discretion

As initially mentioned, this Court modified the decision of the NLRC and absolved petitioner from his solidary liability for respondent employees' claims This was based on a finding that as mere managerial employee, petitioner had no participation in the decision to cease operations and terminate the services of respondent employees which was the exclusive responsibility of AMAL alone Nevertheless, for having acted in bad faith by appropriating the assets of AMAL to satisfy his own claims to the prejudice of respondent employees' pending claims, petitioner was held directly liable for moral and exemplary damages based on the provisions of Articles 19, 21, 2219(10) and 2229 of the Civil Code

In this motion, petitioner assails the award of damages and the order to return the assets of AMAL which he appropriated for being unwarranted, arguing that the same were beyond the jurisdiction of this Court to grant in a complaint for illegal dismissal in the absence of an employer-employee relationship between petitioner and respondent employeesThe argument is premised on the following pronouncements on previous decisions that:

The Court, therefore, believes and so holds that the "money claims of workers" referred to in paragraph 3 of Article 217 embraces money claims which arise out of or in connection with the employer-employee relationship, or some aspect or incident of such relationship Put a little differently, that money claims of workers which now fall within the original and exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal connection with the employer-employee relationship

xxx       xxx       xxx The important principle that runs through these three (3) cases is that where the claim to the principal relief sought is to be resolved not by reference to the Labor Code or other labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter or to the NLRC In such situations, resolution of the dispute requires expertise, not in labor management relation nor in wage structures and other terms and conditions of employment, but rather in the application of the general civil law Clearly, such claims fall outside of the area of competence or expertise ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies disappears5

While it is conceded that no employer-employee ties existed between the petitioner and respondent employees, this does not preclude this Court from adjudging him liable for damages In labor disputes like the instant suit, it is not required that the claim for relief should directly result from an employer-employee relationship It suffices that there be a showing of a reasonable causal connection between the claim asserted and the employer-employee relations6

Respondent employees could have been afforded relief in their suit for illegal dismissal and non-payment of statutory benefits were it not for petitioner's unscrupulous acts of appropriating for himself the assets of AMAL which rendered the satisfaction of respondent employees' claims impossible By taking undue advantage of his position as general manager of AMAL, petitioner was able to facilitate the consummation of his acts as he had access over the company's assets

On this score, it is evident that petitioner's acts of bad faith were offshoots of the termination of their employment relations with AMAL The company's decision to close down its business impelled petitioner to act precipitately in appropriating the assets of AMAL, fearing perhaps that the same might not be enough to satisfy all the legitimate claims against it

Petitioner's contention that his application of AMAL's assets to satisfy his own claims against the company is nothing more than a simple legal compensation or set-off deserves scant consideration as it was done without deference to the legitimate claims of respondent employees and other creditors of AMAL, in contravention of the provisions on concurrence and preference of credits under the Civil Code Although his legitimate claims are not disputed, the same, however, are properly cognizable at the proceedings for AMAL's dissolution

Thus, we affirm our previous conclusion that although the question of damages arising from petitioner's bad faith has not directly sprung from the illegal dismissal, it is clearly intertwined therewith Accordingly, petitioner's bad faith having been sufficiently established, the award of damages against him and the order for him to return the assets of AMAL which he appropriated, or their value, are in order

Finally, we underscore the fact that this case has already dragged on for the past nine years, making it extremely urgent that it be resolved with finality and for this Court not to sanction any further delay or attempts to frustrate the disposition of the legitimate claims of respondent employees

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit The denial is final

SO ORDERED

EN BANC

[GR No L-7817  October 31, 1956]

ALFREDO M VELAYO, in his capacity as Assignee of the insolvent COMMERCIAL AIR LINES, INC (CALI), Plaintiff-Appellant, vs SHELL COMPANY OF THE PHILIPPINE ISLANDS, LTD, Defendant-Appellee, YEK HUA TRADING CORPORATION, PAUL SYCIP and MABASA & CO, intervenors

 

D E C I S I O N

FELIX, J:

Antecedents — The Commercial Air Lines, Inc, which will be hereinafter referred to as CALI, is a corporation duly organized and existing in accordance with the Philippines laws, with offices in the City of Manila and previously engaged in air transportation business The Shell Company of the P I, Ltd, which will be designated as the  Defendant, is on the other hand, a corporation organized under the laws of England and duly licensed to do business in the Philippines, with principal offices at the Hongkong and Shanghai Bank building in the City of Manila

Since the start of CALI’s operations, its fuel needs were all supplied by the  Defendant Mr Desmond Fitzgerald, its Credit Manager who extended credit to CALI, was in charge of the collection thereof However, all matters referring to extensions of the term of payment had to be decided first by Mr Stephen Crawford and later by Mr Wildred Wooding, who represented in this country Defendant’s Board of Directors, the residence of which is in London, England (Exhs 4-B and 4-A)

As of August, 1948, the books of the Defendant showed a balance of P170,16258 in its favor for goods it sold and delivered to CALI Even before August 6, 1948,  Defendant had reasons to believe that the financial condition of the CALI was for from being satisfactory As a matter of fact, according to Mr Fitzgerald, CALI’s Douglas C-54 plane, then in California, was offered to him by Mr Alfonso Sycip, CALI’s President of the Board of Directors, in partial settlement of their accounts, which offer was, however, declined by Mr Crawford, probably because upon inquiries made by Mr Fitzgerald sometime before August 6, 1948, for the purpose of preparing the report for its London office regarding CALI’s indebtedness, Col Lambert, CALI’s Vice President and General Manager, answered that the total outstanding liabilities of his corporation was only P550,000, and the management of  Defendant probably assumed that the assets of the CALI could very well meet said liabilities and were not included to take charge of the sale of CALI’s said Douglas C-54 plane to collect its credit

On August 6, 1948, the management of CALI informally convened its principal creditors (excepting only the insignificant small claims) who were invited to a luncheon that was held between 12:chanroblesvirtuallawlibrary00 and 2:chanroblesvirtuallawlibrary00 o’clock in the afternoon of that day in the Trade and Commerce Building at 123 Juan Luna St, Manila, and informed them that CALI was in a state of insolvency and had to stop operation The creditors present, or represented at the meeting, were:chanroblesvirtuallawlibrary  Mr A L Bartolini, representing Firestone Tire & Rubber Co; chan roblesvirtualawlibraryMr Quintin Yu, representing Commercial News; chan roblesvirtualawlibraryMr Mark Pringle, representing Smith, Bell & Co (Lloyds of London);  Messrs Vicente Liwag, C Dominguez and Pacifico Agcaoili, representing National Airports Corporation; chan roblesvirtualawlibraryMessrs W J Bunnel and Manuel Chan, representing Goodrich International Rubber Co; chan roblesvirtualawlibraryMr G E Adair, representing Goodyear Tire & Rubber Co; chan roblesvirtualawlibraryMr J T Chuidian, representing Gibbs, Gibbs, Chuidian & Quasha; chan roblesvirtualawlibraryMr E Valera, representing Mabasa & Co; chan roblesvirtualawlibraryMr D Fitzgerald, representing Shell Co PI Ltd; chan roblesvirtualawlibraryand Mr Alfonso Z Sycip, representing himself, Yek Hua Trading Corporation and Paul Sycip (Exhs NN, JJJ, MM, QQQ, II-4, SS, TT, UU, VV, WW, XX, YY, ZZ, AAA, BBB, CCC, DDD, EEE, FFF, GGG, and HHH)

The persons present, including Mr Desmond Fitzgerald, signed their names and the names of the companies they represented on a memorandum pad of the law firm Quisumbing, Sycip, and Quisumbing (Exhs VV and VV-1)

In that meeting at noontime of August 6, 1948, out of the 194 creditors in all (Exh OO) 15 were listed as principal creditors having big balances (Exh NN), to wit:chanroblesvirtuallawlibrary

13th Air Force  P12,88000Civil Aeronautics Administration  98,12700Gibbs, Giibs, Chuidian & Quasha  5,54490Goodrich Int’l Rubber Co  3,14247Goodyear Tire & Rubber Co  1,72750Mabasa & Co  4,86772Manila Int’l Airport  55,28004Manila Int’l Air Terminal (PAL)  36,16368Shell Co of the Phil, Ltd  152,64168Smith, Bell & Co, Ltd  45,53400Paul Sycip  8,18933Mrs Buenaventura  20,00000Firestone Tire & Rubber Co  4,91172Alfonso Sycip  575,88083Yek Hua Trading Corp  487,87120

  —————

  P1,512,76287

What occurred in that meeting may be summarized as follows:chanroblesvirtuallawlibrary Mr Alexander Sycip, Secretary of the Board of Directors of the CALI, informed the creditors present that this corporation was insolvent and had to stop operations He explained the memorandum agreement executed by the CALI with the Philippine Air Lines, Inc, on August 4, 1948, regarding the proposed sale to the latter of the aviation equipments of the former (Exhs MM and QQQ, par 1 — memo of meeting;chan roblesvirtualawlibraryExhs III and PPP — P Agcaoili’s memorandum dated August 7, 1948, to the General Manager of the National Airports Corp) Mr Alexander Sycip was assisted in the explanation by CPA Alfredo Velayo of Washington, Sycip & Company, Auditors of the CALI, who discussed the balance sheets and distributed copies thereof to the creditors present (Exhs NN, NN-1 to 7;  chan roblesvirtualawlibraryExh JJ — P Agcaoili’s copy of balance sheet p 229- 230 tsn, Nov 27, 1951, of the testimony of D Fitzgerald) The said balance sheet made mention of a C-54 plane in the United States, the property now involved in this suit He was likewise assisted in his explanation by Mr Curtis L Lambert, Vice President and General Manager of the CALI, who described in greater detail the assets of the CALI There was a general understanding among all the creditors present on the desirability of consummating the sale in favor of the Philippine Air Lines Inc (Exhs MM and QQQ, par 2 — Memo of meeting; chan roblesvirtualawlibraryExhs III and PPP, par 5 — P Agcoaili’s memorandum dated August 7, 1948, to the General Manager of the National Airports Corp; chan roblesvirtualawlibraryand pp 299-300 tsn, January 15, 1952, of the testimony of Desmond Fitzgerald)

Then followed a discussion on the payment of claims of creditors and the preferences claimed for the accounts due to the employees, the Government and the National Airports Corporation The representatives of the latter Messrs Vicente H Liwag, C Dominguez and Pacifico V Agcaoili, contended that their accounts were preferred The other creditors disputed such contention of preference (Exhs MM and QQQ, par 3 — 0151 Memo of meeting; chan roblesvirtualawlibraryExhs III and PPP, par 3 — P Agcaoili’s memorandum dated August 1, 1948, to the General Manager of the National Airports Corp; chan roblesvirtualawlibraryand pp 247-248 tsn, January 10, 1952, of the testimony of D Fitzgerald) No understanding was reached on this point and it was then generally agreed that the matter of preference be further studied by a working committee to be formed (Exhs MM, par 3 — Memo of meeting) The creditors present agreed to the formation of a working committee to continue the discussion of the payment of claims and preferences alleged by certain creditors, and it was further agreed that said working committee would supervise the preservation of the properties of the corporation while the creditors attempted to come to an understanding as to a fair distribution of the assets among them (Exhs MM and QQQ, Memo of meeting) From the latter exhibit the following is copied:chanroblesvirtuallawlibrary

“4  Certain specific matters such as the amount owing to the Philippine Air Lines, Inc, and the claims of Smith, Bell vs Co, (representing Lloyds of London) that its claim should be offset against the payments which may be due to CALI from insurance claims were not taken up in detail It was agreed that these matters together with the general question of what are preferred claims should be the subject of further discussions, but shall not interfere with the consummation of the sale in favor of PAL

“5  The creditors present agreed to the formation of the working committee to supervise the preservation of the properties of the corporation and agreed further that Mr Fitzgerald shall represent the creditors as a whole in this committee It was understood, however, that all questions relating to preference of claims can be decided only by the creditors assembled

“6  It was the sense of the persons present that, if possible, the insolvency court be avoided but that should the creditors not meet in agreement, then all the profits from the sale will be submitted to an insolvency court for proper division among the creditors”

To this working committee, Mr Desmond Fitzgerald, Credit Manager, of the  Defendant, Atty Agcaoili of the National Airports Corporation and Atty Alexander Sycip (Exhs III and PPP, par 5 — P Agcaoili’s memorandum dated August 7, 1948, to the General Manager of the National Airports (Corp) were appointed After the creditors present knew the balance sheet and heard the explanations of the officers of the CALI, it was their unanimous opinion that it would be advantageous not to present suits against this corporation but to strive for a fair pro-rata division of its assets (Exh MM, par 6, Memo of meeting), although the management of the CALI announced that in case of non-agreement of the creditors on a pro-rata division of the assets, it would file insolvency proceedings (p 70, tsn, October 22, 1951)

Mr Fitzgerald did not decline the nomination to form part of said working committee and on August 9, 1948, the 3 members thereof discussed methods of achieving the objectives of the committee as decided at the creditors’ meeting, which were to preserve the assets of the CALI and to study the way of making a fair division of all the assets among the creditors Atty Sycip made an offer to Mr D Fitzgerald to name a representative to oversee the preservation of the assets of the CALI, but Mr Fitzgerald replied that the creditors could rely on Col Lambert Atty Pacifico Agcaoili promised to refer the arguments adduced at the second meeting to the General Manager of the National Airports Corporations and to obtain the advice of the Corporate Counsel, so the negotiation with respect to the division of assets of the CALI among the creditors was left pending or under advice when on that very day of the meeting of the working committee, August 9, 1948, which Mr Fitzgerald attended, Defendant effected a telegraphic transfer of its credit against the CALI to the American corporation Shell Oil Company, Inc, assigning its credit, amounting to $79,44000, which was subsequently followed by a deed of assignment of credit dated August 10, 1948, the credit amounting this time to the sum of $85,08129 (Exh I)

On August 12, 1948, the American corporation Shell Oil Company, Inc, filed a complaint against the CALI in the Superior Court of the State of California, USA in and for the County of San Bernardino, for the collection of an assigned credit of $79,44000 — Case No 62576 of said Court (Exhs A, E, F, G, H, V, and Z) and a writ of attachment was applied for and issued on the same date against a C-54 plane (Exhs B, C, D, Y, W, X, and X-1)

On September 17, 1948, an amended complaint was filed to recover an assigned credit of $85,08129 (Exhs I, K, L, M, Q, R, S, T, U, DD) and a supplemental attachment for a higher sum was applied for and issued against the C-54 plane, plus miscellaneous personal properties held by Pacific Overseas Air Lines for the CALI (Exhs N, O, P, AA, BB, BB-1 and CC) and on January 5, 1949, a judgment by default was entered by the American court (Exhs J, EE, FF, GG, and HH)

Unaware of Defendant’s assignments of credit and attachment suit, the stockholders of CALI resolved in a special meeting of August 12, 1948, to approve the memorandum agreement of sale to the Philippine Air Lines, Inc, and noted “that the Board had been trying to reach an agreement with the creditors of the corporation to prevent insolvency proceedings, but so far no definite agreement had been reached” (Exh OO — Minutes of August 12, 1948, stockholders’ meeting)

By the first week of September, 1948, the National Airports Corporation learned of Defendant’s action in the United States and hastened to file its own complaint with attachment against the CALI in the Court of First Instance of Manila (Exhs KKK, LLL, and MMM) The CALI, also prompted by  Defendant’s action in getting the alleged undue preference over the other creditors by attaching the C-54 plane in the United States, beyond the jurisdiction of the Philippines, filed on October 7, 1948, a petition for voluntary insolvency On this date, an order of insolvency was issued by the court (Exh JJ) which necessarily stayed the National Airports Corporation’s action against the CALI and dissolved its attachment (Exh NNN), thus compelling the National Airports Corporation to file its claims with the insolvency court (Exh SS)

By order of October 28, 1948, the Court confirmed the appointment of Mr Alfredo M Velayo, who was unanimously elected by the creditors as Assignee in the proceedings, and ordered him to qualify as such by taking the oath of office within 5 days from notice and filing a bond in the sum of P30,00000 to be approved by the Court conditioned upon the faithful performance of his duties, and providing further that all funds that the Assignee may collect or receive from the debtors of the corporation, or from any other source or sources, be deposited in a local bank (Exh KK) On November 3, 1948, the clerk of court executed a deed of conveyance in favor of the Assignee (Alfredo M Velayo) over all the assets of the CALI (Exh LL)

The Case — After properly qualifying as Assignee, Alfredo M Velayo instituted this case (No 6966 of the Court of First Instance of Manila) on December 17, 1948, against the Shell Company of P I, Ltd, for the purpose of securing from the Court a writ of injunction restraining  Defendant, its agents, servants, attorneys and solicitors from prosecuting in and for the County of San Bernardino in the Superior Court of the State of California, USA the aforementioned Civil Case No 62576 against the insolvent Commercial Air Lines, Inc, begun by it in the name of the American corporation Shell Oil Company, Inc, and as an alternative remedy, in case the purported assignment of  Defendant’s alleged credit to the American corporation Shell Oil Company, Inc, and the attachment issued against CALI in the said Superior Court of California shall have the effect of defeating the procurement by  Plaintiff as Assignee in insolvency of the above- mentioned airplane, which is the property of the insolvent CALI, situated in the Ontario International Airport, with in the County of San Bernardino, State of California, USA, that judgment for damages in double the value of the airplane be awarded in favor of Plaintiff againstDefendant, with costs

The complaint further prays that upon the filing of a bond executed to the  Defendant in an amount to be fixed by the Court, to the effect that  Plaintiff will pay to Defendant all damages the latter may sustain by reason of the injunction if the Court should finally decide that the  Plaintiffwas not entitled thereto, the Court issued a writ of preliminary injunction enjoining theDefendant, its agent, servants, attorney’s and solicitor, from prosecuting the aforementioned case No 62576, the same writ of preliminary injunction to issue without notice to the Defendantit appearing by verified complaint that the great irreparable injury will result to the  Plaintiff-Appellant before the matter could be on notice The Plaintiff also prays for such other remedies that the Court may deem proper in the premises

On December 20, 1948, the Defendant filed an opposition to the Plaintiff’s petition for the issuance of a writ of the preliminary injunction, and on December 22, 1948, the Court denied the same because whether the conveyance of Defendant’s credit was fraudulent or not, the Philippine court would not be in position to enforce its orders as against the American corporation Shell Oil Company, Inc, which is outside of the jurisdiction of the Philippines

Plaintiff having failed to restrain the progress of the attachment suit in the United States by denial of his application for a writ of preliminary injunction and the consequences on execution of the C-54 plane in the County of San Bernardino, State of California, U S A, he confines his action to the recovery of damages against the Defendant

On December 28, 1948, Defendant filed its answer to the complaint, which was amended on February 3, 1949 In its answer,  Defendant, besides denying certain averments of the complaint alleged, among other reasons, that the assignment of its credit in favor of the Shell Oil Company, Inc, in the United States was for a valuable consideration and made in accordance with the established commercial practices, there being no law prohibiting a creditor from assigning his credit to another;  chan roblesvirtualawlibrarythat it had no interest whatsoever in Civil Case No 62576 instituted in the Superior Court in the State of California by the Shell Oil Company, Inc, which is a separate and distinct corporation organized and existing in the State of Virginia and doing business in the State of California, U S A, the Defendant having as its stockholders the Shell Petroleum Company of London and other persons residing in that City, while the Shell Oil Company Inc, of the United State has its principal stockholders the Shell Union Oil Company of the US and presumably countless American investors inasmuch as its shares of stock are being traded daily in the New York stock market;  chan roblesvirtualawlibrarythat Mr Fitzgerald, Defendant’s Credit Manager, was merely invited to a luncheon-meeting at the Trade and Commerce Building in the City of Manila on August 6, 1948, without knowing the purpose for which it was called;  chan roblesvirtualawlibraryand that Mr Fitzgerald could not have officially represented the Defendant at that time because such authority resides on Mr Stephen Crawfurd Defendant, therefore, prays that the complaint be dismissed with costs against thePlaintiff

Then Alfonso Sycip, Yek Hua Trading Corporation and Paul Sycip, as well as Mabasa & Co, filed, with permission of the Court, their respective complaints in intervention taking the side of thePlaintiff These complaints in intervention were timely answered by Defendant which prayed that they be dismissed

After proper proceedings and hearing, the Court rendered decision on February 26, 1954, dismissing the complaint as well as the complaints in intervention, with costs against the Plaintiff In view of this outcome, Plaintiff comes to us praying that the judgment of the lower court be reversed and that the Defendant be ordered to pay him damages in the sum of P660,000 (being double the value of the airplane as established by evidence, ie, P330,000), with costs, and for such other remedy as the Court may deem just and equitable in the premises

The Issues — Either admission of the parties, or by preponderance of evidence, or by sheer weight of the circumstance attending the transactions herein involved, We find that the facts narrated in the preceding statement of the “antecedents” have been sufficiently established, and the questions at issue submitted to our determination in this instance may be boiled down to the following propositions:chanroblesvirtuallawlibrary

(1)  Whether or not under the facts of the case, the Defendant Shell Company of the P I, Ltd, taking advantage of its knowledge of the existence of CALI’s airplane C-54 at the Ontario International Airport within the Country of San Bernardino, State of California, U S A,

(Which knowledge it acquired:chanroblesvirtuallawlibrary first at the informal luncheon-meeting of the principal creditors of CALI on August 5, 1948, where its Credit Manager, Mr Desmond Fitzgerald, was selected to form part of the Working Committee to supervise the preservation of CALI’s properties and to study the way of making a fair division of all the assets among the creditors and thus avoid the institution of insolvency proceedings in court; chan roblesvirtualawlibraryand

Subsequently, at the meeting of August 9, 1948, when said Mr Fitzgerald met the other members of the said Working Committee and heard and discussed the contention of certain creditors of CALI — on the accounts due the employees, the Government and the National Airports Corporation — who alleged that their claims were preferred),

acted in bad faith and betrayed the confidence and trust of the other creditors of CALI present in said meeting by affecting a hasty telegraphic transfer of its credit to the American corporation Shell Oil Company, Inc, for the sum of $79,440 which was subsequently followed by a deed of assignment of credit dated August 10, 1948, amounting this time to the sum of $85,08128 (Exhs Z), thus defeating the purpose of the informal meetings of CALI’s principal creditors end depriving the  Plaintiff, as its Assignee, of the means of obtaining said C-54 plane, or the value thereof, to the detriment and prejudice of the other CALI’s creditors who were consequently deprived of their share in the distribution of said value;  chan roblesvirtualawlibraryand (2) Whether or not by reason of said betrayal of confidence and trust,  Defendant may be made under the law to answer for the damages prayed by the Plaintiff; chan roblesvirtualawlibraryand if so, what should be the amount of such damages

DISCUSSION OF THE CONTROVERSY

I  The mere enunciation of the first proposition can lead to no other conclusion than thatDefendant, upon learning the precarious economic situation of CALI and that with all probability, it could not get much of its outstanding credit because of the preferred claims of certain other creditors, forgot that “Man does not live by bread alone” and entirely disregarded all moral inhibitory tenets So, on the very day its Credit Manager attended the meeting of the Working Committee on August 9, 1948, it hastily made a telegraphic assignment of its credit against the CALI to its sister American Corporation, the Shell Oil Company, Inc, and by what is stated in the preceding pages hereof, We know that were the damaging effects of said assignment upon the right of other creditors of the CALI to participate in the proceeds of said CALI’s plane C-54

Defendants endeavor to extricate itself from any liability caused by such evident misdeed of its part, alleging that Mr Fitzgerald had no authority from his principal to commit the latter on any agreement; chan roblesvirtualawlibrarythat the assignment of its credit in favor of its sister corporation, Shell Oil Company, Inc, was for a valuable consideration and in accordance with the established commercial practices; chan roblesvirtualawlibrarythat there is no law prohibiting a creditor from assigning his credit to another;  chan roblesvirtualawlibraryand that the Shell Oil Company Inc, of the United States is a corporation different and independent from the  Defendant But all these defenses are entirely immaterial and have no bearing on the main question at issue in this appeal Moreover, we might say that Defendantcould not have accomplished the transfer of its credit to its sister corporation if all the Shell companies throughout the world would not have a sort of union, relation or understanding among themselves to come to the aid of each other The telegraphic transfer made without knowledge and at the back of the other creditors of CALI may be a shrewd and surprise move that enabled Defendant to collect almost all if not the entire amount of its credit, but the Court of Justice cannot countenance such attitude at all, and much less from a foreign corporation to the detriment of our Government and local business

To justify its actions, Defendant may also claim that Mr Fitzgerald, based on his feeling of distrust and apprehension, entertained the conviction that intervenors Alfonso Sycip and Yek Hua Trading Corporation tried to take undue advantage by infiltrating their credits But even assuming for the sake of argument, that these intervenors really resorted to such strategem or fraudulent device, yet Defendant’s act finds not justification for no misdeed on the part of a person is cured by any misdeed of another, and it is to be noted that neither Alfonso Z Sycip, nor Yek Hua Trading Corporation were the only creditors of CALI, nor even preferred ones, and that the infiltration of one’s credit is of no sequence if it cannot be proven in the insolvency proceedings to the satisfaction of the court Under the circumstances of the case, Defendant’s transfer of its aforementioned credit would have been justified only if Mr Fitzgerald had declined to take part in the Working Committee and frankly and honestly informed the other creditors present that he had no authority to bind his principal and that the latter was to be left free to collect its credit from CALI by whatever means his principal deemed wise and were available to it But then such information would have immediately dissolved all attempts to come to an amicable conciliation among the creditors and would have precipitated the filing in court of CALI’s voluntary insolvency proceedings and nulified the intended transfer of  Defendant’s credit to its above-mentioned sister corporation

II  We may agree with the trial judge, that the assignment of Defendant’s credit for a valuable consideration is not violative of the provisions of sections 32 and 70 of the Insolvency Law (Public Act No 1956), because the assignment was made since August 9, 1948, the original complaint in the United States was filed on August 12, 1948, and the writ of attachment issued on this same date, while CALI filed its petition for insolvency on October 7, 1948 At his Honor correctly states, said Sections 32 and 70 only contemplate acts and transactions occuring within 30 days prior to the commencement of the proceedings in insolvency and, consequently, all other acts outside of the 30-day period cannot possibly be considered as coming within the orbit of the operation In addition to this, We may add that Article 70 of the Insolvency Law refers to acts of the debtor (in this case the insolvent CALI) and not of the creditor, the Shell Company of the P I Ltd But section 70 does not constitute the only provisions of the law pertinent to the matter The Insolvency Law also provides the following:chanroblesvirtuallawlibrary

“SEC 33  The assignee shall have the right to recover all the estate, debt and effects of said insolvent If at the time of the commencement of the proceedings in insolvency, an action is pending in the name of the debtor, for the recovery of a debt or other thing might or ought to pass to the assignee by the assignment, the assignee shall be allowed to prosecute the action, in like manner and with life effect as if it had been originally commenced by him If there are any rights of action in favor of the insolvency for damages, on any account, for which an action is not pending the assignee shall have the right to prosecute the same with effect as the insolvent might have done himself if no proceedings in insolvency had been instituted cralaw ”

It must not be forgotten that in accordance with the spirit of the Insolvency Law and with the provisions of Chapter V thereof which deal with the powers and duties of a receiver, the assignee represents the insolvent as well as the creditors in voluntary and involuntary proceedings — Intestate of Mariano G Veloso, etc vs Vda de Veloso S C — G R No 42454;  chan roblesvirtualawlibraryHunter, Kerr & Co vs Samuel Murray, 48 Phil 449; chan roblesvirtualawlibraryChartered Bank vs Imperial, 48 Phil 931; chan roblesvirtualawlibraryAsia Banking Corporation vs Herridge, 45 Phil 527 — (II Tolentino’s Commercial Laws of the Philippines, 633) See also Section 36 of the Insolvency LawFrom the foregoing, We see that  Plaintiff, as Assignee of the Insolvent CALI, had personality and authority to institute this case for damages, and the only question that remains determination is whether the payment of damages sought to be recovered from Defendant may be ordered under the Law and the evidence of record

IF ANY PERSON, before the assignment is made, having notice of the commencement of the proceedings in insolvency, or having reason to believe that insolvency proceedings are about to be commenced, embezzles or disposes of any money, goods, chattels, or effects of the insolvent, he is chargeable therewith, and liable to an action by the assignee for double the value of the property sought to be embezzled or disposed of, to be received for the benefit of the insolvent estate

The writer of this decision does not entertain any doubt that the  Defendant — taking advantage of his knowledge that insolvency proceedings were to be instituted by CALI if the creditors did not come to an understanding as to the manner of distribution of the insolvent asset among them, and believing it most probable that they would not arrive at such understanding as it was really the case — schemed and effected the transfer of its sister corporation in the United States, where CALI’s plane C-54 was by that swift and unsuspected operation efficaciously disposed of said insolvent’s property depriving the latter and the Assignee that was latter appointed, of the opportunity to recover said plane In addition to the aforementioned Section 37, Chapter 2 of the PRELIMINARY TITLE of the Civil Code, dealing on Human Relations, provides the following:chanroblesvirtuallawlibrary

“Art 19  Any person must, in the exercise of his rights and in the performances of his duties, act with justice, give everyone his due and observe honesty and good faith”

It maybe said that this article only contains a mere declarations of principles and while such statement may be is essentially correct, yet We find that such declaration is implemented by Article 21 and sequence of the same Chapter which prescribe the following:chanroblesvirtuallawlibrary

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

The Code Commission commenting on this article, says the following:chanroblesvirtuallawlibrary

“Thus at one stroke, the legislator, if the forgoing rule is approved (as it was approved), would vouchsafe adequate legal remedy for that untold numbers of moral wrongs which is impossible for human foresight to provide for specifically in the statutes

“But, it may be asked, would this proposed article obliterate the boundary line between morality and law? The answer is that, in the last analysis, every good law draws its breath of life from morals, from those principles which are written with words of fire in the conscience of man If this premises is admitted, then the proposed rule is a prudent earnest of justice in the face of the impossibility of enumerating, one by one, all wrongs which cause damages When it is reflected that while codes of law and statutes have changed from age to age, the conscience of man has remained fixed to its ancient moorings, one cannot but feel that it is safe and salutary to transmute, as far as may be, moral norms into legal rules, thus imparting to every legal system that enduring quality which ought to be one of its superlative attributes

“Furthermore, there is no belief of more baneful consequence upon the social order than that a person may with impunity cause damage to his fellow-men so long as he does not break any law of the State, though he may be defying the most sacred postulates of morality What is more, the victim loses faith in the ability of the government to afford him protection or relief

“A provision similar to the one under consideration is embodied in article 826 of the German Civil Code

“The same observations may be made concerning injurious acts that are contrary to public policy but are not forbidden by statute There are countless acts of such character, but have not been foreseen by the lawmakers Among these are many business practices that are unfair or oppressive, and certain acts of landholders and employers affecting their tenants and employees which contravene the public policy of social justice

“Another rule is expressed in Article 24 which compels the return of a thing acquired ‘without just or legal grounds’ This provision embodies the doctrine that no person should unjustly enrich himself at the expense of another, which has been one of the mainstays of every legal system for centuries It is most needful that this ancient principles be clearly and specifically consecrated in the proposed Civil Code to the end that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the prejudice of another The German Civil Code has a similar provision (art 812)” (Report of the Code Commission on the Proposed Civil Code of the Philippines, p 40- 41)

From the Civil Code Annotated by Ambrosio Padilla, Vol I, p 51, 1956 edition, We also copy the following:chanroblesvirtuallawlibrary

“A moral wrong or injury, even if it does not constitute a violation of a statute law, should be compensated by damages Moral damages (Art 2217) may be recovered (Art 2219) In Article 20, the liability for damages arises from a willful or negligent act contrary to law In this article, the act is contrary to morals, good customs or public policy”

Now, if Article 23 of the Civil Code goes as far as to provide that:chanroblesvirtuallawlibrary

“Even if an act or event causing damage to another’s property was not due to the fault or negligence of the  Defendant, the latter shall be liable for indemnity if through the act or event he was benefited”

with mere much more reason the Defendant should be liable for indemnity for acts it committed in bad faith and with betrayal of confidence

It may be argued that the aforequoted provisions of the Civil Code only came into effect on August 30, 1950, and that they cannot be applicable to acts that took place in 1948, prior to its effectivity But Article 2252 of the Civil Code, though providing that:chanroblesvirtuallawlibrary

“Changes made and new provisions and rules laid down by this Code which may be prejudice or impair vested or acquired rights in accordance with the old legislation, shall have no retroactive effect cralaw ”

implies that when the new provisions of the Code does nor prejudice or impair vested or acquired rights in accordance with the old legislation — and it cannot be alleged that in the case at barDefendant had any vested or acquired right to betray the confidence of the insolvent CALI or of its creditors — said new provisions, like those on Human Relations, can be given retroactive effect Moreover, Article 2253 of the Civil Code further provides:chanroblesvirtuallawlibrary

“ cralaw But if a right should be declared for the first time in this Code, it shall be effective at once, even though the act or event which may give rise thereto may have been done or may have occurred under the prior legislation, provided said new right does not prejudice or impair any vested or acquired right, of the same origin”

and according to Article 2254, “no vested or acquired right can arise from acts or omissions which are against the law or which infringe upon the right of others”

In case of Juan Castro vs Acro Taxicab Company, (82 Phil, 359; chan roblesvirtualawlibrary47 Off Gaz, [5] 2023), one of the question at issue was whether or not the provisions of the New Civil Code of the Philippines on moral damages should be applied to an act of negligence which occurred before the effectivity of said code, and this Court, through Mr Justice Briones, sustaining the affirmative proposition and citing decisions of the Supreme Court of Spain of February 14, 1941, and November 14, 1934, as well as the comment of Mr Castan, Chief Justice of the Supreme Court of Spain, about the revolutionary tendency of Spanish jurisprudence, said the following:chanroblesvirtuallawlibrary

“We conclude, therefore, reaffirming the doctrine laid down in the case of Lilius (59 J F 800) in the sense that indemnity lies for moral and patrimonial damages which include physical and pain sufferings With this (doctrine), We effect in this jurisdiction a real symbiosis 1 of the Spanish and American Laws and, at the same time, We act in consonance with the spirit and progressive march of time” (translation)

The writer of this decision does not see any reason for not applying the provisions of Section 37 of the Insolvency Law to the case at bar, specially if We take into consideration that the term “any person” used therein cannot be limited to the officers or employee of the insolvent, as no such limitation exist in the wording of the section (See also Sec 38 of the same Act), and that, as stated before, the Defendant schemed and affected the transfer of its credits (from which it could derive practically nothing) to its sister corporation in the United States where CALI’s plane C-54 was then situated, succeeding by such swift and unsuspected operation in disposing of said insolvent’s property by removing it from the possession and ownership of the insolvent However, some members of this Court entertain doubt as to the applicability of said section 37 because in their opinion what  Defendant in reality disposed of was its own credit and not the insolvent’s property, although this was practically the effect and result of the scheme Having in mind this objection and that the provisions of Article 37 making the person coming within its purview liable for double the value of the property sought to be disposed of   constitute a sort of penal clause which shall be strictly construed, and considering further that the same result may be obtained, by applying only the provisions of the Civil Code, the writer of this decision yields to the objection aforementioned

Articles 2229, 2232, 2234, 2142, and 2143 of the Civil Code read as follows:chanroblesvirtuallawlibrary

“Art 2229  Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages”

“Art 2232  In contracts quasi-contracts, the Court may award exemplary damages if theDefendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner”

“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 should be upon, although no proof of loss is necessary in order that such liquidated damages 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”

“Art 2142  Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another”

“Art, 2143  The provisions for quasi-contracts in this Chapter do not exclude other quasi-contracts which may come within the purview of the preceding article”

In accordance with these quoted provisions of the Civil Code, We hold Defendant liable to pay to the Plaintiff, for the benefit of the insolvent CALI and its creditors, as compensatory damages a sum equivalent to the value of the plane at the time aforementioned and another equal sum as exemplary damages

There is no clear proof in the record about the real value of CALI’s plane C-54 at the time whenDefendant’s credit was assigned to its sister corporation in the United States

Judgment

Wherefore, and on the strength of the foregoing considerations, the decision appealed from is reversed and  Defendant-Appellee-, Shell Company of the Philippine Islands, Ltd, is hereby sentenced to pay to Plaintiff-Appellant, as Assignee of the insolvent CALI, damages in a sum double the amount of the value of the insolvent’s airplane C-54 at the time Defendant’s credit against the CALI was assigned to its sister corporation in the United States, which value shall be determined in the corresponding incident in the lower court after this decision becomes final Costs are taxed against Defendant-Appellee It is SO ORDERED

Paras, CJ, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J B L, and Endencia, concur

 

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

GR No 115902 September 27, 1995

FILINVEST CREDIT CORPORATION, petitioner, vsHON COURT OF APPEALS and SPOUSES EDILBERTO and MARCIANA TADIAMAN, respondents

 

DAVIDE, JR, J:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals in CA-GR CV No 30231  1 affirming in toto the decision of the Regional Trial Court (RTC) of San Fernando (Pampanga), Branch 46, in Civil Case No 6599 2

The antecedent facts are summarized by the Court of Appeals as follows:

Defendants-appellees, spouses Edilberto and Marciana Tadiaman, residents of Cabanatuan City, purchased a 10-wheeler Izusu cargo truck from Jordan Enterprises, Inc, in Quezon City, in installments Said spouses executed a promissory note for P196,68000 payable in 24 monthly installments in favor of Jordan Enterprises, Inc, and a Chattel Mortgage over the motor vehicle purchased to secure the payment of the promissory note Jordan Enterprises, Inc assigned its rights and interests over the said instruments to Filinvest Finance and Leasing Corporation, which in turn assigned them to plaintiff-appellant Filinvest Credit Corporation

Subsequently, the spouses Tadiaman defaulted in the payment of the installments due on the promissory note, and plaintiff-appellant filed an action for replevin and damages against them with the court below Upon motion of the plaintiff-appellant, a writ of replevin was issued, and the truck was seized in the province of Isabela, by persons who represented themselves to be special sheriffs of the court, but who turned out to be employees of the plaintiff-appellant The truck was brought by such persons all the way back to Metro Manila

Thereafter, defendant spouses filed a counterbond, and the lower court ordered the return of the truck This was not immediately implemented because the defendant spouses were met with delaying tactics of the plaintiff-appellant, and when they finally recovered the truck, they found the same to be "cannibalized" This was graphically recounted in the report (Exhibit "3") of Deputy Sheriff Anastacio Dizon, who assisted the spouses in recovering the vehicle, excerpts of which are as follows:

On February 14, 1983, the undersigned contacted Mr Villanueva, Branch Manager of the FILINVEST at Bo Dolores, San Fernando, Pampanga and he gave the information that the said Isuzu Cargo Truck, subject of the aforesaid Court Order, was already delivered to their main garage at Bo Talon, Las Piñas; Metro Manila Mr Villanueva further told the undersigned that in order to effectively enforce the aforementioned Court Order, the undersigned should discuss the matter with Mr Telesforo (Jun) Isidro, Collection in-charge, and Mr Gaspar Antonio delos Santos, Vice President for Branch Administration of the FILINVEST main office at Makati, Metro Manila

On February 18, 1983, defendant Marciana Tadiaman, Atty Benites and the undersigned contacted Messrs Gaspar Antonio delos Santos and Telesforo (Jun) Isidro at the main office, FILINVEST at Paseo de Roxas, Makati, Metro Manila and we discussed the smooth retaking of possession by the defendants of the 10-wheeler Isuzu Cargo Truck with motor No E 120-22041, Serial No SPM 710164864 Messrs Delos Santos and Isidro alternatively argued that the Traveler's Insurance Company is one of the black listed Insurance firm, so much so, it is only the company's lawyer who can direct the delivery of the above-cited Cargo Truck to us They told us to wait for the arrival of their Lawyer at 5:40 pm, and we agreed that in the meantime that their lawyer is not around, the said vehicle would not be transferred to any other place

Came 5:30 PM, but the company's lawyer never arrived and we were told to go back on February 21, 1983 Mr delos Santos finally told us that the company will not deliver to us the said Cargo Truck until and after their company lawyer would say so

On February 19, 1983, Mr Felicisimo Hogaldo, Atty Benites, defendant Marciana Tadiaman, three policemen of Las Pinas, Metro Manila, and the undersigned went directly to the FILINVEST garage at Bo Talon, Las Pinas, Metro Manila and there contracted Mr Ismael Pascual, Custodian of all repossessed vehicles of the said company, and Mr Pedro Gervacio, Security Guard of the company assigned by the Allied Investigation Bureau at 6th Floor, Ramon Santos Bldg They told us that the 10-wheeler Cargo Truck subject of the above-cited court order is not one of the vehicles listed in their in-coming and out-going ledger books and they told us to examine their books

Defendant Marciana Tadiaman told Messrs Pedro Gervacio and Ismael Pascual that she saw the above-mentioned Cargo-Truck last February 14, 1983 at the end corner of the garage And for that purpose she requested us, including Mr Pascual and the Security Guard, to inspect the site where the said truck was supposed to have been placed when she for the first time saw it on February 14, 1983

Unexpectedly, she saw and pointed to us on the site oil leaks on the ground which she believed came from the vehicle we were looking for We also saw skid marks of tires of a truck starting from the site where the cargo truck was previously placed as pointed to by defendant Marciana Tadiaman up to around 20 meters before reaching the gate of the compound The other skid larks of tires of a truck was also seen on a portion of a road leading to a compound owned by other person

Mr Gervacio and Pascual strongly insisted that they do not know the whereabouts of the said Cargo Truck The undersigned requested the Policemen of Las Pinas, Metro Manila, Atty Benites and defendant Marciana Tadiaman to see for ourselves the road leading to a compound owned by another firm, about 1/3 of the Length of which road is completely blocked by a big and tall building It was at this portion where the subject Cargo Truck was placedMr Ismael Pascual called their main office, FILINVEST, by telephone about the discovery of the whereabouts of said cargo truck by the undersigned Defendant Marciana Tadiaman to

Mr Pascual that there were missing parts and that other parts of the truck were completely changed with worn-out spare partsMr Pascual told the undersigned that he will only affix his signature on the acknowledgment receipt, below the line "GIVEN BY", if the missing parts and replaced parts were not mentioned in said receipt

It was because of the said actuations of the plaintiff-appellant that the defendants-appellee [sic] filed a counterclaim for damages  3

After trial, the trial court rendered a decision the dispositive portion of which reads as follows:

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

(a) The sum of P88,33332 which is the balance of the promissory note as of September 26, 1982, with interest thereon at 14% per annum from said date(b) The sum equivalent to 25% of the amount sued upon, as and for attorney's fees, that is P88,33332 plus the stipulated interest; and(c) The costs of suit

On the Counterclaim:

Plaintiff not having successfully rebutted the defendants' evidence respecting damages caused to them by virtue of the illegal seizure of the property, and hiding the truck in some other place not their garage, feigning knowledge that the same had been recorded in their incoming ledger books, the "cannibalizing" done while the truck was in the custody of plaintiff's garage, the frustrations which the defendants had to undergo for two weeks before the truck was finally placed in the hands of Sheriff Dizon, all point to the liability of plaintiff for its failure intentionally or otherwise "to observe certain norms that spring from the fountain of good conscience and guide human conduct to the end that law may approach its supreme ideal, which is the sway and dominance of justice

WHEREFORE, judgment is rendered in favor of counter-claimants defendants and against plaintiff, ordering the latter to pay to the defendants the following sums:

(1) Actual damages representing lost spare parts while in the custody of plaintiff in its garage being hidden from defendants, in the sum of P50,00000;(2) P50,00000 as moral damages;(3) P20,00000 as exemplary damages;(4) P20,00000 as attorney's fee; and(5) Proportionate part of the costs adjudged against plaintiff

SO ORDERED 4

Petitioner Filinvest Credit Corporation (hereinafter Filinvest) appealed that portion of the judgment on the counterclaim to the Court of Appeals (CA-GR CV No 30231) and assigned the following errors of the lower court:

I

THE TRIAL COURT ERRED IN AWARDING DAMAGES; ACTUAL, MORAL, EXEMPLARY AND ATTORNEY'S FEES AND PROPORTIONATE PART OF THE COSTS IN FAVOR OF THE DEFENDANTS IN THEIR COUNTER-CLAIMS IN THE ABSENCE OF ANY ACTIONABLE LOSS SUSTAINED BY THEM FOR IT WAS THE DEFENDANTS WHO VIOLATED THEIR PROMISSORY NOTE AND CHATTEL MORTGAGE WITH THE PLAINTIFF

II

THE TRIAL COURT ERRED IN HOLDING THAT THE PLAINTIFF OR ANY OF ITS REPRESENTATIVES HAD NO RIGHT TO TAKE THE MORTGAGED PROPERTY AFTER THE BREACH OF THE CONDITIONS IN THE PROMISSORY NOTE AND CHATTEL MORTGAGE BY THE DEFENDANTS  5

In its decision of 26 May 1994, the Court of Appeals affirmed in toto the decision of the trial court It found no merit in the appeal Thus:

The plaintiff-appellant argues that it had the right to seize the truck from the moment that the defendants-appellees defaulted in the payment of the monthly installments, and to institute an action for replevin preliminary to effecting a foreclosure of the property mortgaged extrajudicially The plaintiff-appellant misses the point entirely In the first place, it has not been held liable for filing an action for replevin in order to recover possession of the truck prior to its foreclosure, but for the manner in which it carried out the seizure of the vehicle It is ironic that, in spite of plaintiff-appellant's apparent recognition of the necessity of legal means for the recovery of the truck, in the end, it utilized illegal means in the actual seizure of the vehicle by having its employees pose as special agents of the court in effecting the same Plaintiff-appellant even went to the extent of asking the appointment of a special sheriff to enforce the order of seizure, but still had the truck seized by its own people instead It is as if the plaintiff-appellant utilized the court only to clothe its employees with apparent authority to seize the vehicle concerned

In the second place, plaintiff-appellant was held liable for hiding the truck and making it difficult for the defendants-appellees to recover the same Defendants-appell[ees] were able to have the writ of seizure quashed on the basis of a counterbond Plaintiff-appellant should have been the first to obey the order for the return of the seized truck, considering its avowed adherence to law and order And yet, it made it difficult for the defendants-appellees to actually recover the vehicle, as reported by the deputy sheriff above

In the third place, there is unrebutted evidence that the truck was "cannibalized" while in the custody of the plaintiff-appellant The latter argues that such evidence is not credible, because, if the truck was stripped of vital parts, it could not have been driven by the defendants-appellees all the way back to Cabanatuan City Plaintiff-appellant conveniently overlooks the testimony of defendant-appellee Mrs Tadiaman that they had to buy the missing parts in order to make the truck run (tsn, p 40, October 2, 1986, Exhibits "'9", "10" and "11")  6

Filinvest now comes to us alleging that the Court of Appeals:

(a) DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND THE APPLICABLE DECISIONS OF THIS HONORABLE COURT WHEN IT REVERSED THE DECISION OF THE REGIONAL TRIAL COURT OF MANILA, BRANCH 9;(b) ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT SUSTAINED THE ERRONEOUS DECISION OF THE HONORABLE REGIONAL TRIAL COURT BRANCH 46 OF SAN FERNANDO, PAMPANGA;(c) ACTED WITH GRAVE ABUSE OF DISCRETION AND CONTRARY TO EXISTING LAW AND JURISPRUDENCE WHEN [IT] SUSTAINED THE SPECULATIVE FINDING OF THE RTC THAT THE PETITIONER "CANNIBALIZED" THE MORTGAGED VEHICLE;(d) ERRED GRIEVOUSLY WHEN IT EXONERATED PRIVATE RESPONDENTS FROM PAYING THE PETITIONER ON THE LATTER'S LEGITIMATE CLAIMS UNDER THE COMPLAINT PARTICULARLY ON THE UNPAID PROMISSORY NOTE MADE BY THE PRIVATE RESPONDENTS;(e) ACTED CONTRARY TO LAW WHEN IT IGNORED THE PLAIN ADMISSIONS IN THE ANSWER (AT PARAGRAPH 2, & 3, PAGE 1) OF THE DEFENDANTS (PRIVATE RESPONDENTS) THAT THEY HAVE DULY EXECUTED A PROMISSORY NOTE SECURED BY A DEED OF CHATTEL MORTGAGE AND THAT THE PRIVATE RESPONDENTS VIOLATED THE TERMS OF THE PROMISSORY NOTE IN FAILING TO PAY THE INSTALLMENTS DUE THEREON FOR NOV 15, 1981 AND THE SUBSEQUENT 9 INSTALLMENTS OR UP TO AUGUST 15, 1982;

(f) ERRED IN REFUSING TO APPLY THE TERMS AND CONDITIONS OF THE PROMISSORY NOTE AND THE DEED OF CHATTEL MORTGAGE SIGNED BY THE PONCES "AS THE LAW BETWEEN THE PARTIES" TO THE CONTRACT SUBJECT OF THE SUIT IN THE RTC  7

Additionally, Filinvest maintains that:

(g) THERE IS NO PROOF TO SUSTAIN THE AWARD OF MORAL DAMAGES FOR P50,00000 ACCORDINGLY THERE IS NO BASIS FOR THE AWARD OF EXEMPLARY DAMAGES 8

We gave due course to the petition and required the parties to submit their respective memoranda after the filing of the comment to the petition by the private respondents and of the reply thereto by Filinvest The parties subsequently filed their memoranda which merely reiterated the arguments in their respective initiatory pleadings

The only relevant issue in this petition is whether or not the Court of Appeals committed reversible error in dismissing Filinvest's appeal from the decision of the trial court on the private respondents' counterclaim and in affirming in toto the said decision The first ground raised herein by Filinvest is baseless since the discussions or arguments in Filinvest's petition and memorandum fail to disclose what the decision of Branch 9 of the RTC of Manila is all about So is the fourth ground, for, the unappealed portion of the trial court's decision did in fact order the private respondents to pay Filinvest the unpaid balance of the promissory note, with interest and attorney's fees All the other grounds are deemed waived for not having been raised in the appeal to the Court of Appeals In any event, Filinvest's disquisitions on such irrelevant issues are confounded

As to the sole issue defined above, the Court of Appeals correctly ruled that Filinvest is liable for damages not because it commenced an action for replevin to recover possession of the truck prior to its foreclosure, but because of the manner it carried out the seizure of the vehicle Sections 3 and 4, Rule 60 of the Rules of Court are very clear and direct as to the procedure for the seizure of property under a writ of replevin, thus:

Sec 3 Order — Upon the filing of such affidavit and bond with the clerk or judge of the court in which the action is pending, the judge of such court shall issue an order describing the personal property alleged to be wrongfully detained, and requiring the sheriff or other proper officer of the court forthwith to take such property into his custody

Sec 4 Duty of the officer — Upon receiving such order the officer must serve a copy thereof on the defendant together with a copy of the application, affidavit and bond, and must forthwith take the property, if it be in the possession of the defendant or his agent, and retain it in his custody (emphasis supplied)

In the instant case, it was not the sheriff or any other proper officer of the trial court who implemented the writ of replevin Because it was aware that no other person can implement the writ, Filinvest asked the trial court to appoint a special sheriff Yet, it used its own employees who misrepresented themselves as deputy sheriffs to seize the truck without having been authorized by the court to do so Filinvest justified its seizure by citing a statement in Bachrach Motor Co vs Summers, 9 to wit, "the only restriction on the mode by which the mortgagee shall secure possession of the mortgaged property after breach of condition is that he must act in an orderly manner and without creating a breach of the peace, subjecting himself to an action for trespass"

This justification is misplace and misleading for Bachrach itself had ruled that if a mortgagee cannot obtain possession of a mortgaged property for its sale on foreclosure, it must bring a civil action either to recover such possession as a preliminary step to the sale or to obtain judicial foreclosure Pertinent portions of Bachrach read as follows:

Where, however, debtor refuses to yield up the property, the creditor must institute an action, either to effect a judicial foreclosure directly, to secure possession as a preliminary to the sale contemplated in the provision above quoted He cannot lawfully take the property by force against the will of the debtor Upon this point the American authorities are even more harmonious that they are upon the point that the creditor is entitled to possession As was said may years ago by the writer of this opinion in a monographic article contributed to an encyclopedic legal treatise, "if possession cannot be peaceably obtained the mortgagee must bring an action" (Trust Deeds and Power of Sale Mortgages, 28 Am & Eng Encyc of Law, 2d ed, 783) In the Article of Chattel Mortgages, in Corpus Juris, we find the following statement of the law on the same point: "The only restriction on the mode by which the mortgagee shall secure possession of the mortgaged property after breach of condition is that he must act in an orderly manner and without creating a breach of the peace, subjecting himself to an action to trespass (11 CJ, 560; see also 5 RCL, 462)

The reason why the law does not allow the creditor to possess himself of the mortgaged property with violence and against the will of the debtor is to be found in the fact that the creditor's right of possession is conditioned upon the fact of default, and the existence of this fact may naturally be the subject of controversy The debtor, for instance, may claim in good faith, and rightly or wrongly, that the debt is paid, or that for some other reason the alleged default is nonexistent His possession in this situation is as fully entitled to protection as that of any other person, and in the language of article 446 of the Civil Code he must be respected therein To allow the creditor to seize the property against the will of the debtor would make the former to a certain extent both judge and executioner in his own cause — a thing which is inadmissible in the absence of unequivocal agreement in the contract itself or express provision to that effect in the statute

It will be observed that the law places the responsibility of conducting the sale upon "a public officer;" and it might be supposed that an officer, such as the sheriff, can seize the property where the creditor could not This suggestion is, we think, without force, as it is manifest that the sheriff or other officer proceeding under the authority of the language already quoted from section 14 of the Chattel Mortgage Law, becomes pro hac vice the mere agent of the creditor There is nothing in this provision which creates a specific duty on the part of the officer to seize the mortgaged property; and no intention on the part of the law-making body to impose such a duty can be implied The conclusion is clear that for the recovery of possession, where the right is disputed, the creditor must proceed along the usual channels by action in court Whether the sheriff, upon being indemnified by the creditor, could safely proceed to take the property from the debtor, is a point upon which we express no opinion

But whatever conclusion may be drawn in the premises with respect to the true nature of a chattel mortgage, the result must in this case be the same; for whether the mortgagee becomes the real owner of the mortgaged property — as some suppose — or acquires only certain rights therein, it is none the less clear that he has after default the right of possession; though it cannot be admitted that he may take the law into his own hands and wrest the property violently from the possession of the mortgagor Neither can he do through the medium of a public officer that which he cannot directly do himself The consequence is that in such case the creditor must either resort to a civil action to recover possession as a preliminary to a sale, or preferably he may bring an action to obtain a judicial foreclosure in conformity, so far as with the provisions of the Chattel to Mortgage Law 10

Replevin is, of course, the appropriate action to recover possession preliminary to the extrajudicial foreclosure of a chattel mortgage Filinvest did in fact institute such an action and obtained a writ of replevin And, by filing it, Filinvest admitted that it cannot acquire possession of the mortgaged vehicle in an orderly or peaceful manner Accordingly, it should have left the enforcement of the writ in accordance with Rule 60 of the Rules of Court which it had voluntarily invoked

Parenthetically, it must be observed that the trial court erred in holding that the action for replevin was "not in order as [Filinvest] is not the owner of the property (Sec, 2 par (a) Rule 60)" 11 It is not only the owner who can institute a replevin suit A person "entitled to the possession" of the property also can, as provided in the same paragraph cited by the trial court, which reads:

Sec 2 Affidavit and bond — Upon applying for such order the plaintiff must show

(a) That the plaintiff is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof;  (emphasis supplied)

Upon the default by the mortgagor in his obligations, Filinvest, as a mortgagee, had the right to the possession of the property mortgaged preparatory to its sale in a public auction 12 However, for employing subterfuge in seizing the truck by misrepresenting its employees as deputy sheriffs and then hiding and cannibalizing it, Filinvest committed bad faith in violation of Article 19 of the Civil Code which provides:

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

In common usage, good faith is ordinarily used to describe that state of mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking, means being faithful to one's duty or obligation 13 It consists of the honest intention to abstain from taking an unconscionable and unscrupulous advantage of another  14

This leaves us to the issue of damages and attorney's fees

In their answer with counterclaim, the private respondents asked for (a) actual damages of P50,00000 for the spare parts found missing after their recovery of the truck and another P50,00000 for unearned profits due to the failure to use the truck in their ricemill business; (b) moral damages of P50,00000 for "the mental anguish, serious anxiety, physical suffering, wounded feelings, social humiliation, moral shock, sleepless nights and other similar injury" which they suffered as a "proximate result of the [petitioner's illegal, wrongful and unlawful acts"; (c) nominal damages of P30,00000; (d) exemplary damages of P20,00000; and (e) attorney's fees of P20,00000 which they incurred "as a direct result of [petitioner's] illegal and unwarranted actuations and in connection with the defense of this action"  15

As to actual damages, the petitioner admits that per Exhibits "1," "9," and "10" of the private respondents, only the sum of P33,22200 — and not P50,00000 — was "supposedly spent for the alleged lost spare parts" 16 The petitioner may thus be held liable only for such amount for actual or compensatory damages

Anent the moral damages, the trial court ruled that the acts of the petitioner were in total disregard of Articles 19, 20, and 21 of the Civil Code  17 It added that the petitioner had not only caused actual damages in lost earnings, but had also caused the private respondents to suffer indignities at the hands of the petitioner's personnel in hiding the truck in question, misleading them, and making them work for the release of the truck for about two weeks, thereby justifying the award of moral damages along with the exemplary and other damages in favor of the private respondents 18

We agree with this finding of the trial court The petitioner's acts clearly fall within the contemplation of Articles 19 and 21 of the Civil Code  19 The acts of fraudulently taking the truck, hiding it from the private respondents, and removing its spare parts show nothing but a willful intention to cause loss to the private respondents that is punctuated with bad faith and is obviously contrary to good customs Thus, the private respondents are entitled to the moral damages they prayed for, for under Article 2219 of the Civil Code, moral damages may be recovered in cases involving acts referred to in Article 21 of the same Code

The private respondents prayed for nominal damages of P30,00000 which the trial court did not award them Having failed to appeal this omission by the trial court, we cannot make anymore such award at this point

The award of exemplary damages is in order in view of the wanton, fraudulent, and oppressive manner by which the petitioner sought to enforce its right to the possession of the mortgaged vehicle Article 2232 of the Civil Code provides:

In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner

Of course, a plaintiff need not prove the actual extent of exemplary damages, for its determination is addressed to the sound discretion of the court upon proof of the plaintiff's entitlement to moral, temperate, or actual or compensatory damages Article 2234 of the Civil Code thus provides in part as follows:

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

The award for attorney's fees must, however, be set aside There is no question that the petitioner filed in good faith its complaint for replevin and damages to protect its rights under the promissory note and the chattel mortgage That the private respondents had defaulted in its obligation under the promissory note thereby authorizing the petitioner to seek enforcement of its claim thereunder and proceed against the mortgage of the vehicle was duly recognized by the trial court by its judgment against the private respondents incorporated in the first part of the dispositive portion The private respondents did not appeal therefrom There would then be no basis for awarding attorney's fees in favor of the private respondents for whatever physical suffering, mental anguish, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or any other similar injury they had suffered, even if proven, were only such as are usually caused to parties haled into court as a defendant and which are not compensable, for the law could not have meant to impose a penalty on the right to litigate 20

WHEREFORE, the assailed judgment of the Court of Appeals in CA-GR CV No 30231 as well as that of the Regional Trial Court of San Fernando, Pampanga, Branch 46 in Civil Case No 6599 on the counterclaim is AFFIRMED, subject to the modifications abovestated As so modified, the petitioner is hereby ordered to pay the private respondents only the following:

(a) actual damages in the reduced amount of P33,22200;(b) moral damages in the amount of P50,00000; and(c) exemplary damages in the amount of P20,00000

No pronouncement as to costs

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

GR No L-14628             September 30, 1960

FRANCISCO HERMOSISIMA, petitioner, vsTHE HON COURT OF APPEALS, ET AL, respondents

Regino Hermosisima for petitionerFP Gabriel, Jr for respondents

CONCEPCION, J:

An appeal by certiorari, taken by petitioner Francisco Hermosisima, from a decision of Court of Appeals modifying that of the Court of First Instance of Cebu

On October 4, 1954, Soledad Cagigas, hereinafter referred to as complaint, filed with said of her child, Chris Hermosisima, as natural child and moral damages for alleged breach of promise Petitioner admitted the paternity of child and expressed willingness to support the latter, but denied having ever promised to marry the complainant Upon her motion, said court ordered petitioner, on October 27, 1954, to pay, by way of alimonypendente lite, P5000 a month, which was, on February 16, 1955, reduced to P3000 a month In due course, later on, said court rendered a decision the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered, declaring the child, Chris Hermosisima, as the natural daughter of defendant, and confirming the order  pendente lite, ordering defendant to pay to the said child, through plaintiff, the sum of thirty pesos (P3000), payable on or before the fifth day of every month sentencing defendant to pay to plaintiff the sum of FOUR THOUSAND FIVE HUNDRED PESOS (P4,50000) for actual and compensatory damages; the sum of FIVE THOUSAND PESOS (P5,00000) as moral damages; and the further sum of FIVE HUNDRED PESOS (P50000) as attorney's fees for plaintiff, with costs against defendant

On appeal taken by petitioner, the Court of Appeals affirmed this decision, except as to the actual and compensatory damages and the moral damages, which were increased to P5,61425 and P7,00000, respectively

The main issue before us is whether moral damages are recoverable, under our laws, for breach of promise to marry The pertinent facts are:

Complainant Soledad Cagigas, was born in July 1917 Since 1950, Soledad then a teacher in the Sibonga Provincial High School in Cebu, and petitioner, who was almost ten (10) years younger than she, used to go around together and were regarded as engaged, although he had made no promise of marriage prior thereto In 1951, she gave up teaching and became a life insurance underwriter in the City of Cebu, where intimacy developed among her and the petitioner, since one evening in 1953, when after coming from the movies, they had sexual intercourse in his cabin on board M/V "Escaño," to which he was then attached as apprentice pilot In February 1954, Soledad advised petitioner that she was in the family way, whereupon he promised to marry her Their child, Chris Hermosisima, was born on June 17, 1954, in a private maternity and clinic However, subsequently, or on July 24, 1954, defendant married one Romanita Perez Hence, the present action, which was commenced on or about October 4, 1954

Referring now to the issue above referred to, it will be noted that the Civil Code of Spain permitted the recovery of damages for breach to marry Article 43 and 44 of said Code provides:

ART 43 A mutual promise of marriage shall not give rise to an obligation to contract marriage No court shall entertain any complaint by which the enforcement of such promise is sought

ART 44 If the promise has been in a public or private instrument by an adult, or by a minor with the concurrence of the person whose consent is necessary for the celebration of the marriage, or if the banns have been published, the one who without just cause refuses to marry shall be obliged to reimburse the other for the expenses which he or she may have incurred by reason of the promised marriage

The action for reimbursement of expenses to which the foregoing article refers must be brought within one year, computed from the day of the refusal to celebrate the marriage

Inasmuch as these articles were never in force in the Philippines, this Court ruled in De Jesus vs Syquia (58 Phil, 866), that "the action for breach of promises to marry has no standing in the civil law, apart from the right to recover money or property advanced upon the faith of such promise" The Code Commission charged with the drafting of the Proposed Civil Code of the Philippines deem it best, however, to change the law thereon We quote from the report of the Code Commission on said Proposed Civil Code:

Articles 43 and 44 the Civil Code of 1889 refer to the promise of marriage But these articles are not enforced in the Philippines The subject is regulated in the Proposed Civil Code not only as to the aspect treated of in said articles but also in other particulars It is advisable to furnish legislative solutions to some questions that might arise relative to betrothal Among the provisions proposed are: That authorizing the adjudication of moral damages, in case of breach of promise of marriage, and that creating liability for causing a marriage engagement to be broken1awphîlnèt

Accordingly, the following provisions were inserted in said Proposed Civil Code, under Chapter I, Title III, Book I thereof:

Art 56 A mutual promise to marry may be made expressly or impliedly

Art 57 An engagement to be married must be agreed directly by the future spouses

Art 58 A contract for a future marriage cannot, without the consent of the parent or guardian, be entered into by a male between the ages of sixteen and twenty years or by a female between the ages of sixteen and eighteen years Without such consent of the parents or guardian, the engagement to marry cannot be the basis of a civil action for damages in case of breach of the promise

Art 59 A promise to marry when made by a female under the age of fourteen years is not civilly actionable, even though approved by the parent or guardian

Art 60 In cases referred to in the proceeding articles, the criminal and civil responsibility of a male for seduction shall not be affected

Art 61 No action for specific performance of a mutual promise to marry may be brought

Art 62 An action for breach of promise to marry may be brought by the aggrieved party even though a minor without the assistance of his parent or guardian Should the minor refuse to bring suit, the parent or guardian may institute the action

Art 63 Damages for breach of promise to marry shall include not only material and pecuniary losses but also compensation for mental and moral suffering

Art 64 Any person, other than a rival, the parents, guardians and grandparents, of the affianced parties, who cause a marriage engagement to be broken shall be liable for damages, both material and moral, to the engaged person who is rejected

Art 65 In case of breach of promise to marry, the party breaking the engagement shall be obliged to return what he or she has received from the other as gift on account of the promise of the marriage

These article were, however, eliminated in Congress The reason therefor are set forth in the report of the corresponding Senate Committee, from which we quote:

The elimination of this Chapter is proposed That breach of promise to marry is not actionable has been definitely decide in the case of De Jesus vs Syquia, 58 Phil, 866 The history of breach of promise suit in the United States and in England has shown that no other action lends itself more readily to abuse by designing women and unscrupulous men It is this experience which has led to the abolition of the rights of action in the so-called Balm suit in many of the American States

See statutes of:

Florida 1945 — pp 1342 — 1344Maryland 1945 — pp 1759 — 1762Nevada 1943 — p 75Maine 1941 — pp 140 — 141New Hampshire 1941 — p 223California 1939 — p 1245Massachusetts 1938 — p 326Indiana 1936 — p 1009Michigan 1935 — p 201New York 1935Pennsylvania p 450

The Commission perhaps though that it has followed the more progression trend in legislation when it provided for breach of promise to marry suits But it is clear that the creation of such causes of action at a time when so many States, in consequence of years of experience are doing away with them, may well prove to be a step in the wrong direction (Congressional Record, Vol IV, No 79, Thursday, May 19, 1949, p 2352)

The views thus expressed were accepted by both houses of Congress In the light of the clear and manifest intent of our law making body not to sanction actions for breach of promise to marry, the award of moral damages made by the lower courts is, accordingly, untenable The Court of Appeals said award:

Moreover, it appearing that because of defendant-appellant's seduction power, plaintiff-appellee, overwhelmed by her love for him finally yielded to his sexual desires in spite of her age and self-control, she being a woman after all, we hold that said defendant-appellant is liable for seduction and, therefore, moral damages may be recovered from him under the provision of Article 2219, paragraph 3, of the new Civil Code

Apart from the fact that the general tenor of said Article 2219, particularly the paragraphs preceding and those following the one cited by the Court of Appeals, and the language used in said paragraph strongly indicates that the "seduction" therein contemplated is the crime punished as such in Article as such in Article 337 and 338 of the Revised Penal Code, which admittedly does not exist in the present case, we find ourselves unable to say that petitioner is morally guilty of seduction, not only because he is approximately ten (10) years younger than the complainant — who around thirty-six (36) years of age, and as highly enlightened as a former high school teacher and a life insurance agent are supposed to be — when she became intimate with petitioner, then a mere apprentice pilot, but, also, because, the court of first instance found that, complainant "surrendered herself" to petitioner because, "overwhelmed by her love" for him, she "wanted to bind" "by having a fruit of their engagement even before they had the benefit of clergy"

The court of first instance sentenced petitioner to pay the following: (1) a monthly pension of P3000 for the support of the child: (2) P4,500, representing the income that complainant had allegedly failed to earn during her pregnancy and shortly after the birth of the child, as actual and compensation damages; (3) P5,000, as moral damages; and (4) P50000, as attorney's fees The Court of Appeals added to the second item the sum of P1,11425 — consisting of P14420, for hospitalization and medical attendance, in connection with the parturiation, and the balance representing expenses incurred to support the child — and increased the moral damages to P7,00000

With the elimination of this award for damages, the decision of the Court of Appeals is hereby affirmed, therefore, in all other respects, without special pronouncement as to cost in this instance It is so ordered

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

GR No 97336 February 19, 1993

GASHEM SHOOKAT BAKSH, petitioner, vsHON COURT OF APPEALS and MARILOU T GONZALES, respondents

Public Attorney's Office for petitioner

Corleto R Castro for private respondent

 

DAVIDE, JR, J:

This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to review and set aside the Decision  1of the respondent Court of Appeals in CA-GR CV No 24256 which affirmed in toto the 16 October 1939 Decision of Branch 38 (Lingayen) of the Regional Trial Court (RTC) of Pangasinan in Civil Case No 16503 Presented is the issue of whether or not damages may be recovered for a breach of promise to marry on the basis of Article 21 of the Civil Code of the Philippines

The antecedents of this case are not complicated:

On 27 October 1987, private respondent, without the assistance of counsel, filed with the aforesaid trial court a complaint  2 for damages against the petitioner for the alleged violation of their agreement to get married She alleges in said complaint that: she is twenty-two (22) years old, single, Filipino and a pretty lass of good moral character and reputation duly respected in her community; petitioner, on the other hand, is an Iranian citizen residing at the Lozano Apartments, Guilig, Dagupan City, and is an exchange student taking a medical course at the Lyceum Northwestern Colleges in Dagupan City; before 20 August 1987, the latter courted and proposed to marry her; she accepted his love on the condition that they would get married; they therefore agreed to get married after the end of the school semester, which was in October of that year; petitioner then visited the private respondent's parents in Bañaga, Bugallon, Pangasinan to secure their approval to the marriage; sometime in 20 August 1987, the petitioner forced her to live with him in the Lozano Apartments; she was a virgin before she began living with him; a week before the filing of the complaint, petitioner's attitude towards her started to change; he maltreated and threatened to kill her; as a result of such maltreatment, she sustained injuries; during a confrontation with a representative of the barangay captain of Guilig a day before the filing of the complaint, petitioner repudiated their marriage agreement and asked her not to live with him anymore and; the petitioner is already married to someone living in Bacolod City Private respondent then prayed for judgment ordering the petitioner to pay her damages in the amount of not less than P45,00000, reimbursement for actual expenses amounting to P60000, attorney's fees and costs, and granting her such other relief and remedies as may be just and equitable The complaint was docketed as Civil Case No 16503

In his Answer with Counterclaim, 3 petitioner admitted only the personal circumstances of the parties as averred in the complaint and denied the rest of the allegations either for lack of knowledge or information sufficient to form a belief as to the truth thereof or because the true facts are those alleged as his Special and Affirmative Defenses He thus claimed that he never proposed marriage to or agreed to be married with the private respondent; he neither sought the consent and approval of her parents nor forced her to live in his apartment; he did not maltreat her, but only told her to stop coming to his place because he discovered that she had deceived him by stealing his money and passport; and finally, no confrontation took place with a representative of the barangay captain Insisting, in his Counterclaim, that the complaint is baseless and unfounded and that as a result thereof, he was unnecessarily dragged into court and compelled to incur expenses, and has suffered mental anxiety and a besmirched reputation, he prayed for an award of P5,00000 for miscellaneous expenses and P25,00000 as moral damages

After conducting a pre-trial on 25 January 1988, the trial court issued a Pre-Trial Order  4 embodying the stipulated facts which the parties had agreed upon, to wit:

1 That the plaintiff is single and resident (sic) of Bañaga, Bugallon, Pangasinan, while the defendant is single, Iranian citizen and resident (sic) of Lozano Apartment, Guilig, Dagupan City since September 1, 1987 up to the present;

2 That the defendant is presently studying at Lyceum Northwestern, Dagupan City, College of Medicine, second year medicine proper;

3 That the plaintiff is (sic) an employee at Mabuhay Luncheonette , Fernandez Avenue, Dagupan City since July, 1986 up to the present and a (sic) high school graduate;

4 That the parties happened to know each other when the manager of the Mabuhay Luncheonette, Johhny Rabino introduced the defendant to the plaintiff on August 3, 1986

After trial on the merits, the lower court, applying Article 21 of the Civil Code, rendered on 16 October 1989 a decision  5 favoring the private respondent The petitioner was thus ordered to pay the latter damages and attorney's fees; the dispositive portion of the decision reads:

IN THE LIGHT of the foregoing consideration, judgment is hereby rendered in favor of the plaintiff and against the defendant

1 Condemning (sic) the defendant to pay the plaintiff the sum of twenty thousand (P20,00000) pesos as moral damages

2 Condemning further the defendant to play the plaintiff the sum of three thousand (P3,00000) pesos as atty's fees and two thousand (P2,00000) pesos at (sic) litigation expenses and to pay the costs

3 All other claims are denied 6

The decision is anchored on the trial court's findings and conclusions that (a) petitioner and private respondent were lovers, (b) private respondent is not a woman of loose morals or questionable virtue who readily submits to sexual advances, (c) petitioner, through machinations, deceit and false pretenses, promised to marry private respondent, d) because of his persuasive promise to marry her, she allowed herself to be deflowered by him, (e) by reason of that deceitful promise, private respondent and her parents — in accordance with Filipino customs and traditions — made some preparations for the wedding that was to be held at the end of October 1987 by looking for pigs and chickens, inviting friends and relatives and contracting sponsors, (f) petitioner did not fulfill his promise to marry her and (g) such acts of the petitioner, who is a foreigner and who has abused Philippine hospitality, have offended our sense of morality, good customs, culture and traditions The trial court gave full credit to the private respondent's testimony because, inter alia, she would not have had the temerity and courage to come to court and expose her honor and reputation to public scrutiny and ridicule if her claim was false  7

The above findings and conclusions were culled from the detailed summary of the evidence for the private respondent in the foregoing decision, digested by the respondent Court as follows:

According to plaintiff, who claimed that she was a virgin at the time and that she never had a boyfriend before, defendant started courting her just a few days after they first met He later proposed marriage to her several times and she accepted his love as well as his proposal of marriage on August 20, 1987, on which same day he went with her to her hometown of Bañaga, Bugallon, Pangasinan, as he wanted to meet her parents and inform them of their relationship and their intention to get married The photographs Exhs "A" to "E" (and their submarkings) of defendant with members of plaintiff's family or with plaintiff, were taken that day Also on that occasion, defendant told plaintiffs parents and brothers and sisters that he intended to marry her during the semestral break in October, 1987, and because plaintiff's parents thought he was good and trusted him, they agreed to his proposal for him to marry their daughter, and they likewise allowed him to stay in their house and sleep with plaintiff during the few days that they were in Bugallon When plaintiff and defendant later returned to Dagupan City, they continued to live together in defendant's apartment However, in the early days of October, 1987, defendant would tie plaintiff's hands and feet while he went to school, and he even gave her medicine at 4 o'clock in the morning that made her sleep the whole day and night until the following day As a result of this live-in relationship, plaintiff became pregnant, but defendant gave her some medicine to abort the fetus Still plaintiff continued to live with defendant and kept reminding him of his promise to marry her until he told her that he could not do so because he was already married to a girl in Bacolod City That was the time plaintiff left defendant, went home to her parents, and thereafter consulted a lawyer who accompanied her to the barangay captain in Dagupan City Plaintiff, her lawyer, her godmother, and a barangay tanod sent by the barangay captain went to talk to defendant to still convince him to marry plaintiff, but defendant insisted that he could not do so because he was already married to a girl in Bacolod City, although the truth, as stipulated by the parties at the pre-trial, is that defendant is still single

Plaintiff's father, a tricycle driver, also claimed that after defendant had informed them of his desire to marry Marilou, he already looked for sponsors for the wedding, started preparing for the reception by looking for pigs and chickens, and even already invited many relatives and friends to the forthcoming wedding 8

Petitioner appealed the trial court's decision to the respondent Court of Appeals which docketed the case as CA-GR CV No 24256 In his Brief,  9 he contended that the trial court erred (a) in not dismissing the case for lack of factual and legal basis and (b) in ordering him to pay moral damages, attorney's fees, litigation expenses and costs

On 18 February 1991, respondent Court promulgated the challenged decision 10 affirming in toto the trial court's ruling of 16 October 1989 In sustaining the trial court's findings of fact, respondent Court made the following analysis:

First of all, plaintiff, then only 21 years old when she met defendant who was already 29 years old at the time, does not appear to be a girl of loose morals It is uncontradicted that she was a virgin prior to her unfortunate experience with defendant and never had boyfriend She is, as described by the lower court, a barrio lass "not used and accustomed to trend of modern urban life", and certainly would (sic) not have allowed "herself to be deflowered by the defendant if there was no persuasive promise made by the defendant to marry her" In fact, we agree with the lower court that plaintiff and defendant must have been sweethearts or so the plaintiff must have thought because of the deception of defendant, for otherwise, she would not have allowed herself to be photographed with defendant in public in so (sic) loving and tender poses as those depicted in the pictures Exhs "D" and "E" We cannot believe, therefore, defendant's pretense that plaintiff was a nobody to him except a waitress at the restaurant where he usually ate Defendant in fact admitted that he went to plaintiff's hometown of Bañaga, Bugallon, Pangasinan, at least thrice; at (sic) the town fiesta on February 27, 1987 (p 54, tsn May 18, 1988), at (sic) a beach party together with the manager and employees of the Mabuhay Luncheonette on March 3, 1987 (p 50, tsn id), and on April 1, 1987 when he allegedly talked to plaintiff's mother who told him to marry her daughter (pp 55-56, tsn id) Would defendant have left Dagupan City where he was involved in the serious study of medicine to go to plaintiff's hometown in Bañaga, Bugallon, unless there was (sic) some kind of special relationship between them? And this special relationship must indeed have led to defendant's insincere proposal of marriage to plaintiff, communicated not only to her but also to her parents, and (sic) Marites Rabino, the owner of the restaurant where plaintiff was working and where defendant first proposed marriage to her, also knew of this love affair and defendant's proposal of marriage to plaintiff, which she declared was the reason why plaintiff resigned from her job at the restaurant after she had accepted defendant's proposal (pp 6-7, tsn March 7, 1988)

Upon the other hand, appellant does not appear to be a man of good moral character and must think so low and have so little respect and regard for Filipino women that he openly admitted that when he studied in Bacolod City for several years where he finished his BS Biology before he came to Dagupan City to study medicine, he had a common-law wife in Bacolod City In other words, he also lived with another woman in Bacolod City but did not marry that woman, just like what he did to plaintiff It is not surprising, then, that he felt so little compunction or remorse in pretending to love and promising to marry plaintiff, a young, innocent, trustful country girl, in order to satisfy his lust on her 11

and then concluded:

In sum, we are strongly convinced and so hold that it was defendant-appellant's fraudulent and deceptive protestations of love for and promise to marry plaintiff that made her surrender her virtue and womanhood to him and to live with him on the honest and sincere belief that he would keep said promise, and it was likewise these (sic) fraud and deception on appellant's part that made plaintiff's parents agree to their daughter's living-in with him preparatory to their supposed marriage And as these acts of appellant are palpably and undoubtedly against morals, good customs, and public policy, and are even gravely and deeply derogatory and insulting to our women, coming as they do from a foreigner who has been enjoying the hospitality of our people and taking advantage of the opportunity to study in one of our institutions of learning, defendant-appellant should indeed be made, under Art 21 of the Civil Code of the Philippines, to compensate for the moral damages and injury that he had caused plaintiff, as the lower court ordered him to do in its decision in this case 12

Unfazed by his second defeat, petitioner filed the instant petition on 26 March 1991; he raises therein the single issue of whether or not Article 21 of the Civil Code applies to the case at bar 13

It is petitioner's thesis that said Article 21 is not applicable because he had not committed any moral wrong or injury or violated any good custom or public policy; he has not professed love or proposed marriage to the private respondent; and he has never maltreated her He criticizes the trial court for liberally invoking Filipino customs, traditions and culture, and ignoring the fact that since he is a foreigner, he is not conversant with such Filipino customs, traditions and culture As an Iranian Moslem, he is not familiar with Catholic and Christian ways He stresses that even if he had made a promise to marry, the subsequent failure to fulfill the same is excusable or tolerable because of his Moslem upbringing; he then alludes to the Muslim Code which purportedly allows a Muslim to take four (4) wives and concludes that on the basis thereof, the trial court erred in ruling that he does not posses good moral character Moreover, his controversial "common law life" is now his legal wife as their marriage had been solemnized in civil ceremonies in the Iranian Embassy As to his unlawful cohabitation with the private respondent, petitioner claims that even if responsibility could be pinned on him for the live-in relationship, the private respondent should also be faulted for consenting to an illicit arrangement Finally, petitioner asseverates that even if it was to be assumed arguendo that he had professed his love to the private respondent and had also promised to marry her, such acts would not be actionable in view of the special circumstances of the case The mere breach of promise is not actionable 14

On 26 August 1991, after the private respondent had filed her Comment to the petition and the petitioner had filed his Reply thereto, this Court gave due course to the petition and required the parties to submit their respective Memoranda, which they subsequently complied with

As may be gleaned from the foregoing summation of the petitioner's arguments in support of his thesis, it is clear that questions of fact, which boil down to the issue of the credibility of witnesses, are also raised It is the rule in this jurisdiction that appellate courts will not disturb the trial court's findings as to the credibility of witnesses, the latter court having heard the witnesses and having had the opportunity to observe closely their deportment and manner of testifying, unless the trial court had plainly overlooked facts of substance or value which, if considered, might affect the result of the case 15

Petitioner has miserably failed to convince Us that both the appellate and trial courts had overlooked any fact of substance or values which could alter the result of the case

Equally settled is the rule that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court It is not the function of this Court to analyze or weigh all over again the evidence introduced by the parties before the lower court There are, however, recognized exceptions to this rule Thus, inMedina vs Asistio, Jr, 16 this Court took the time, again, to enumerate these exceptions:

xxx xxx xxx

(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures (Joaquin v Navarro, 93 Phil 257 [1953]); (2) When the inference made is manifestly mistaken, absurb or impossible (Luna v Linatok, 74 Phil 15 [1942]); (3) Where there is a grave abuse of discretion (Buyco v People, 95 Phil 453 [1955]); (4) When the judgment is based on a misapprehension of facts (Cruz v Sosing, L-4875, Nov 27, 1953); (5) When the findings of fact are conflicting (Casica v Villaseca, L-9590 Ap 30, 1957; unrep) (6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellate and appellee (Evangelista v Alto Surety and Insurance Co, 103 Phil 401 [1958]); (7) The findings of the Court of Appeals are contrary to those of the trial court (Garcia v Court of Appeals, 33 SCRA 622 [1970]; Sacay v Sandiganbayan, 142 SCRA 593 [1986]); (8) When the findings of fact are conclusions without citation of specific evidence on which they are based ( Ibid,); (9) When the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents (Ibid,); and (10) The finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on record (Salazar v Gutierrez, 33 SCRA 242 [1970])

Petitioner has not endeavored to joint out to Us the existence of any of the above quoted exceptions in this case Consequently, the factual findings of the trial and appellate courts must be respected

And now to the legal issue

The existing rule is that a breach of promise to marry per se is not an actionable wrong 17 Congress deliberately eliminated from the draft of the New Civil Code the provisions that would have made it so The reason therefor is set forth in the report of the Senate Committees on the Proposed Civil Code, from which We quote:

The elimination of this chapter is proposed That breach of promise to marry is not actionable has been definitely decided in the case of De Jesus vs Syquia  18 The history of breach of promise suits in the United States and in England has shown that no other action lends itself more readily to abuse by designing women and unscrupulous men It is this experience which has led to the abolition of rights of action in the so-called Heart Balm suits in many of the American states  19

This notwithstanding, the said Code contains a provision, Article 21, which is designed to expand the concept of torts or quasi-delict in this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically enumerate and punish in the statute books 20

As the Code Commission itself stated in its Report:

But the Code Commission had gone farther than the sphere of wrongs defined or determined by positive law Fully sensible that there are countless gaps in the statutes, which leave so many victims of moral wrongs helpless, even though they have actually suffered material and moral injury, the Commission has deemed it necessary, in the interest of justice, to incorporate in the proposed Civil Code the following rule:

Art 23 Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage

An example will illustrate the purview of the foregoing norm: "A" seduces the nineteen-year old daughter of "X" A promise of marriage either has not been made, or can not be proved The girl becomes pregnant Under the present laws, there is no crime, as the girl is above nineteen years of age Neither can any civil action for breach of promise of marriage be filed Therefore, though the grievous moral wrong has been committed, and though the girl and family have suffered incalculable moral damage, she and her parents cannot bring action for damages But under the proposed article, she and her parents would have such a right of action

Thus at one stroke, the legislator, if the forgoing rule is approved, would vouchsafe adequate legal remedy for that untold number of moral wrongs which it is impossible for human foresight to provide for specifically in the statutes 21

Article 2176 of the Civil Code, which defines a quasi-delict thus:

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

is limited to negligent acts or omissions and excludes the notion of willfulness or intent Quasi-delict, known in Spanish legal treatises as culpa aquiliana, is a civil law concept while torts is an Anglo-American or common law concept Torts is much broader than culpa aquiliana because it includes not only negligence, but international criminal acts as well such as assault and battery, false imprisonment and deceit In the general scheme of the Philippine legal system envisioned by the Commission responsible for drafting the New Civil Code, intentional and malicious acts, with certain exceptions, are to be governed by the Revised Penal Code while negligent acts or omissions are to be covered by Article 2176 of the Civil Code 22 In between these opposite spectrums are injurious acts which, in the absence of Article 21, would have been beyond redress Thus, Article 21 fills that vacuum It is even postulated that together with Articles 19 and 20 of the Civil Code, Article 21 has greatly broadened the scope of the law on civil wrongs; it has become much more supple and adaptable than the Anglo-American law on torts 23

In the light of the above laudable purpose of Article 21, We are of the opinion, and so hold, that where a man's promise to marry is in fact the proximate cause of the acceptance of his love by a woman and his representation to fulfill that promise thereafter becomes the proximate cause of the giving of herself unto him in a sexual congress, proof that he had, in reality, no intention of marrying her and that the promise was only a subtle scheme or deceptive device to entice or inveigle her to accept him and to obtain her consent to the sexual act, could

justify the award of damages pursuant to Article 21 not because of such promise to marry but because of the fraud and deceit behind it and the willful injury to her honor and reputation which followed thereafter It is essential, however, that such injury should have been committed in a manner contrary to morals, good customs or public policy

In the instant case, respondent Court found that it was the petitioner's "fraudulent and deceptive protestations of love for and promise to marry plaintiff that made her surrender her virtue and womanhood to him and to live with him on the honest and sincere belief that he would keep said promise, and it was likewise these fraud and deception on appellant's part that made plaintiff's parents agree to their daughter's living-in with him preparatory to their supposed marriage" 24 In short, the private respondent surrendered her virginity, the cherished possession of every single Filipina, not because of lust but because of moral seduction — the kind illustrated by the Code Commission in its example earlier adverted to The petitioner could not be held liable for criminal seduction punished under either Article 337 or Article 338 of the Revised Penal Code because the private respondent was above eighteen (18) years of age at the time of the seduction

Prior decisions of this Court clearly suggest that Article 21 may be applied in a breach of promise to marry where the woman is a victim of moral seduction Thus, in  Hermosisima vs Court of Appeals, 25 this Court denied recovery of damages to the woman because:

we find ourselves unable to say that petitioner is morally guilty of seduction, not only because he is approximately ten (10) years younger than the complainant — who was around thirty-six (36) years of age, and as highly enlightened as a former high school teacher and a life insurance agent are supposed to be — when she became intimate with petitioner, then a mere apprentice pilot, but, also, because the court of first instance found that, complainant "surrendered herself" to petitioner because, "overwhelmed by her love" for him, she "wanted to bind" him by having a fruit of their engagement even before they had the benefit of clergy

In Tanjanco vs Court of Appeals, 26 while this Court likewise hinted at possible recovery if there had been moral seduction, recovery was eventually denied because We were not convinced that such seduction existed The following enlightening disquisition and conclusion were made in the said case:

The Court of Appeals seem to have overlooked that the example set forth in the Code Commission's memorandum refers to a tort upon a minor who had been seduced The essential feature is seduction, that in law is more than mere sexual intercourse, or a breach of a promise of marriage; it connotes essentially the idea of deceit, enticement, superior power or abuse of confidence on the part of the seducer to which the woman has yielded (US vs Buenaventura, 27 Phil 121; US vs Arlante, 9 Phil 595)

It has been ruled in the Buenaventura case (supra) that —

To constitute seduction there must in all cases be some sufficient promise or inducement and the woman must yield because of the promise or other inducement If she consents merely from carnal lust and the intercourse is from mutual desire, there is no seduction (43 Cent Dig tit Seduction, par 56) She must be induced to depart from the path of virtue by the use of some species of arts, persuasions and wiles, which are calculated to have and do have that effect, and which result in her person to ultimately submitting her person to the sexual embraces of her seducer (27 Phil 123)

And in American Jurisprudence we find:

On the other hand, in an action by the woman, the enticement, persuasion or deception is the essence of the injury; and a mere proof of intercourse is insufficient to warrant a recovery

Accordingly it is not seduction where the willingness arises out of sexual desire of curiosity of the female, and the defendant merely affords her the needed opportunity for the commission of the act It has been emphasized that to allow a recovery in all such cases would tend to the demoralization of the female sex, and would be a reward for unchastity by which a class of adventuresses would be swift to profit (47 Am Jur 662)

xxx xxx xxx

Over and above the partisan allegations, the fact stand out that for one whole year, from 1958 to 1959, the plaintiff-appellee, a woman of adult age, maintain intimate sexual relations with appellant, with repeated acts of intercourse Such conduct is incompatible with the idea of seduction Plainly there is here voluntariness and mutual passion; for had the appellant been deceived, had she surrendered exclusively because of the deceit, artful persuasions and wiles of the defendant, she would not have again yielded to his embraces, much less for one year, without exacting early fulfillment of the alleged promises of marriage, and would have cut short all sexual relations upon finding that defendant did not intend to fulfill his defendant did not intend to fulfill his promise Hence, we conclude that no case is made under article 21 of the Civil Code, and no other cause of action being alleged, no error was committed by the Court of First Instance in dismissing the complaint 27

In his annotations on the Civil Code, 28 Associate Justice Edgardo L Paras, who recently retired from this Court, opined that in a breach of promise to marry where there had been carnal knowledge, moral damages may be recovered:

if there be criminal or moral seduction, but not if the intercourse was due to mutual lust (Hermosisima vs Court of Appeals, L-14628, Sept 30, 1960; Estopa vs Piansay, Jr, L-14733, Sept 30, 1960; Batarra vs Marcos, 7 Phil 56 (sic); Beatriz Galang vs Court of Appeals, et al, L-17248, Jan 29, 1962) (In other words, if the CAUSE be the promise to marry, and the EFFECT be the carnal knowledge, there is a chance that there was criminal or moral seduction, hence recovery of moral damages will prosper If it be the other way around, there can be no recovery of moral damages, because here mutual lust has intervened)

together with "ACTUAL damages, should there be any, such as the expenses for the wedding presentations (See Domalagon v Bolifer, 33 Phil 471)

Senator Arturo M Tolentino 29 is also of the same persuasion:

It is submitted that the rule in Batarra vs Marcos, 30 still subsists, notwithstanding the incorporation of the present article 31 in the Code The example given by the Code Commission is correct, if there wasseduction, not necessarily in the legal sense, but in the vulgar sense of deception But when the sexual act is accomplished without any deceit or qualifying circumstance of abuse of authority or influence, but the woman, already of age, has knowingly given herself to a man, it cannot be said that there is an injury which can be the basis for indemnity

But so long as there is fraud, which is characterized by willfulness (sic), the action lies The court, however, must weigh the degree of fraud, if it is sufficient to deceive the woman under the circumstances, because an act which would deceive a girl sixteen years of age may not constitute deceit as to an experienced woman thirty years of age But so long as there is a wrongful act and a resulting injury, there should be civil liability, even if the act is not punishable under the criminal law and there should have been an acquittal or dismissal of the criminal case for that reason

We are unable to agree with the petitioner's alternative proposition to the effect that granting, for argument's sake, that he did promise to marry the private respondent, the latter is nevertheless also at fault According to him, both parties are in pari delicto; hence, pursuant to Article 1412(1) of the Civil Code and the doctrine laid down in Batarra vs Marcos, 32 the private respondent cannot recover damages from the petitioner The latter even goes as far as stating that if the private respondent had "sustained any injury or damage in their relationship, it is primarily because of her own doing, 33 for:

She is also interested in the petitioner as the latter will become a doctor sooner or later Take notice that she is a plain high school graduate and a mere employee (Annex "C") or a waitress (TSN, p 51, January 25, 1988) in a luncheonette and without doubt, is in need of a man who can give her economic security Her family is in dire need of financial assistance (TSN, pp 51-53, May 18, 1988) And this predicament prompted her to accept a proposition that may have been offered by the petitioner 34

These statements reveal the true character and motive of the petitioner It is clear that he harbors a condescending, if not sarcastic, regard for the private respondent on account of the latter's ignoble birth, inferior educational background, poverty and, as perceived by him, dishonorable employment Obviously then, from the very beginning, he was not at all moved by good faith and an honest motive Marrying with a woman so circumstances could not have even remotely occurred to him Thus, his profession of love and promise to marry were empty words directly intended to fool, dupe, entice, beguile and deceive the poor woman into believing that indeed, he loved her and would want her to be his life's partner His was nothing but pure lust which he wanted satisfied by a Filipina who honestly believed that by accepting his proffer of love and proposal of marriage, she would be able to enjoy a life of ease and security Petitioner clearly violated the Filipino's concept of morality and brazenly defied the traditional respect Filipinos have for their women It can even be said that the petitioner committed such deplorable acts in blatant disregard of Article 19 of the Civil Code which directs every person to act with justice, give everyone his due and observe honesty and good faith in the exercise of his rights and in the performance of his obligations

No foreigner must be allowed to make a mockery of our laws, customs and traditions

The pari delicto rule does not apply in this case for while indeed, the private respondent may not have been impelled by the purest of intentions, she eventually submitted to the petitioner in sexual congress not out of lust, but because of moral seduction In fact, it is apparent that she had qualms of conscience about the entire episode for as soon as she found out that the petitioner was not going to marry her after all, she left him She is not, therefore, in pari delicto with the petitioner Pari delicto means "in equal fault; in a similar offense or crime; equal in guilt or in legal fault" 35 At most, it could be conceded that she is merely in delicto

Equity often interferes for the relief of the less guilty of the parties, where his transgression has been brought about by the imposition of undue influence of the party on whom the burden of the original wrong principally rests, or where his consent to the transaction was itself procured by fraud 36

In Mangayao vs Lasud, 37 We declared:

Appellants likewise stress that both parties being at fault, there should be no action by one against the other (Art 1412, New Civil Code) This rule, however, has been interpreted as applicable only where the fault on both sides is, more or less, equivalent It does not apply where one party is literate or intelligent and the other one is not (cf Bough vs Cantiveros, 40 Phil 209)

We should stress, however, that while We find for the private respondent, let it not be said that this Court condones the deplorable behavior of her parents in letting her and the petitioner stay together in the same room in their house after giving approval to their marriage It is the solemn duty of parents to protect the honor of their daughters and infuse upon them the higher values of morality and dignity

WHEREFORE, finding no reversible error in the challenged decision, the instant petition is hereby DENIED, with costs against the petitioner

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

GR No 79184 May 6, 1992

ERLINDA L PONCE, petitioner, vsVALENTINO L LEGASPI and THE HON COURT OF APPEALS, respondents

FS Farolan & Associates Law Offices for petitioner

 

GUTIERREZ, JR, J:

This controversy calls for the balancing of two conflicting interests: the petitioner's right to litigate versus the respondent's right to be protected from malicious prosecution

The present case stemmed from the filing before the Supreme Court on October 3, 1977 of a complaint for disbarment against respondent Atty Valentino Legaspi by petitioner Erlinda Ponce

At the time of the filing of the disbarment proceedings, petitioner Ponce, together with her husband Manuel, owned forty three percent (43%) of the stockholdings of L'NOR Marine Services, Inc (L'NOR) She was then Treasurer and director of the Board of Directors of L'NOR while her husband was a director Forty eight percent (48%) of L'NOR's stocks was owned by the spouses Edward and Norma Porter who were then serving as President/General Manager and Secretary respectively

The pertinent portions of the complaint are reproduced below:

xxx xxx xxx

10 During the time or period while respondent is the legal counsel of the aforecited corporation, there occurred certain fraudulent manipulations, anomalous management and prejudicial operations by certain officers of said corporation, namely: Edward J Porter, President/General Manager; Norma Y Porter, Secretary; and Zenaida T Manaloto, Director, who caused great damage and prejudice which will be related hereunder;

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14 About July, 1976, said spouses Edward J Porter and Norma Y Porter, together with Zenaida T Manaloto, facilitated, assisted and aided by herein respondent Legaspi (Annexes "B" and "B-1" herewith), incorporated the Yrasport Drydocks, Inc, hereinafter designated YRASPORT, which they control with the following stockholdings:

Edward J Porter 180 sharesNorma Y Porter 180 sharesEriberto F Yrastorza 16 sharesZenaida T Manaloto 8 sharesRoman M Maceda 8 sharesAndres A Nombrado 8 shares

and whose line of business is in direct competition with L'NOR;

15 YRASPORT, like Yrasport Enterprises, was launched without the knowledge of the minority stockholders owning 43% of L'NOR, and was really designed to compete, if not eliminate, L'NOR as a competitor;

16 That as a matter of fact attempts were made to secure one of L'NOR jobs in favor of YRASPORT, which fraudulent scheme was however frustrated only by the timely opposition of herein complainant;

17 YRASPORT likewise availed of and used the office space, equipment, personnel, funds, other physical facilities, and goodwill of L'NOR while competing at the same time against and causing the latter great damage and irreparable injury;

xxx xxx xxx

21 Edward J Porter, President-General Manager of L'NOR, purchased from ISECOR (Industrial Supply Corporation) on November 3, 1974 one skaagit winch with its cables for P10,00000; that on November 18, 1974 said Edward J Porter assigned the purchase of said skaagit winch with its cables in favor of L'NOR at the price of P10,00000; and that the latter corporation then assumed the agreed obligation covering the P10,00000 purchase price in favor of ISECOR;

22 Subsequently, on or about October 18, 1975, said President-General Manager Edward J Porter misrepresented facts regarding the acquisition cost of said skaagit winch with its cables to the effect that the same was sold by ISECOR at the cost of P20,00000; that he collected the sum from L'NOR for direct payment to ISECOR allegedly to liquidate in full the obligation of P20,00000 in favor of ISECOR, when, in truth and in fact, the obligation is only P10,00000 and not more;

23 On account of the aforecited flagrant fraud, a charge of Estafa was filed against Edward J Porter and the office of the City Fiscal handed down a resolution to prosecute him in court, copy of pertinent exhibits herewith marked as Annexes "C", "C-1", "C-2", "C-3", "C-4" and "C-5";

24 In view of the aforesaid illegal manipulations, illicit schemes, palpable frauds and estafa committed by said President-General Manager Edward J Porter, in confabulation and conspiracy with the other officers of the corporation, namely: his wife Norma Y Porter and Zenaida T Manaloto, herein complainant requested respondent Valentino Legaspi to take and pursue appropriate local steps and seasonable actions in order to protect the paramount interest of L'NOR of which he is the legal counsel by retainer, but the latter, without any valid excuse whatsoever, refused to do so, although he is still collecting his monthly retainer;

25 On account of the refusal of said corporate attorney of L'NOR, respondent Legaspi, complainant was forced to retain the services of another counsel to prosecute the appropriate derivative suit in the Court of First Instance of Cebu, copy herewith marked Annex "D"; and that, in opposition to the same, respondent Legaspi appeared as legal counsel and attorney of Edward J Porter and his confederates, copy of exhibits marked Annex "D-1" herewith;

26 In the Criminal Case filed against Edward J Porter for Estafa (Annex "C" supra), respondent Legaspi likewise appeared as counsel for respondent Porter despite the fact that he is the legal counsel of L'NOR which is the prejudiced party and for whose benefit the criminal case was really being prosecuted, copy of letter of respondent, marked as Annex "C-6" herewith;

27 Up to the present time respondent is still collecting his monthly retainer, and for his appearance for Edward J Porter, et als in the derivative suit, he collected the sum of P2,00000 from L'NOR as payment for his illicit legal services in defending the Porters and Manaloto against the very interest of the corporation paying him monthly retainer;

28 Said Edward J Porter and his confederates, in their respective capacity as such officers of L'NOR, continue and persist in perpetrating malicious acts, anomalous management and fraudulent operations against the interest of L'NOR, and that respondent Legaspi was duly adviced verbally and also in writing by complainant to take the necessary action in his capacity as legal counsel of L'NOR to protect zealously the interest of the latter, but respondent Legaspi has done absolutely nothing, and grossly neglected and flagrantly violated his duties as legal counsel up to the present time, pertinent exhibits herewith marked as Annexes "E", "E-1", "E-2", "E-4", "E-5", "E-6";

29 That, on the contrary, respondent Legaspi in his dual capacity as legal counsel of L'NOR and YRASPORT, and at the same time acting in his capacity as corporate secretary of YRASPORT, facilitated, assisted, aided or otherwise abetted the illegal manipulations, illicit schemes, fraudulent operations and grave frauds committed by said Edward J Porter and his confederates who are officers of L'NOR against the interest of the latter and to further the malicious competitive sabotage of YRASPORT alleged heretofore; and

30 That, upon the foregoing, we most respectfully prefer against respondent Valentino Legaspi the following charges:

First Specification:

That respondent Valentino Legaspi has committed gross misconduct in office as a practicing lawyer and member of the Philippine Bar, because, as legal counsel, he violated his duty to and the trust of his client, L'NOR Marine Services, Inc, whom he is professionally duty bound to represent with entire devotion faithfully as such attorney, and whose paramount interest he should protect in all good faith with absolute fidelity, but that, in truth and in fact, he did not do so

Second Specification:

That respondent Valentino Legaspi, while acting as legal counsel of L'NOR under continuing monthly retainer, has acted at the same time as lawyer of Edward J Porter, et als, who have committed anomalous acts, prejudicial manipulations and grave frauds against his client L'NOR Marine services, Inc, that he therefore represented professionally conflicting interest; and that he committed grave malpractice that is in flagrant violation of the recognized canons of legal ethics

Third Specification:

That respondent Valentino Legaspi committed grossly corrupt or dishonest conduct while under retainer and acting as attorney of L'NOR Marine Services, Inc, when he facilitated, assisted, aided or otherwise abetted the organization, registration and operation of another competing entity, Yrasport Drydocks, Inc, in which he is also the lawyer and corporate Secretary, at the expense of and to which the business and transactions of L'NOR are being diverted or otherwise appropriated, including the pirating of skilled personnel and also facilities, and that respondent committed the same with evident bad faith and absolute lack of fidelity to his client L'NOR, thereby degrading the good esteem, integrity and honor of the profession (Records, Administrative Case No 1819, pp 4-13)

In his comment, Atty Legaspi denied the allegations in paragraphs 10, 21, 22, 23, 24, 28, 29 and 30 He qualifiedly admitted the allegations in paragraphs 14 and 15, stating that Yrasport was not organized to compete directly with L'NOR He averred that L'NOR could not cope up with the business and Yrasport was formed for the purpose of complementing L'NOR's business He added that there is nothing in the law nor contract which prohibits a stockholder from competing with the business of the corporation

Atty Legaspi admitted the allegations in paragraphs 26 and 27 that he appeared for Edward Porter in the estafa case filet against the latter, reasoning that his appearances were direct orders of management and that it was not improper for counsel to represent both the corporate officers when they are being sued at the same time

As to the allegations in paragraphs 16 and 17, Atty Legaspi declared that he has no sufficient knowledge to form a belief as to the truth or falsity of the statements contained therein

On January 23, 1978, the Court issued a resolution dismissing the disbarment complaint against Legaspi The resolution is quoted hereunder:

Administrative Case No 1819 (Erlinda L Ponce v Valentino L Legaspi) –– Considering the complaint for disbarment against Atty Valentino L Legaspi as well as said respondent's comment thereon, the Court Resolved to DISMISS the complaint for lack of merit (Records, Administrative Case No 1819 p 91)

The petitioner filed a motion for reconsideration which was denied by the Court on March 31, 1978

On February 10, 1978, Atty Legaspi filed before the Court of First Instance (now Regional Trial Court of Cebu) a complaint for damages against the petitioner

The petitioner filed a motion to dismiss which was denied by the trial court

On July 18, 1983, the lower court rendered judgment the dispositive portion of which reads as follows:

WHEREFORE, this court being satisfied that the material allegations of the complaint have been proved and remained uncontradicted with the testimonial and documentary evidence introduced and admitted by the court, judgment is hereby rendered in favor of the plaintiff and against the defendant Erlinda L Ponce ordering the defendant to pay Valentino L Legaspi, plaintiff herein, the amount of P1,00000 as actual damages, P50,00000 as moral damages and P25,00000 as exemplary damages and to pay the costs (Rollo, p 115)

The petitioner appealed to the Court of Appeals On May 26, 1987, the Court of Appeals affirmed the lower court's judgment In affirming the appealed decision, the Court of Appeals reasoned:

Defendant-appellant contends that plaintiff-appellee's action for damages is purely retaliatory in character and stems from an alleged feeling of wounded pride or amor proprio; that granting without admitting that the appellee has suffered certain adverse effects in his reputation because of the disbarment case, it does not constitute malicious prosecution as would otherwise perhaps render the appellant liable for damages; that the facts on record indubitably show that the appellant was merely exercising her right of access to courts for redress of legitimate grievances when she filed the disbarment case believing then as she still does, that appellee committed a breach of his professional duties as a lawyer In refutation, appellee alleges that appellant belittles this action for damages as "purely retaliatory in character and stems from an alleged feeling of wounded pride or amor proprio"; that by such statement, appellant has unmasked herself as to how little regard she has for the feelings of others and how she clings to the law if only to secure her purpose; that what is being sought by appellee is compensation for appellee's malice, falsehoods and deceit in trying to destroy the professional standing of a humble practitioner just because he did better than the other

While free access to the courts is guaranteed under Section 9, Article IV of the 1973 Constitution (now Section 11, Article III of the 1986 Constitution), it does not give unbridled license to file any case, whatever the motives are Whoever files a case shall be responsible for the consequences thereof whenever his act of filing infringes upon the rights of others In the same way that although freedom of speech is guaranteed, one cannot claim to be protected under such freedom when he is being held liable for the libel he commits

The case at bar cannot be considered as one for recovery of damages arising from malicious prosecution, for a disbarment proceeding is not a criminal action (De Jesus-Paras v Vailoces, 111 Phil 569; 1 SCRA 954, 957) However, we should not lose sight of the fact that utterances made in the course of judicial proceedings, including all kinds of pleadings, petitions and motions, belong to the class of communications that are absolutely privileged (Sison v David, 110 Phil 662; 1 SCRA 60, 71 citing authorities) and no civil action for libel or slander may arise therefrom unless the contents of the petition are irrelevant to the subject matter thereof (1 SCRA 71) It has also been held that a privileged communication should not be subjected to microscopic examination to discover grounds of malice or falsity Such excessive scrutiny would defeat the protection which the law throws over privileged communications The ultimate test is that of bona fides (Deles v Aragona, Jr, 27 SCRA 633, 642) The privileged character of her complaint filed with the Supreme Court must have been what defendant had in mind when she invokes her right to free access to the courts However, defendant's actuations before and after the filing of administrative complaint with the Supreme Court disprove her bona fides On this issue, the trial court found:

Yet, the uncontroverted evidence before the court belie these allegations because there are antecedent incidents between plaintiff and defendant that speak otherwise; that she filed this disbarment complaint against plaintiff with malice aforethought This conclusion is founded on the fact that defendant was embittered against him for failing to obtain a compromise against Eduardo Coronel before the military due to plaintiff's defense of his client; that she wanted to dissolve the L'Nor Corporation in order to repossess the premises leased to the former upon the corporation's dissolution and Porter's ouster which was thwarted by plaintiff's advice as counsel for L'Nor; plaintiff's letter (Exhibit "H") that she was not authorized to use the title of Chairman of the Board; not counter-signing plaintiff's check (Exhibits I, I-1, and I-2); her insistence to have the surplus profits declared as cash dividend which likewise failed due to plaintiff's advice; her letter (Exh J) asking plaintiff to desist from defending the corporation and its officers; plaintiff's refusal to give her advice without authority from the Board of Directors; numerous cases filed with the Security and Exchange Commission which were all dismissed and with the Court of First Instance and Circuit Criminal Court which plaintiff ably defended causing their eventual dismissal and other acts against plaintiff which demonstrated palpably defendant's hatred for the plaintiff acts clearly evidencing malice contrary to her averments in the Answer

To top it all, notwithstanding her evident support and advice by counsel, she cleverly hid the identity of said counsel prosecuting all her acts of vilification and harassment in her own name Furthermore, the testimony of plaintiff that she distributed copies of her complaint for disbarment against plaintiff to his clients remain uncontradicted Finally, instead of coming to court in good faith she instead moved from her residence at Seaview Heights, Lawaan, Talisay, Cebu without informing the court nor her counsel and has not been heard from From the foregoing, malice is evident

Appellant claims that the finding of the lower court that appellant disseminated information regarding the filing of her complaint for disbarment and caused a copy of the same to be furnished appellee's clients is totally unsupported by any evidence on record The contention is untenable Plaintiff declared that he came to know of the complaint against him even before the Supreme Court required him to comment because two or three of his clients told him that they had a copy given to them (p 8, tsn, June 3, 1983)

The foregoing acts committed by the defendant violate the conduct that she should have observed in her relation to plaintiff, as  provided in the following provisions of the Civil Code of the Philippines, to wit:

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, wilfully or negligently causes damage to another, shall indemnify the latter for the same

Art 26 Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief;

(1) Prying into the privacy of another's residence;

(2) Meddling with or disturbing the private life or family relations of another;

(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition (Rollo, pp 45-48)

The petitioner's motion for reconsideration was denied by the respondent Court in its resolution dated July 7, 1987 Hence, this petition

The petitioner assigns the following errors:

I

THE RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT OF CEBU, BRANCH XXI, WHICH FOUND THE HEREIN PETITIONER GUILTY OF BAD FAITH IN INSTITUTING A COMPLAINT FOR DISBARMENT AGAINST THE PRIVATE RESPONDENT

II

THE RESPONDENT COURT OF APPEALS ERRED IN ORDERING THE PETITIONER TO PAY THE PRIVATE RESPONDENT ACTUAL, MORAL AND EXEMPLARY DAMAGES TO PAY THE COSTS (Rollo, p 21)

Before proceeding with the merits of the case, the scope of an action for damages arising from malicious prosecution needs to be clarified Both the Court of Appeals and the petitioner are of the belief that the suit for damages filed by Atty Legaspi is not one arising from malicious prosecution because "a disbarment proceeding is not a criminal action (De Jesus-Paras v Vailoces, 1 SCRA 954 [1961])" The obvious inference is that only an unsuccessful criminal action may subsequently give rise to a claim for damages based on malicious prosecution This is not correct While generally, malicious prosecution refers to unfounded criminal actions and has been expanded to include unfounded civil suits just to vex and humiliate the defendant despite the absence of a cause of action or probable cause (Equitable Banking Corporation v Intermediate Appellate Court, 133 SCRA 138 [1984]) the foundation of an action for malicious prosecution is an original proceeding, judicial in character (Lorber v Storrow, 70 P 2d 513 [1937]; Shigeru Hayashida v Tsunehachi Kakimoto, 23 P 2d 311 [1933]; Graves v Rudman, 257 NYS 212 [1932]) A disbarment proceeding is, without doubt, judicial in character and therefore may be the basis for a subsequent action for malicious prosecution

A perusal of the allegations in Atty Legaspi's complaint for damages, particularly paragraphs 10, 11, 12 and 15 thereof (Rollo, pp 56-59) shows that his main cause of action was predicated on injury resulting from the institution of the disbarment case against him This being the case, we find that the suit filed by the respondent lawyer makes out a case of damages for malicious prosecution

An action for damages arising from malicious prosecution is anchored on the provisions of Article 21, 2217 and 2219 [8] of the New Civil Code Under these Articles:

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

Art 2217 Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission

Art 2219 Moral damages may be recovered in the following and analogous cases:

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(8) Malicious prosecution

In order, however, for the malicious prosecution suit to prosper, the plaintiff must prove: (1) the fact of the prosecution and the further fact that the defendant was himself the prosecutor, and that the action finally terminated with an acquittal; (2) that in bringing the action, the prosecutor acted without probable cause; and (3) that the prosecutor was actuated or impelled by legal malice, that is by improper or sinister motive (Lao v Court of Appeals, 199 SCRA 58 [1991]; Rehabilitation Finance Corporation v Kohl, 4 SCRA 535 [1962]; Buchanan v Viuda de Esteban, 32 Phil 363 [1915])

The foregoing requisites are necessary safeguards to preserve a person's right to litigate which may otherwise be emasculated by the undue filing of malicious prosecution cases Thus, as further held in the aforecited case ofBuchanan v Viuda de Esteban, supra: "Malice is essential to the maintenance of an action for malicious prosecution and not merely to the recovery of exemplary damages But malice alone does not make one liable for malicious prosecution, where probable cause is shown, even where it appears that the suit was brought for the mere purpose of vexing, harassing and injuring his adversary In other words, malice and want of probable causemust both exist in order to justify the action" (Emphasis supplied; see also Rehabilitation Finance Corp v Koh,supra)

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 (or in this case, the wrongdoing) for which he was prosecuted (See Buchanan v Viuda de Esteban, supra)

The general rule is well settled that one cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause In other words, a suit will lie only in cases where a legal prosecution has been carried on without probable cause (Id; emphasis supplied)

The petitioner, at the time of her filing of the administrative complaint against the respondent, held substantial stockholdings in L'NOR She believed that L'NOR was defrauded by its President/General Manager, Edward Porter, and filed a complaint for estafa against the latter Porter was convicted by the trial court but, upon appeal, was acquitted by the appellate court

Respondent did not deny that he represented Porter during the preliminary investigation and trial of the criminal case In his comment in the disbarment complaint against him, he justified his action by saying that they were "direct orders of management" and that there is "nothing improper for counsel to represent both the corporation and corporate officers at the same time they are being sued" (Records, Administrative Case No 1819, p 64)

It is of no moment now that Porter was acquitted of the estafa charge Apparently, at that time, petitioner Ponce saw a conflict of interest situation To her mind, the act of the respondent in appearing as counsel for Porter, who had allegedly swindled L'NOR, the interest of which he was duty bound to protect by virtue of the retainer contract, constituted grave misconduct and gross malpractice

Atty Legaspi did not deny that he aided the Porters in facilitating the incorporation of YRASPORT and that he himself was its corporate secretary He emphasized, though, that due to L'NOR'S limited capitalization, YRASPORT was organized to complement L'NOR'S business and not to compete with the latter's undertakings

Since the petitioner, however, was of the honest perception that YRASPORT was actually organized to appropriate for itself some of L'NOR's business, then we find that she had probable cause to file the disbarment suit

We take exception to the respondent's comment that, assuming the petitioner's accusation to be true, "there is nothing in Philippine law which considers as unethical the formation of competitive corporations and neither can it be considered with evident bad faith and absolute lack of fidelity" (Records, Administrative Case No 1819, p 69)

The circumstances of the case do not depict a simple case of formation of competitive corporations What the petitioner objects to is the fact that both the respondent lawyer and Porter are fiduciaries of L'NOr and are at the same time fiduciaries of YRASPORT, both of which are engaged in the same line of business

True, at that time, the Corporation Law did not prohibit a director or any other person occupying a fiduciary position in the corporate hierarchy from engaging in a venture which competed with that of the corporation But as a lawyer, Atty Legaspi should have known that while some acts may appear to be permitted through sheer lack of statutory prohibition, these acts are nevertheless circumscribed upon ethical and moral considerations And had Atty Legaspi turned to American jurisprudence which then, as now, wielded a persuasive influence on our law on corporations, he would have known that it was unfair for him or for Porter, acting as fiduciary, to take advantage of an opportunity when the interest of the corporation justly calls for protection (See Ballantine, Corporations, 204, Callaghan & Co, N Y [1946])

Parenthetically, this lapse in the old Corporation Law is now cured by sections 31 and 34 of the Corporation Code which provide:

Sec 31 Liability of directors, trustees or officers — Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall he liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise have accrued to the corporation

Sec 34 Disloyalty of a director — Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture

The Court finds it unnecessary to discuss all the other charges imputed to the respondent lawyer in the disbarment complaint From the foregoing discussion, we have sufficient basis to declare that the petitioner had probable cause in filing the administrative case against Atty Legaspi Facts and circumstances existed which excited belief in Mrs Ponce's mind that the respondent indeed committed unethical acts which warranted the imposition of administrative sanctions Whether or not the petitioner's perception of these facts and circumstances is actually correct is irrelevant to our inquiry, the only issue being whether or not the petitioner had probable cause in filing the complaint

The above discussion should not be construed as a re-opening of the disbarment proceeding against Atty Legaspi References to the complaint for disbarment and the respondent's comment thereto are made only for the purpose of determining the existence of probable cause

Since we adjudge that petitioner Ponce was moved by probable cause, we need not anymore ascertain whether or not the petitioner acted with malice in filing the complaint The existence of probable cause alone, regardless of considerations of malice, is sufficient to defeat the charge of malicious prosecution

The respondent court treated Atty Legaspi's complaint as one for damages arising from libel and applied the test of bona fides, citing the case of  Deles v Aragona (27 SCRA 633 [1969]) This is incorrect

In the first place, allegations and averments in pleadings are absolutely privileged as long as they are relevant or pertinent to the issues (See Montenegro v Medina, 73 Phil 602 [1942]) The test of good faith applies only to a qualified privileged communication Had the respondent court studied the Deles case more closely, it would have traced the "bona fides" test to the case of US v Bustos, (37 Phil 731 [1918]) In the latter case, the Court was referring to a qualified privileged communication when it formulated the "bona fides" test

Moreover, the test to break through the protective barrier of an absolutely privileged communication is not "bona fides" but relevance In the present case, Atty Legaspi's complaint nowhere alleged that the statements made by the petitioner were irrelevant Thus, we find that the petitioner's complaint for disbarment is still covered by the privilege and may not be the basis of a damage suit arising from libel

We disagree with the findings of the two lower courts that it was the petitioner who distributed copies of the complaint for disbarment to Atty Legaspi's clients It should be noted that Atty Legaspi did not even present these alleged clients in court to testify to the source of these copies Considering that a complaint for disbarment becomes of public record once it is filed with the Court, then the petitioner may not be pinpointed as the sole and indisputable source of the copies received by the respondent's clients

Atty Legaspi may have suffered injury as a consequence of the disbarment proceedings But the adverse result of an action does not  per se make the action wrongful and subject the actor to make payment of damages for the law could not have meant to impose a penalty on the right to litigate (Saba v Court of Appeals, 189 SCRA 50 [1990], citing Rubio v Court of Appeals, 141 SCRA 488 [1986]; see also Salao v Salao, 70 SCRA 65 [1976] and Ramos v Ramos, 61 SCRA 284 [1974], citing Barreto v Arevalo, 99 Phil 771 [1956]) One who exercises his rights does no injury (Saba v Court of Appeals, supra, citing Auyong Hian v Court of Tax Appeals, 59 SCRA 110 [1974]) If damage results from a person's exercising his legal rights, it is damnum absque injuria [Id]

WHEREFORE, the petition is hereby GRANTED The decision of the respondent Court of Appeals is SET ASIDE and REVERSED

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

GR No 115814 May 26, 1995

PEDRO P PECSON, petitioner, vsCOURT OF APPEALS, SPOUSES JUAN NUGUID and ERLINDA NUGUID, respondents

 

DAVIDE, JR, J:

This petition for review on certiorari seeks to set aside the decision 1 of the Court of Appeals in CA-GR SP No 32679 affirming in part the order 2 of the Regional Trial Court (RTC) of Quezon City, Branch 101, in Civil Case No Q-41470

The factual and procedural antecedents of this case as gathered from the record are as follows:

Petitioner Pedro P Pecson was the owner of a commercial lot located in Kamias Street, Quezon City, on which he built a four-door two-storey apartment building For his failure to pay realty taxes amounting to twelve thousand pesos (P12,00000), the lot was sold at public auction by the city Treasurer of Quezon City to Mamerto Nepomuceno who in turn sold it on 12 October 1983 to the private respondents, the spouses Juan Nuguid and Erlinda Tan-Nuguid, for one hundred three thousand pesos (P103,00000)

The petitioner challenged the validity of the auction sale in Civil Case No Q-41470 before the RTC of Quezon City In its decision of 8 February 1989, the RTC dismissed the complaint, but as to the private respondents' claim that the sale included the apartment building, it held that the issue concerning it was "not a subject of the litigation" In resolving the private respondents' motion to reconsider this issue, the trial court held that there was no legal basis for the contention that the apartment building was included in the sale  3

Both parties then appealed the decision to the Court of Appeals The case was docketed as CA-GR CV No 2931 In its decision of 30 April 1992,  4 the Court of Appeals affirmed in toto the assailed decision It also agreed with the trial court that the apartment building was not included in the auction sale of the commercial lot Thus:

Indeed, examining the record we are fully convinced that it was only the land — without the apartment building — which was sold at the auction sale, for plaintiff's failure to pay the taxes due thereon Thus, in the Certificate of Sale of Delinquent Property To Purchaser (Exh K, p 352, Record) the property subject of the auction sale at which Mamerto Nepomuceno was the purchaser is referred to as Lot No 21-A, Block No K-34, at Kamias, Barangay Piñahan, with an area of 2563 sq m, with no mention whatsoever, of the building thereon The same description of the subject property appears in the Final Notice To Exercise The Right of Redemption (over subject property) dated September 14, 1981 (Exh L, p 353, Record) and in the Final Bill of Sale over the same property dated April 19, 1982 (Exh P, p 357, Record) Needless to say, as it was only the land without any building which Nepomuceno had acquired at the auction sale, it was also only that land without any building which he could have legally sold to the Nuguids Verily, in the Deed of Absolute Sale of Registered Land executed by Mamerto Nepomuceno in favor of the Nuguids on October 25, 1983 (Exh U, p 366, Record) it clearly appears that the property subject of the sale for P103,00000 was only the parcel of land, Lot 21-A, Blk K-34 containing an area of 2563 sq meters, without any mention of any improvement, much less any building thereon (emphases supplied)

The petition to review the said decision was subsequently denied by this Court  5 Entry of judgment was made on 23 June 1993 6

On November 1993, the private respondents filed with the trial court a motion for delivery of possession of the lot and the apartment building, citing article 546 of the Civil Code  7 Acting thereon, the trial court issued on 15 November 1993 the challenged order  8 which reads as follows:

Submitted for resolution before this Court is an uncontroverted [sic] for the Delivery of Possession filed by defendants Erlinda Tan, Juan Nuguid, et al considering that despite personal service of the Order for plaintiff to file within five (5) days his opposition to said motion, he did not file any

In support of defendant's motion, movant cites the law in point as Article 546 of the Civil Code

Movant agrees to comply with the provisions of the law considering that plaintiff is a builder in good faith and he has in fact, opted to pay the cost of the construction spent by plaintiff From the complaint itself the plaintiff stated that the construction cost of the apartment is much more than the lot, which apartment he constructed at a cost of P53,00000 in 1965 (par 8 complaint) This amount of P53,00000 is what the movant is supposed to pay under the law before a writ of possession placing him in possession of both the lot and apartment would be issued

However, the complaint alleges in paragraph 9 that three doors of the apartment are being leased This is further confirmed by the affidavit of the movant presented in support of the motion that said three doors are being leased at a rental of P7,00000 a month each The movant further alleges in his said affidavit that the present commercial value of the lot is P10,00000 per square meter or P2,500,00000 and the reasonable rental value of said lot is no less than P21,00000 per month

The decision having become final as per Entry of Judgment dated June 23, 1993 and from this date on, being the uncontested owner of the property, the rents should be paid to him instead of the plaintiff collecting them From June 23, 1993, the rents collected by plaintiff amounting to more than P53,00000 from tenants should be offset from the rents due to the lot which according to movant's affidavit is more than P21,00000 a month

WHEREFORE, finding merit in the Motion, the Court hereby grants the following prayer that:

1 The movant shall reimburse plaintiff the construction cost of P53,00000

2 The payment of P53,00000 as reimbursement for the construction cost, movant Juan Nuguid is hereby entitled to immediate issuance of a writ of possession over the Lot and improvements thereon

3 The movant having been declared as the uncontested owner of the Lot in question as per Entry of Judgment of the Supreme Court dated June 23, 1993, the plaintiff should pay rent to the movant of no less than P21,00000 per month from said date as this is the very same amount paid monthly by the tenants occupying the lot

4 The amount of P53,00000 due from the movant is hereby offset against the amount of rents collected by the plaintiff from June 23, 1993, to September 23, 1993

SO ORDERED

The petitioner moved for the reconsideration of the order but it was not acted upon by the trial court Instead, on 18 November 1993, it issued a writ of possession directing the deputy sheriff "to place said movant Juan Nuguid in possession of subject property located at No 79 Kamias Road, Quezon City, with all the improvements thereon and to eject therefrom all occupants therein, their agents, assignees, heirs and representatives"  9

The petitioner then filed with the Court of Appeals a special civil action for certiorari and prohibition assailing the order of 15 November 1993, which was docketed as CA-GR SP No 32679 10 In its decision of 7 June 1994, the Court of Appeals affirmed in part the order of the trial court citing Article 448 of the Civil Code In disposing of the issues, it stated:

As earlier pointed out, private respondent opted to appropriate the improvement introduced by petitioner on the subject lot, giving rise to the right of petitioner to be reimbursed of the cost of constructing said apartment building, in accordance with Article 546 of the Civil Code, and of the right to retain the improvements until he is reimbursed of the cost of the improvements, because, basically, the right to retain the improvement while the corresponding indemnity is not paid implies the tenancy or possession in fact of the land on which they are built [2 TOLENTINO, CIVIL CODE OF THE PHILIPPINES (1992) p 112] With the facts extant and the settled principle as guides, we agree with petitioner that respondent judge erred in ordering that "the movant having been declared as the uncontested owner of the lot in question as per Entry of Judgment of the Supreme Court dated June 23, 1993, the plaintiff should pay rent to the movant of no less than P21,000 per month from said date as this is the very same amount paid monthly by the tenants occupying the lot

We, however, agree with the finding of respondent judge that the amount of P53,00000 earlier admitted as the cost of constructing the apartment building can be offset from the amount of rents collected by petitioner from June 23, 1993 up to September 23, 1993 which was fixed at P7,00000 per month for each of the three doors Our underlying reason is that during the period of retention, petitioner as such possessor and receiving the fruits from the property, is obliged to account for such fruits, so that the amount thereof may be deducted from the amount of indemnity to be paid to him by the owner of the land, in line with Mendoza vs De Guzman, 52 Phil 164

The Court of Appeals then ruled as follows:

WHEREFORE, while it appears that private respondents have not yet indemnified petitioner with the cost of the improvements, since Annex I shows that the Deputy Sheriff has enforced the Writ of Possession and the premises have been turned over to the possession of private respondents, the quest of petitioner that he be restored in possession of the premises is rendered moot and academic, although it is but fair and just that private respondents pay petitioner the construction cost of P53,00000; and that petitioner be ordered to account for any and all fruits of the improvements received by him starting on June 23, 1993, with the amount of P53,00000 to be offset therefrom

IT IS SO ORDERED 11

Aggrieved by the Court of Appeals' decision, the petitioner filed the instant petition

The parties agree that the petitioner was a builder in good faith of the apartment building on the theory that he constructed it at the time when he was still the owner of the lot, and that the key issue in this case is the application of Articles 448 and 456 of the Civil Code

The trial court and the Court of Appeals, as well as the parties, concerned themselves with the application of Articles 448 and 546 of the Civil Code These articles read as follows:

Art 448 The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof (361a)

xxx xxx xxx

Art 546 Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof (453a)

By its clear language, Article 448 refers to a land whose ownership is claimed by two or more parties, one of whom has built some works, or sown or planted something The building, sowing or planting may have been made in good faith or in bad faith The rule on good faith laid down in Article 526 of the Civil Code shall be applied in determining whether a builder, sower or planter had acted in good faith 12

Article 448 does not apply to a case where the owner of the land is the builder, sower, or planter who then later loses ownership of the land by sale or donation This Court said so in Coleongco vs Regalado: 13

Article 361 of the old Civil Code is not applicable in this case, for Regalado constructed the house on his own land before he sold said land to Coleongco Article 361 applies only in cases where a person constructs a building on the land of another in good or in bad faith, as the case may be It does not apply to a case where a person constructs a building on his own land, for then there can be no question as to good or bad faith on the part of the builder

Elsewise stated, where the true owner himself is the builder of works on his own land, the issue of good faith or bad faith is entirely irrelevant

Thus in strict point of law, Article 448 is not apposite to the case at bar Nevertheless, we believe that the provision therein on indemnity may be applied by analogy considering that the primary intent of Article 448 is to avoid a state of forced co-ownership and that the parties, including the two courts below, in the main agree that Articles 448 and 546 of the Civil Code are applicable and indemnity for the improvements may be paid although they differ as to the basis of the indemnity

Article 546 does not specifically state how the value of the useful improvements should be determined The respondent court and the private respondents espouse the belief that the cost of construction of the apartment building in 1965, and not its current market value, is sufficient reimbursement for necessary and useful improvements made by the petitioner This position is, however, not in consonance with previous rulings of this Court in similar cases In Javier vs Concepcion, Jr, 14 this Court pegged the value of the useful improvements consisting of various fruits, bamboos, a house and camarin made of strong material based on the market value of the said improvements In Sarmiento vs Agana, 15 despite the finding that the useful improvement, a residential house, was built in 1967 at a cost of between eight thousand pesos (P8,00000) to ten thousand pesos(P10,00000), the landowner was ordered to reimburse the builder in the amount of forty thousand pesos (P40,00000), the value of the house at the time of the trial In the same way, the landowner was required to pay the "present value" of the house, a useful improvement, in the case ofDe Guzman vs De la Fuente, 16 cited by the petitioner

The objective of Article 546 of the Civil Code is to administer justice between the parties involved In this regard, this Court had long ago stated in  Rivera vs Roman Catholic Archbishop of Manila 17 that the said provision was formulated in trying to adjust the rights of the owner and possessor in good faith of a piece of land, to administer complete justice to both of them in such a way as neither one nor the other may enrich himself of that which does not belong to him Guided by this precept, it is therefore the current market value of the improvements which should be made the basis of reimbursement A contrary ruling would unjustly enrich the private respondents who would otherwise be allowed to acquire a highly valued income-yielding four-unit apartment building for a measly amount Consequently, the parties should therefore be allowed to adduce evidence on the present market value of the apartment building upon which the trial court should base its finding as to the amount of reimbursement to be paid by the landowner

The trial court also erred in ordering the petitioner to pay monthly rentals equal to the aggregate rentals paid by the lessees of the apartment building Since the private respondents have opted to appropriate the apartment building, the petitioner is thus entitled to the possession and enjoyment of the apartment building, until he is paid the proper indemnity, as well as of the portion of the lot where the building has been constructed This is so because the right to retain the improvements while the corresponding indemnity is not paid implies the tenancy or possession in fact of the land on which it is built, planted or sown 18 The petitioner not having been so paid, he was entitled to retain ownership of the building and, necessarily, the income therefrom

It follows, too, that the Court of Appeals erred not only in upholding the trial court's determination of the indemnity, but also in ordering the petitioner to account for the rentals of the apartment building from 23 June 1993 to 23 September 1993

WHEREFORE, the decision of the Court of Appeals in CA-GR SP No 32679 and the Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No Q-41470 are hereby SET ASIDE

The case is hereby remanded to the trial court for it to determine the current market value of the apartment building on the lot For this purpose, the parties shall be allowed to adduce evidence on the current market value of the apartment building The value so determined shall be forthwith paid by the private respondents to the petitioner otherwise the petitioner shall be restored to the possession of the apartment building until payment of the required indemnity

No costs

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

GR No 117009 October 11, 1995

SECURITY BANK & TRUST COMPANY and ROSITO C MANHIT, petitioners, vsCOURT OF APPEALS and YSMAEL C FERRER, respondents

 

PADILLA, J:

In this petition for review under Rule 45 of the Rules of Court, petitioners seek a review and reversal of the decision * of respondent Court of Appeals in CA-GR CV No 40450, entitled "Ysmael C Ferrer v Security Bank and Trust Company, et al" dated 31 August 1994, which affirmed the decision ** of the Regional Trial Court, Branch 63, Makati in Civil Case No 42712, a complaint for breach of contract with damages

Private respondent Ysmael C Ferrer was contracted by herein petitioners Security Bank and Trust Company (SBTC) and Rosito C Manhit to construct the building of SBTC in Davao City for the price of P1,760,00000 The contract dated 4 February 1980 provided that Ferrer would finish the construction in two hundred (200) working days Respondent Ferrer was able to complete the construction of the building on 15 August 1980 (within the contracted period) but he was compelled by a drastic increase in the cost of construction materials to incur expenses of about P300,00000 on top of the original cost The additional expenses were made known to petitioner SBTC thru its Vice-President Fely Sebastian and Supervising Architect Rudy de la Rama as early as March 1980 Respondent Ferrer made timely demands for payment of the increased cost Said demands were supported by receipts, invoices, payrolls and other documents proving the additional expenses

In March 1981, SBTC thru Assistant Vice-President Susan Guanio and a representative of an architectural firm consulted by SBTC, verified Ferrer's claims for additional cost A recommendation was then made to settle Ferrer's claim but only for P200,00000 SBTC, instead of paying the recommended additional amount, denied ever authorizing payment of any amount beyond the original contract price SBTC likewise denied any liability for the additional cost based on Article IX of the building contract which states:

If at any time prior to the completion of the work to be performed hereunder, increase in prices of construction materials and/or labor shall supervene through no fault on the part of the contractor whatsoever or any act of the government and its instrumentalities which directly or indirectly affects the increase of the cost of the project, OWNER shall equitably make the appropriate adjustment on mutual agreement of both parties

Ysmael C Ferrer then filed a complaint for breach of contract with damages The trial court ruled for Ferrer and ordered defendants SBTC and Rosito C Manhit to pay:

a) P259,41723 for the increase in price of labor and materials plus 12% interest thereon per annumfrom 15 August 1980 until fully paid;

b) P24,00000 as actual damages;

c) P20,00000 as moral damages;

d) P20,00000 as exemplary damages;

e) attorney's fees equivalent to 25% of the principal amount due; and

f) costs of suit

On appeal, the Court of Appeals affirmed the trial court decision

In the present petition for review, petitioners assign the following errors to the appellate court:

IN HOLDING THAT PLAINTIFF-APPELLEE HAS, BY PREPONDERANCE OF EVIDENCE SUFFICIENTLY PROVEN HIS CLAIM AGAINST THE DEFENDANTS-APPELLANTS

IN INTERPRETING AN OTHERWISE CLEAR AND UNAMBIGUOUS PROVISION OF THE CONSTRUCTION CONTRACT

IN DISREGARDING THE EXPRESS PROVISION OF THE CONSTRUCTION CONTRACT, THE LOWER COURT VIOLATED DEFENDANTS-APPELLANTS' CONSTITUTIONAL GUARANTY OF NON IMPAIRMENT OF THE OBLIGATION OF CONTRACT  1

Petitioners argue that under the aforequoted Article IX of the building contract, any increase in the price of labor and/or materials resulting in an increase in construction cost above the stipulated contract price will not automatically make petitioners liable to pay for such increased cost, as any payment above the stipulated contract price has been made subject to the condition that the "appropriate adjustment" will be made "upon mutual agreement of both parties" It is contended that since there was no mutual agreement between the parties, petitioners' obligation to pay amounts above the original contract price never materialized

Respondent Ysmael C Ferrer, through counsel, on the other hand, opposed the arguments raised by petitioners It is of note however that the pleadings filed with this Court by counsel for Ferrer hardly refute the arguments raised by petitioners, as the contents of said pleadings are mostly quoted portions of the decision of the Court of Appeals, devoid of adequate discussion of the merits of respondent's case The Court, to be sure, expects more diligence and legal know-how from lawyers than what has been exhibited by counsel for respondent in the present case Under these circumstances, the Court had to review the entire records of this case to evaluate the merits of the issues raised by the contending parties

Article 22 of the Civil Code which embodies the maxim, Nemo ex alterius incommodo debet lecupletari (no man ought to be made rich out of another's injury) states:

Art 22 Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him

The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as "basic principles to be observed for the rightful relationship between human beings and for the stability of the social order, designed to indicate certain norms that spring from the fountain of good conscience, guides for human conduct [that] should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice" 2

In the present case, petitioners' arguments to support absence of liability for the cost of construction beyond the original contract price are not persuasive

Under the previously quoted Article IX of the construction contract, petitioners would make the appropriate adjustment to the contract price in case the cost of the project increases through no fault of the contractor (private respondent) Private respondent informed petitioners of the drastic increase in construction cost as early as March 1980

Petitioners in turn had the increased cost evaluated and audited When private respondent demanded payment of P259,41723, petitioner bank's Vice-President Rosito C Manhit and the bank's architectural consultant were directed by the bank to verify and compute private respondent's claims of increased cost A recommendation was then made to settle private respondent's claim for P200,00000 Despite this recommendation and several demands from private respondent, SBTC failed to make payment It denied authorizing anyone to make a settlement of private respondent's claim and likewise denied any liability, contending that the absence of a mutual agreement made private respondent's demand premature and baseless

Petitioners' arguments are specious

It is not denied that private respondent incurred additional expenses in constructing petitioner bank's building due to a drastic and unexpected increase in construction cost In fact, petitioner bank admitted liability for increased cost when a recommendation was made to settle private respondent's claim for P200,00000 Private respondent's claim for the increased amount was adequately proven during the trial by receipts, invoices and other supporting documents

Under Article 1182 of the Civil Code, a conditional obligation shall be void if its fulfillment depends upon the sole will of the debtor In the present case, the mutual agreement, the absence of which petitioner bank relies upon to support its non-liability for the increased construction cost, is in effect a condition dependent on petitioner bank's sole will, since private respondent would naturally and logically give consent to such an agreement which would allow him recovery of the increased cost

Further, it cannot be denied that petitioner bank derived benefits when private respondent completed the construction even at an increased cost

Hence, to allow petitioner bank to acquire the constructed building at a price far below its actual construction cost would undoubtedly constitute unjust enrichment for the bank to the prejudice of private respondent Such unjust enrichment, as previously discussed, is not allowed by law

Finally, with respect to the award of attorney's fees to respondent, the Court has previously held that, "even with the presence of an agreement between the parties, the court may nevertheless reduce attorney's fees though fixed in the contract when the amount thereof appears to be unconscionable or unreasonable"  3 As previously noted, the diligence and legal know-how exhibited by counsel for private respondent hardly justify an award of 25% of the principal amount due, which would be at least P60,00000 Besides, the issues in this case are far from complex and intricate The award of attorney's fees is thus reduced to P10,00000

WHEREFORE, with the above modification in respect of the amount of attorney's fees, the appealed decision of the Court of Appeals in CA GR CV No 40450 is AFFIRMED

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

GR No 98273 October 28, 1991

CLARITA V CRUZ, petitioner, vsNATIONAL LABOR RELATIONS COMMISSION (NLRC), PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), EMS MANPOWER & PLACEMENT SERVICE (PHIL), ABDUL KARIM AL YAHYA, and TRAVELLERS INSURANCE, respondents

Public Attorney's Office for petitioner

Manuel T Collado for private respondent

 

CRUZ, J:p

Clarita V Cruz** went abroad pursuant to an employment contract that she hoped would improve her future Although a high school graduate, she agreed to work as a domestic helper in Kuwait in consideration of an attractive salary and vacation leave benefits she could not expect to earn in this country But her foreign adventure proved to be a bitter disappointment On March 18,1988, after completing her two-year engagement, she was back home in the Philippines with her dead dreams and an angry grievance

On March 23,1988, she filed a complaint against EMS Manpower and Placement Services (Phil) and its foreign principal, Abdul Karim Al Yahya, for underpayment of her salary and non-payment of her vacation leave She also claimed that she was charged a placement fee of P7,00000 instead of the legal maximum of only P5,00000 She alleged that her foreign employer treated her as a slave and required her to work 18 hours a day She was beaten up and suffered facial deformity, head trauma and decreased sensation in the right portion of her body On top of all this, she was paid only $120 per month and her total salaries were given to her only three hours before her flight back to Manila This was after the plane she was supposed to take had left and she had to stay in the airport for 24 hours before her employer finally heard her pleas and delivered her passport and ticket to her

In its answer and position paper, the private respondent raised the principal defense of settlement as evidenced by the Affidavit of Desistance executed by the complainant on June 21, 1988 In this document, she declared inter alia that —

xxx xxx xxx

2 Thereafter going thoroughly over the facts of the case by reconciling our records, we came to discover that it was only a plain case of misunderstanding on our part, and that we have already settled our differences;

3 That I am no longer interested in further continuance of the above case against EMS Manpower & Placement Services either criminal, civil or administrative or whatever nature as I hereby desist now and hereafter;

4 That I am executing this affidavit of desistance to attest to the truth of the foregoing facts and circumstances and for the purpose of asking the dismissal of my said complaint against EMS Manpower & Placement Services

On the basis of this affidavit, the Philippine Overseas Employment Administration (POEA) dismissed her complaint in a decision dated May 16, 1989 This was affirmed by the National Labor Relations Commission (NLRC) in its resolution dated December 28, 1990, reconsideration of which was denied on February 21, 1991

The petition now before us faults the POEA and the NLRC with grave abuse of discretion for having upheld the Affidavit of Desistance Cruz rejects the settlement as having been obtained from her under duress and false pretenses and insists on her original claim for the balance of her salaries and vacation- leave pay at the agreed rate of P25000 per month

Her contention is that she was inveigled into signing the Affidavit of Desistance without the assistance of counsel The "Attorney" Alvarado who assisted her was not really a lawyer but only a helper in the Overseas Workers Welfare Administration Atty Biolena, on the other hand, merely acknowledged the document Moreover, when she signed the affidavit, she was under the impression when she was agreeing to settle only her claim for one month unpaid vacation leave, as the wording of the receipt she issued on the same date showed, to wit:

June 21, 1988

Receipt

This is to certify that I received the amount of P2,40000 from EMS Manpower & Placement Services in settlement of 1 month unpaid vacation leave

(Sgd) CLARITA V CRUZ

IN THE PRESENCE OF:

(Sgd) OG ALVARADO

OWWA Legal Dept

For its part, the private respondent argues that the petitioner is bound by her Affidavit of Desistance, which she freely and knowingly executed After all, she was not an ignorant and illiterate person but a high school graduate who understood what she was signing The due execution of the instrument must also be sustained on the basis of the presumptions of regularity of official functions and of good faith

Significantly, neither the private respondent nor the Solicitor General refuted the petitioner's submission that the person who allegedly assisted her in the execution of the Affidavit of Desistance and explained to her its content and meaning was not a lawyer but a mere employee in the OWWA His status was merely assumed but not established by the respondents although it was directly questioned The comments of the public and private respondents did not meet this challenge squarely

It is no less noteworthy that the receipt the petitioner issued on the same day was only for "P2,40000 in settlement of 1 month unpaid vacation" This clearly shows that she was not waiving the rest of her demands in exchange for that measly amount (which did not even really represent the commutable value of the 1 month vacation leave at the rate of $25000) In fact, the total claim of the petitioner is for P88,84000, itemized as follows:

a) P84,24000, representing the salary differentials of $130 for 24 months (US $3,12000 x P2700)

b) P2,60000, representing the balance of her vacation leave pay

c) P2,00000, representing her excess placement fee

In Principe v Philippine-Singapore Transport Service, Inc, 1 this Court held:

Even assuming for the sake of argument that the quitclaim had foreclosed petitioner's right over the death benefits of her husband, the fact that the consideration given in exchange thereof was very much less than the amount petitioner is claiming renders the quitclaim null and void for being contrary to public policy The State must be firm in affording protection to labor The quitclaim wherein the consideration is scandalously low and inequitable cannot be an obstacle to petitioner's pursuing her legitimate claim Equity dictates that the compromise agreement should be voided in this instance (Emphasis supplied)

The following guidelines were likewise set in Periquet v NLRC: 2

Not all waivers and quitclaims are invalid as against public policy If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction (Emphasis supplied)

The Court is convinced that the petitioner was not fully aware of the import and consequences of the Affidavit of Desistance when she executed it, allegedly with the assistance of counsel Except for the disputable presumptions invoked by the private respondent, such assistance has not been established against the petitioner's allegation that the "Attorney" Alvarado who supposedly counseled her was not even a lawyer Indeed, even assuming that such assistance had been duly given, there is still the question of the intrinsic validity of the quitclaim in view of the gross disparity between the amount of the settlement and the petitioner's original claim It is difficult to believe that the petitioner would agree to waive her total claim of P88,84000 for the unseemly settlement of only P2,40000 And even if she did, the waiver would still be null and void as violative of public policy

It remains to state that, contrary to the contention of the private respondent in the proceedings below that it has no privity of contract with the petitioner, we have held in a long line of cases that the local recruiter is solidarily liable with the foreign principal for all damages sustained by the overseas worker in connection with his contract of employment Such liability is provided for in Section 1, Rule II, Book II, of the POEA Rules and Regulations, which we have consistently sustained

This decision demonstrates once again the tenderness of the Court toward the worker subjected to the lawless exploitation and impositions of his employer The protection of our overseas workers is especially necessary because of the inconveniences and even risks they have to undergo in their quest for a better life in a foreign land away from their loved ones and their own government

The domestic helper is particularly susceptible to abuse because she usually works only by herself in a private household unlike other workers employed in an open business concern who are able to share and discuss their problems and bear or solve them together The domestic helper is denied that comfort She has no companions in her misery She usually broods alone There is no one to turn to for help That is why we must carefully listen to her when she is finally able to complain against those who would rob her of her just rewards and even of her dignity as a human being

WHEREFORE, the resolutions of the NLRC dated December 28, 1990, and February 21, 1991, are SET ASIDE, and the Affidavit of Desistance is DECLARED null and void POEA Case No 88-03-255 is REMANDED to the POEA for further proceedings and expeditious resolution

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

GR No L-30745 January 18, 1978

PHILIPPINE MATCH CO, LTD, plaintiff-appellant, vsTHE CITY OF CEBU and JESUS E ZABATE, Acting City Treasurer, defendants-appellees

Pelaez, Pelaez & Pelaez for appellant

Nazario Pacquiao, Metudio P Belarmino & Ceferino Jomuad for appellees

 

AQUINO, J:

This case is about the legality of the tax collected by the City of Cebu on sales of matches stored by the Philippine Match Co, Ltd in Cebu City but delivered to customers outside of the City

Ordinance No 279 of Cebu City (approved by the mayor on March 10, 1960 and also approved by the provincial board) is "an ordinance imposing a quarterly tax on gross sales or receipts of merchants, dealers, importers and manufacturers of any commodity doing business" in Cebu City It imposes a sales tax of one percent (1%) on the gross sales, receipts or value of commodities sold, bartered, exchanged or manufactured in the city in excess of P2,000 a quarter

Section 9 of the ordinance provides that, for purposes of the tax, "all deliveries of goods or commodities stored in the City of Cebu, or if not stored are sold" in that city, "shall be considered as sales" in the city and shall be taxable Thus, it would seem that under the tax ordinance sales of matches consummated outside of the city are taxable as long as the matches sold are taken from the company's stock stored in Cebu City

The Philippine Match Co, Ltd, whose principal office is in Manila, is engaged in the manufacture of matches Its factory is located at Punta, Sta Ana, Manila It ships cases or cartons of matches from Manila to its branch office in Cebu City for storage, sale and distribution within the territories and districts under its Cebu branch or the whole Visayas-Mindanao region Cebu City itself is just one of the eleven districts under the company's Cebu City branch office The company does not question the tax on the matches of matches consummated in Cebu City, meaning matches sold and delivered within the cityIt assails the legality of the tax which the city treasurer collected on out-of- town deliveries of matches, to wit: (1) sales of matches booked and paid for in Cebu City but shipped directly to customers outside of the city; (2) transfers of matches to newsmen assigned to different agencies outside of the city and (3) shipments of matches to provincial customers pursuant to salesmen's instructions

The company paid under protest to the city t the sum of P12,84461 as one percent sales tax on those three classes of out-of-town deliveries of matches for the second quarter of 1961 to the second quarter of 1963 In paying the tax the company accomplished the verified forms furnished by the city treasurers office It submitted a statement indicating the four kinds of transactions enumerated above, the total sales, and a summary of the deliveries to the different agencies, as well as the invoice numbers, names of customers, the value of the sales, the transfers of matches to salesmen outside of Cebu City, and the computation of taxes Sales of matches booked and paid for in Cebu City but shipped directly to customers outside of the city refer to orders for matches made in the city by the company's customers, by means of personal or phone calls, for which sales invoices are issued, and then the matches are shipped from the bodega in the city, where the matches had been stored, to the place of business or residences of the customers outside of the city, duly covered by bills of lading The matches are used and consumed outside of the city

Transfers of matches to salesmen assigned to different agencies outside of the city embrace equipments of matches from the branch office in the city to the salesmen (provided with panel cars) assigned within the province of Cebu and in the different districts in the Visayas and Mindanao under the jurisdiction or supervision of the Cebu City branch office The shipments are covered by bills of lading No sales invoices whatever are issued The matches received by the salesmen constitute their direct cash accountability to the company The salesmen sell the matches within their respective territories They issue cash sales invoices and remit the proceeds of the sales to the company's Cebu branch office The value of the unsold matches constitutes their stock liability The matches are used and consumed outside of the city

Shipments of matches to provincial customers pursuant to newsmens instructions embrace orders, by letter or telegram sent to the branch office by the company's salesmen assigned outside of the city The matches are shipped from the company's bodega in the city to the customers residing outside of the city The salesmen issue the sales invoices The proceeds of the sale, for which the salesmen are accountable are remitted to the branch office As in the first and seconds of transactions above-mentioned, the matches are consumed and used outside of the city The company in its letter of April 15, 1961 to the city treasurer sought the refund of the sales tax paid for out-of-town deliveries of matches It invoked Shell Company of the Philippines, Ltd vs Municipality of Sipocot, Camarines Sur, 105 Phil 1263 In that case sales of oil and petroleum products effected outside the territorial limits of Sipocot, were held not to be subject to the tax imposed by an ordinance of that municipality

The city treasurer denied the request His stand is that under section 9 of the ordinance all out-of-town deliveries of latches stored in the city are subject to the sales tax imposed by the ordinance On August 12, 1963 the company filed the complaint herein, praying that the ordinance be d void insofar as it taxed the deliveries of matches outside of Cebu City, that the city be ordered to refund to the company the said sum of P12,84461 as excess sales tax paid, and that the city treasurer be ordered to pay damages

After hearing, the trial court sustained the tax on the sales of matches booked and paid for in Cebu City although the matches were shipped directly to customers outside of the city The lower court held that the said sales were consummated in Cebu City because delivery to the carrier in the city is deemed to be a delivery to the customers outside of the city

But the trial court invalidated the tax on transfers of matches to salesmen assigned to different agencies outside of the city and on shipments of matches to provincial customers pursuant to the instructions of the newsmen It ordered the defendants to refund to the plaintiff the sum of P8,92355 as taxes paid out the said out-of-town deliveries with legal rate of interest from the respective dates of payment

The trial court characterized the tax on the other two transactions as a "storage tax" and not a sales tax It assumed that the sales were consummated outside of the city and, hence, beyond the city's taxing power The city did not appeal from that decision The company appealed from that portion of the decision upholding the tax on sales of matches to customers outside of the city but which sales were booked and paid for in Cebu City, and also from the dismissal of its claim for damages against the city treasurer

The issue is whether the City of Cebu can tax sales of matches which were perfected and paid for in Cebu City but the matches were delivered to customers outside of the City

We hold that the appeal is devoid of merit bemuse the city can validly tax the sales of matches to customers outside of the city as long as the orders were booked and paid for in the company's branch office in the city Those matches can be regarded as sold in the city, as contemplated in the ordinance, because the matches were delivered to the carrier in Cebu City Generally, delivery to the carrier is delivery to the buyer (Art 1523, Civil Code; Behn, Meyer & Co vs Yangco, 38 Phil 602)

A different interpretation would defeat the tax ordinance in question or encourage tax evasion through the simple expedient of arranging for the delivery of the matches at the out skirts of the city through the purchase were effected and paid for in the company's branch office in the city

The municipal board of Cebu City is empowered "to provide for the levy and collection of taxes for general and purposes in accordance with law" (Sec 17[a], Commonwealth Act No 58; Sec 31[l], Rep Act No 3857, Revised Charter of Cebu city)

The taxing power validly delegated to cities and municipalities is defined in the Local Autonomy Act, Republic Act No 2264 (Pepsi-Cola Bottling Co of the Philippines, Inc vs Municipality of Tanauan, Leyte, L-31156, February 27, 1976, 69 SCRA 460), which took effect on June 19, 1959 and which provides:

SEC 2 Taxation — Any provision of law to the contrary notwithstanding, all chartered cities, municipalities and municipal districts shall have authority to impose municipal license taxes or fees upon persons engaged in any occupation or business, or exercising privileges in chartered cities, municipalities or municipal districts by requiring them to secure licenses at rates fixed by the municipal board or city council of the city, the municipal council of the municipality, or the municipal district council of the municipal district; to collect fees and charges for services rendered by the city, municipality or municipal district; to regulate and impose reasonable fees for services rendered in connection with any business, profession or occupation being conducted within the city, municipality or municipal district and otherwise to levy for public purposes, just and uniform taxes, licenses or fees;

Provided, That municipalities and municipal districts shall, in no case, impose any percentage tax on sales or other taxes in any form based thereon nor impose taxes on articles subject to specific tax, except gasoline, under the provisions of the National International Revenue Code;

Provided, however, That no city, municipality or municipal districts may levy or impose any of the following: (here follows an enumeration of internal revenue taxes)

Note that the prohibition against the imposition of percentage taxes (formerly provided for in section 1 of Commonwealth Act No 472) refers to municipalities and municipal districts but not to chartered cities (See Local Tax Code, PD No 231 Marinduque Iron Mines Agents, Inc vs Municipal Council of Hinabangan Samar, 120 Phil 413; Ormoc Sugar Co, Inc vs Treasurer of Ormoc City, L-23794, February 17, 1968, 22 SCRA 603) Note further that the taxing power of cities, municipalities and municipal districts may be used (1) "upon any person engaged in any occupation or business, or exercising any privilege" therein; (2) for services rendered by those political subdivisions or rendered in connection with any business, profession or occupation being conducted therein, and (3) to levy, for public purposes, just and uniform taxes, licenses or fees (C N Hodges vs Municipal Board of the City of Iloilo, 117 Phil 164, 167 See sec 31[251, Revised Charter of Cebu City)

Applying that jurisdictional test to the instant case, it is at once obvious that sales of matches to customers outside oil Cebu City, which sales were booked and paid for in the company's branch office in the city, are subject to the city's taxing power The instant case is easily distinguishable from the Shell Company case where the price of the oil sold was paid outside of the municipality of Sipocot, the entity imposing the tax

On the other hand, the ruling in Municipality of Jose Panganiban, Province of Camarines Norte vs Shell Company of the Philippines, Ltd, L-18349, July 30, 1966, 17 SCRA 778 that the place of delivery determines the taxable situs of the property to be taxed cannot properly be invoked in this case Republic Act No 1435, the law which enabled the Municipality of Jose Panganiban to levy the sales tax involved in that case, specifies that the tax may be levied upon oils "distributed within the limits of the city or municipality", meaning the place where the oils were delivered That feature of the Jose Panganiban case distinguished it from this case The sales in the instant case were in the city and the matches sold were stored in the city The fact that the matches were delivered to customers, whose places of business were outside of the city, would not place those sales beyond the city's taxing power Those sales formed part of the merchandising business being assigned on by the company in the city In essence, they are the same as sales of matches fully consummated in the city

Furthermore, because the sellers place of business is in Cebu City, it cannot be sensibly argued that such sales should be considered as transactions subject to the taxing power of the political subdivisions where the customers resided and accepted delivery of the matches sold The company in its second assignment of error contends that the trial court erred in not ordering defendant acting city treasurer to pay exemplary damages of P20,000 and attorney's fees

The claim for damages is predicated on articles 19, 20, 21, 27 and 2229 of the Civil Code It is argued that the city treasurer refused and neglected without just cause to perform his duty and to act with justice and good faith The company faults the city treasurer for not following the opinion of the city fiscals, as legal adviser of the city, that all out-of-town deliveries of matches are not subject to sales tax because such transactions were effected outside of the city's territorial limits In reply, it is argued for defendant city treasurer that in enforcing the tax ordinance in question he was simply complying with his duty as collector of taxes (Sec 50, Revised Charter of Cebu City) Moreover, he had no choice but to enforce the ordinance because according to section 357 of the Revised Manual of Instruction to Treasurer's "a tax ordinance win be enforced in accordance with its provisions" until d illegal or void by a competent court, or otherwise revoked by the council or board from which it originated

Furthermore, the Secretary of Finance had reminded the city treasurer that a tax ordinance approved by the provincial board is operative and must be enforced without prejudice to the right of any affected taxpayer to assail its legality in the judicial forum The fiscals opinion on the legality of an ordinance is merely advisory and has no binding effect Article 27 of the Civil Code provides that "any person suffering material or moral lose because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken"

Article 27 presupposes that the refuse or omission of a public official is attributable to malice or inexcusable negligence In this case, it cannot be said that the city treasurer acted wilfully or was grossly t in not refunding to the plaintiff the taxes which it paid under protest on out-of-town sales of matches The record clearly reveals that the city treasurer honestly believed that he was justified under section 9 of the tax ordinance in collecting the sales tax on out-of-town deliveries, considering that the company's branch office was located in Cebu City and that all out-of-town purchase order for matches were filled up by the branch office and the sales were duly reported to it The city treasurer acted within the scope of his authority and in consonance with his bona fide interpretation of the tax ordinance The fact that his action was not completely sustained by the courts would not him liable for We have upheld his act of taxing sales of matches booked and paid for in the city

"As a rule, a public officer, whether judicial ,quasi-judicial or executive, is not y liable to one injured in consequence of an act performed within the scope of his official authority, and in the line of his official duty" "Where an officer is invested with discretion and is empowered to exercise his judgment in matters brought before him he is sometimes called a quasi-judicial officer, and when so acting he is usually given immunity from liability to persons who may be injured as the result or an erroneous or mistaken decision, however erroneous his judgment may be provided the acts complained of are done within the scope of the officer's authority and without malice, or corruption" (63 Am Jur 2nd 798, 799 cited in Philippine Racing Club, Inc vs Bonifacio, 109 Phil 233, 240-241)

It has been held that an erroneous interpretation of an ordinance does not constitute nor does it amount to bad faith that would entitle an aggrieved party to an award for damages (Cabungcal vs Cordovan 120 Phil 667, 572-3) That salutary in addition to moral temperate, liquidated or compensatory damages (Art 2229, Civil Code) Attorney's fees are being claimed herein as actual damages We find that it would not be just and equitable to award attorney's fees in this case against the City of Cebu and its (See Art 2208, Civil Code)

WHEREFORE, the trial court's judgment is affirmed No costs SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

GR No L-22554 August 29, 1975

DELFIN LIM and JIKIL TAHA, plaintiffs-appellants, vsFRANCISCO PONCE DE LEON AND ORLANDO MADDELA, defendants-appellees

Ricardo L Manalilig for plaintiffs-appellants

Iñigo R Peña for defendants-appellees

 

MARTIN, J:

Appeal on a question of law from the decision of the Court of First Instance of Palawan in Civil Case No 416, entitled "Delfin Lim and Jikil Taha vs Francisco Ponce de Leon and Orlando Maddela", dismissing the complaint of the plaintiffs and ordering them to pay each of the defendants jointly and severally the sum of P50000 by way of actual damages; P50000 by way of attorney's fees; and P1,00000 by way of exemplary damages

On April 29, 1961, plaintiff-appellant Jikil Taha sold to a certain Alberto Timbangcaya of Brooke's Point, Palawan a motor launch named M/L "SAN RAFAEL" A year later or on April 9, 1962 Alberto Timbangcaya filed a complaint with the Office of the Provincial Fiscal of Palawan alleging that after the sale Jikil Taha forcibly took away the motor launch from him

On May 14, 1962, after conducting a preliminary investigation, Fiscal Francisco Ponce de Leon in his capacity as Acting Provincial Fiscal of Palawan, filed with the Court of First Instance of Palawan the corresponding information for Robbery the Force and Intimidation upon Persons against Jikil Taha The case was docketed as Criminal Case No 2719

On June 15, 1962, Fiscal Francisco Ponce de Leon, upon being informed that the motor launch was in Balabac, Palawan, wrote the Provincial Commander of Palawan requesting him to direct the detachment commander-in Balabac to impound and take custody of the motor launch  1

On June 26, 1962, Fiscal Ponce de Leon reiterated his request to the Provincial Commander to impound the motor launch, explaining that its subsequent sale to a third party, plaintiff-appellant Delfin Lim, cannot prevent the court from taking custody of the same  2 So, on July 6, 1962 upon order of the Provincial Commander, defendant-appellee Orlando Maddela, Detachment Commander of Balabac, Palawan, seized the motor launch "SAN RAFAEL" from plaintiff-appellant Delfin Lim and impounded it

On July 15, 1962 plaintiff-appellant Delfin Lim pleaded with Orlando Maddela to return the motor launch but the latter refused Likewise, on September 20, 1962, Jikil Taha through his counsel made representations with Fiscal Ponce de Leon to return the seized property to plaintiff-appellant Delfin Lim but Fiscal Ponce de Leon refused, on the ground that the same was the subject of a criminal offense

All efforts to recover the motor launch going to naught, plaintiffs-appellants Delfin Lim and Jikil Taha, on November 19, 1962, filed with the Court of First Instance of Palawan a complaint for damages against defendants-appellees Fiscal Francisco Ponce de Leon and Orlando Maddela, alleging that on July 6, 1962 Orlando Maddela entered the premises of Delfin Lim without a search warrant and then and there took away the hull of the motor launch without his consent; that he effected the seizure upon order of Fiscal Ponce de Leon who knew fully well that his office was not vested with authority to order the seizure of a private property; that said motor launch was purchased by Delfin Lim from Jikil Taha in consideration of Three Thousand Pesos (P3,00000), Two Thousand Pesos (P2,00000) of which has been given to Jikil Taha as advance payment; that as a consequence of the unlawful seizure of the motor launch, its sale did not materialize; and that since July 6, 1962, the said motor launch had been moored at the Balabac Bay, Palawan and because of exposure to the elements it had become worthless and beyond repair For the alleged violation of their constitutional rights, plaintiffs-appellants prayed that defendants-appellees be ordered to pay jointly and severally each of them the sum of P5,75000 representing actual, moral and exemplary damages and attorney's fees

In their answer, defendants-appellees denied the material allegations of the complaint and as affirmative defenses alleged that the motor launch in question which was sold by Jikil Taha to Alberto Timbangcaya on April 29, 1961 was sometime in April 1962, forcibly taken with violence upon persons and with intent to gain by Jikil Taha from Alfredo Timbangcaya without the latter's knowledge and consent, thus giving rise to the filing of a criminal charge of robbery against Jikil Taha; that Fiscal Ponce de Leon, in his capacity as Acting Provincial Fiscal of Palawan ordered Orlando Maddela to seize and impound the motor launch "SAN RAFAEL", for being thecorpus delicti of the robbery; and that Orlando Maddela merely obeyed the orders of his superior officer to impound said launch By way of counterclaim, defendants-appellees alleged that because of the malicious and groundless filing of the complaint by plaintiffs-appellants, they were constrained to engage the services of lawyers, each of them paying P50000 as attorney's fees; and that they suffered moral damages in the amount of P5,00000 each and actual damages in the amount of P50000 each They also prayed that each of them awarded exemplary damages in the amount of P1,00000

On September 13, 1965, the trial court rendered its decision, upholding the validity of the seizure of the motor launch on the ground that "the authority to impound evidences or exhibits or corpus delicti in a case pending investigation is inherent in the Provincial Fiscal who controls the prosecution and who introduces those exhibits in the court" Accordingly, the trial court dismissed the complaint of plaintiffs-appellants and ordered them to pay jointly and severally each of the defendants-appellees the amount of P50000 by way of actual damages another amount of P50000 for attorney's fees and P1,00000 as exemplary damages

Hence, this appeal

Two vital issues call for resolution by this Court First, whether or not defendant-appellee Fiscal Ponce de Leon had the power to order the seizure of the motor launch in question without a warrant of search and seizure even if the same was admittedly the corpus delicti of the crime Second, whether or not defendants-appellees are civilly liable to plaintiffs-appellants for damages allegedly suffered by them granting that the seizure of the motor launch was unlawful

The gravamen of plaintiffs-appellants' argument is that the taking of the motor launch on July 6, 1962 by Orlando Maddela upon the order of Fiscal Ponce de Loon was in violation of the constitutional guarantee against unreasonable searches and seizures since it was done without a warrant

The pertinent provision of the Constitution then in force reads:

3) The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures shall not be violated, and no warrants shall issue but upon probable cause, to be determined by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched, and the persons or things to be seized  3

A cursory reading of the above provision easily brings into focus the unreasonableness of the seizure of the aforementioned motor launch A search and seizure to be reasonable, must be effected by means of a valid search warrant And for a search warrant to be valid: (1) it must be issued upon probable cause; (2) the probable cause must be determined by the judge himself and not by the applicant or any other person; (3) in the determination of probable cause, the judge must examine, under oath or affirmation, the complainant and such witnesses as the latter may produce; and (4) the warrant issued must particularly describe the place to be searched and persons or things to be seized  4 Thus in a long line of decisions, this Court has declared invalid search warrants which were issued in utter disregard of the constitutional injunction  5

Defendants-appellees admitted that when Orlando Maddela entered the premises of Delfin Lim and impounded the motor launch he was not armed with a search warrant; that he effected the seizure of the motor launch in the absence of and without the consent of Delfin Lim There can be no question that without the proper search warrant, no public official has the right to enter the premises of another without his consent for the purpose of search and seizure  6 And since in the present case defendants-appellees seized the motor launch without a warrant, they have violated the constitutional right of plaintiffs-appellants against unreasonable search and seizure

Defendants-appellees however would want to justify the seizure of the motor launch even without a warrant because of Fiscal Ponce de Leon's alleged inherent power to order the seizure of a personal property which is thecorpus delicti of a crime, he being a quasi judicial officer who has the control of the prosecution and the presentation of the evidence in the criminal case They argue that inasmuch as the motor launch in question was allegedly stolen by Jikil Taha from Timbangcaya, Fiscal Ponce de Leon could order its seizure even without a search warrant We cannot agree Under the old Constitution 7 the power to issue a search warrant is vested in a judge or magistrate and in no other officer and no search and seizure can be made without a proper warrant At the time the act complained of was committed, there was no law or rule that recognized the authority of Provincial Fiscals to issue a search warrant In his vain attempt to justify the seizure of the motor launch in question without a warrant Fiscal Ponce de Leon invoked the provisions of Republic Act No 732, which amended Sections 1674 and 1687 of the Revised Administrative Code But there is nothing in said law which confers upon the provincial fiscal; the authority to issue warrants, much less to order without warrant the seizure of a personal property even if it is the corpus delicti of a crime True, Republic Act No 732 has broadened the power of provincial fiscals to conduct preliminary investigations, but said law did not divest the judge or magistrate of its power to determine, before issuing the corresponding warrant, whether or not probable cause exists therefor  8

Moreover, under Sections 2 and 3 of Rule 122 of the Rules of Court 9 which complement the constitutional provision earlier cited, two principles are made clear, namely: (1) that in the seizure of a stolen property search warrant is still necessary; and (2) that in issuing a search warrant the judge alone determines whether or not there is a probable cause The fact that a thing is a corpus delicti of a crime does not justify its seizure without a warrant As held in US v de los Reyes and Esguerra, 10 citing McClurg v Brenton: 11

The mere fact that a man is an officer, whether of high or low degree, gives him no more right than is possessed by the ordinary private citizen to break in upon the privacy of a home and subject its occupant to the indignity of a search for the evidence of crime, without a legal warrant procured for that purpose No amount of incriminating evidence whatever its source, will supply the place of such warrant At the closed door of the home be it palace or hovel even bloodhounds must wait till the law, by authoritative process, bids it open (Emphasis supplied)

Defendant-appellee Fiscal Ponce de Leon would also invoke lack of time to procure a search warrant as an excuse for the seizure of the motor launch without one He claimed that the motor launch had to be seized immediately in order to preserve it and to prevent its removal out of the locality, since Balabac, Palawan, where the motor launch was at the time, could only be reached after three to four days' travel by boat 12 The claim cannot be sustained The records show that on June 15, 1962 13 Fiscal Ponce de Leon made the first request to the Provincial Commander for the impounding of the motor launch; and on June 26, 1962 14 another request was made The seizure was not effected until July 6, 1962 In short, Fiscal Ponce de Leon had all the time to procure a search warrant had he wanted to and which he could have taken in less than a day, but he did not Besides, there is no basis for the apprehension that the motor launch might be moved out of Balabac because even prior to its seizure the motor launch was already without its engine 15 In sum, the fact that there was no time to secure a search warrant would not legally justify a search without one 16

As to whether or not they are entitled to damages, plaintiffs-appellants anchor their claim for damages on Articles 32 and 2219 of the New Civil Code which provide in part as follows:

ART 32 Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages

xxx xxx xxx

(9) The rights to be secure in one's person, house, papers, and effects against unreasonable searches and seizures

xxx xxx xxx

The indemnity shall include moral damages Exemplary damages may also be adjudicated

ART 2219 Moral damages may be recovered in the following and analogous cases:

xxx xxx xxx

(6) Illegal search;

xxx xxx xxx

(1) Acts and action referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35

Pursuant to the foregoing provisions, a person whose constitutional rights have been violated or impaired is entitled to actual and moral damages from the public officer or employee responsible therefor In addition, exemplary damages may also be awarded In the instant case, plaintiff-appellant Delfin Lim claimed that he purchased the motor launch from Jikil Taha in consideration of P3,00000, having given P2,00000 as advanced payment; that since or seizure on July 6, 1962 the motor launch had been moored at Balabac Bay and because of exposure to the elements it has become worthless at the time of the filing of the present action; that because of the illegality of the seizure of the motor launch, he suffered moral damages in the sum of P1,00000; and that because of the violation of their constitutional rights they were constrained to engage the services of a lawyer whom they have paid P1,50000 for attorney's fees We find these claims of Delfin Lim amply supported by the evidence and therefore should be awarded the sum of P3,00000 as actual damages; P1,00000 as moral damages and P75000 for attorney's fees However, with respect co plaintiff Jikil Taha, he is not entitled to recover any damage which he alleged he had suffered from the unlawful seizure of the motor launch inasmuch as he had already transferred the ownership and possession of the motor launch to Delfin Lim at the time it was seized and therefore, he has no legal

standing to question the validity of the seizure Well settled is the rule that the legality of a seizure can be contested only by the party whose rights have been impaired thereby, and that the objection to an unlawful search and seizure is purely personal and cannot be availed of by third parties 17Consequently, one who is not the owner, lessee, or lawful occupant of the premise searched cannot raise the question of validity of the search and seizure 18 Jikil Taha is not without recourse though He can still collect from his co-plaintiff, Delfin Lim the unpaid balance of P1,00000

Defendant-appellee Fiscal Ponce de Leon wanted to wash his hands of the incident by claiming that "he was in good faith, without malice and without the slightest intention of inflicting injury to plaintiff-appellant, Jikil Taha" 19when he ordered the seizure of the motor launch We are not prepared to sustain his defense of good faith To be liable under Article 32 of the New Civil Code it is enough that there was a violation of the constitutional rights of the plaintiffs and it is not required that defendants should have acted with malice or bad faith Dr Jorge Bocobo, Chairman of the Code Commission, gave the following reasons during the public hearings of the Joint Senate and House Committees, why good faith on the part of the public officer or employee is immaterial Thus:

DEAN BOCOBO Article 32, regarding individual rights; Attorney Cirilo Paredes proposes that Article 32 be so amended as to make a public official liable for violation of another person's constitutional rights only if the public official acted maliciously or in bad faith The Code Commission opposes this suggestion for these reasons:

The very nature of Article 32 is that the wrong may be civil or criminal It is not necessary therefore that there should be malice or bad faith To make such a requisite would defeat the main purpose of Article 32 which is the effective protection of individual rights Public officials in the past have abused their powers on the pretext of justifiable motives or good faith in the performance of their duties Precisely, the object of the Article is to put an end to official abuse by the plea of good faith In the United States this remedy is in he nature of a tort

Mr Chairman, this article is firmly one of the fundamental articles introduced in the New Civil Code to implement democracy There is no real democracy if a public official is abusing, and we made the article so strong and so comprehensive that it concludes an abuse of individual rights even if done in good faith, that official is liable As a matter of fact, we know that there are very few public officials who openly and definitely abuse the individual rights of the citizens In most cases, the abuse is justified on a plea of desire to enforce the law to comply with one's duty And so, if we should limit the scope of this article, that would practically nullify the object of the article Precisely, the opening object of the article is to put an end to abuses which are justified by a plea of good faith, which is in most cases the plea of officials abusing individual rights 20

But defendant-appellee Orlando Maddela cannot be held accountable because he impounded the motor launch upon the order of his superior officer While a subordinate officer may be held liable for executing unlawful orders of his superior officer, there are certain circumstances which would warrant Maddela's exculpation from liability The records show that after Fiscal Ponce de Leon made his first request to the Provincial Commander on June 15, 1962 Maddela was reluctant to impound the motor launch despite repeated orders from his superior officer21 It was only after he was furnished a copy of the reply of Fiscal Ponce de Leon, dated June 26, 1962, to the letter of the Provincial Commander, justifying the necessity of the seizure of the motor launch on the ground that the subsequent sale of the launch to Delfin Lim could not prevent the court from taking custody of the same, 22 that he impounded the motor launch on July 6, 1962 With said letter coming from the legal officer of the province, Maddela was led to believe that there was a legal basis and authority to impound the launch Then came the order of his superior officer to explain for the delay in the seizure of the motor launch 23 Faced with a possible disciplinary action from his Commander, Maddela was left with no alternative but to seize the vessel In the light of the above circumstances We are not disposed to hold Maddela answerable for damages

IN VIEW OF THE FOREGOING, the decision appealed from is hereby reversed and another one entered declaring the seizure illegal and ordering defendant-appellee Fiscal Francisco Ponce de Leon to pay to plaintiff-appellant Delfin Lim the sum of P3,00000 as actual damages, plus P1,00000 moral damages, and, in addition, P75000 for attorney's fees With costs against defendant-appellee Fiscal Ponce de Leon

SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

GR No 86720 September 2, 1994

MHP GARMENTS, INC, and LARRY C DE GUZMAN, petitioners, vsTHE HONORABLE COURT OF APPEALS, AGNES VILLA CRUZ, MIRASOL LUGATIMAN, and GERTRUDES GONZALES, respondents

Benjamin M Dacanay for petitioners

Emmanuel O Tansingco for private respondents

 

PUNO, J:

The constitutional protection of our people against unreasonable search and seizure is not merely a pleasing platitude It vouchsafes our right to privacy and dignity against undesirable intrusions committed by any public officer or private individual An infringement of this right justifies an award for damages

On February 22, 1983, petitioner MHP Garments, Inc, was awarded by the Boy Scouts of the Philippines, the exclusive franchise to sell and distribute official Boy Scouts uniforms, supplies, badges, and insignias In their Memorandum Agreement, petitioner corporation was given the authority to "undertake or cause to be undertaken the prosecution in court of all illegal sources of scout uniforms and other scouting supplies" 1

Sometime in October 1983, petitioner corporation received information that private respondents Agnes Villa Cruz, Mirasol Lugatiman, and Gertrudes Gonzales were selling Boy Scouts items and paraphernalia without any authority Petitioner de Guzman, an employee of petitioner corporation, was tasked to undertake the necessary surveillance and to make a report to the Philippine Constabulary (PC)

On October 25, 1983, at about 10:30 AM, petitioner de Guzman, Captain Renato M Peñafiel, and two (2) other constabulary men of the Reaction Force Battalion, Sikatuna Village, Diliman, Quezon City went to the stores of respondents at the Marikina Public Market Without any warrant, they seized the boy and girl scouts pants, dresses, and suits on display at respondents' stalls The seizure caused a commotion and embarrassed private respondents Receipts were issued for the seized items The items were then turned over by Captain Peñafiel to petitioner corporation for safekeeping

A criminal complaint for unfair competition was then filed against private respondents 2 During its pendency, petitioner de Guzman exacted from private respondent Lugatiman the sum of THREE THOUSAND ONE HUNDRED PESOS (P3,10000) in order to be dropped from the complaint On December 6, 1983, after a preliminary investigation, the Provincial Fiscal of Rizal dismissed the complaint against all the private respondents On February 6, 1984, he also ordered the return of the seized items The seized items were not immediately returned despite demands 3 Private respondents had to go personally to petitioners' place of business to recover their goods Even then, not all the seized items were returned The other items returned were of inferior quality

Private respondents then filed Civil Case No 51144 against the petitioners for sums of money and damages 4 In its Decision dated January 9, 1987, the trial court ruled for the private respondents, thus:

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

1 To return the amount of P3,10000 to plaintiff Mirasol Lugatiman with interest at 12% per annum from January 12, 1984, the date of the last receipt issued, until fully paid;2 To pay plaintiff Agnes Villa Cruz the sum of P2,00000 for the 26 pieces of girl scout items not returned;3 To pay plaintiffs the amount of P50,00000 for and as moral damages and P15,00000 for and as exemplary damages; and4 P5,00000 for and as attorney's fees and litigation expenses

Costs against the defendantsSO ORDERED

The decision was appealed to the respondent court On January 18, 1989, its Fifth Division, 5 affirmed the Decision with modification, thus:

WHEREFORE, the decision appealed from is AFFIRMED with MODIFICATION; and, as modified, the dispositive portion thereof now reads as follows:

Judgment is hereby rendered in favor of plaintiffs (private respondents) and against defendants (petitioners), ordering the latter jointly and severally;

1 To return the amount of P3,10000 to plaintiff (respondent) Mirasol Lugatiman and cancel her application for distributor's license;2 To pay plaintiff (respondent) Agnes Villa Cruz the sum of P2,00000 for the unreturned 26 pieces of girl scouts items with interest at 12% per annum from June 4, 1984 (date the complaint was filed) until it is fully paid;3 To pay plaintiffs (respondents) the amount of P10,00000 each, or a total of P30,00000, for and as moral damages; and P5,00000 each, or a total of P15,00000, for and as exemplary damages; and4 To pay plaintiffs (respondents) P5,00000 for and as attorney's fees and litigation expensesCosts of the case a quo and the instant appeal are assessed jointly and severally against defendants-appellants (petitioners) MHP Garments, Inc and Larry de Guzman

SO ORDERED

In this petition for certiorari, petitioners contend:

FIRST ASSIGNMENT OF ERROR

THE COURT OF APPEALS ERRED IN IMPUTING LIABILITY FOR DAMAGES TO THE PETITIONERS WHO DID NOT EFFECT THE SEIZURE OF THE SUBJECT MERCHANDISE

SECOND ASSIGNMENT OF ERROR

THE COURT OF APPEALS ERRED WHEN IT MADE A FINDING THAT THE MANNER WITH WHICH THE CONFISCATION OF PRIVATE RESPONDENTS WAS TORTIOUS BUT PENALIZED INSTEAD THE PETITIONERS WHO DID NOT COMMIT THE ACT OF CONFISCATION

THIRD ASSIGNMENT OF ERROR

THE COURT OF APPEALS ERRED WHEN IT FOUND FOR THE PRIVATE RESPONDENTS AND AGAINST THE PETITIONERS

We affirm

Article III, section 2, of the Constitution protects our people from unreasonable search and seizure It provides:

The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized

This provision protects not only those who appear to be innocent but also those who appear to be guilty but are nevertheless to be presumed innocent until the contrary is proved 6 In the case at bench, the seizure was made without any warrant Under the Rules of Court, 7 a warrantless search can only be undertaken under the following circumstance:

Sec 12 Search incident to a lawful arrest - A person lawfully arrested may be searched for dangerous weapons or anything which may be used as proof of the commission of an offense, without a search warrant

We hold that the evidence did not justify the warrantless search and seizure of private respondents' goods Petitioner corporation received information that private respondents were illegally selling Boy Scouts items and paraphernalia in October 1983 The specific date and time are not established in the evidence adduced by the parties Petitioner de Guzman then made a surveillance of the stores of private respondents They reported to the Philippine Constabulary and on October 25, 1983, the raid was made on the stores of private respondents and the supposed illicit goods were seized The progression of time between the receipt of the information and the raid of the stores of private respondents shows there was sufficient time for petitioners and the PC raiding party to apply for a judicial warrant Despite the sufficiency of time, they did not apply for a warrant and seized the goods of private respondents In doing so, they took the risk of a suit for damages in case the seizure would be proved to violate the right of private respondents against unreasonable search and seizure In the case at bench, the search and seizure were clearly illegal There was no probable cause for the seizure Probable cause for a search has been defined as "such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched" 8 These facts and circumstances were not in any way shown by the petitioners to justify their warrantless search and seizure Indeed, after a preliminary investigation, the Provincial Fiscal of Rizal dismissed their complaint for unfair competition and later ordered the return of the seized goods

Petitioners would deflect their liability with the argument that it was the Philippine Constabulary that conducted the raid and their participation was only to report the alleged illegal activity of private respondents

While undoubtedly, the members of the PC raiding team should have been included in the complaint for violation of the private respondents' constitutional rights, still, the omission will not exculpate petitioners

In the case of Lim vs Ponce de Leon, 9 we ruled for the recovery of damages for violation of constitutional rights and liberties from public officer or private individual, thus:

Art 32 Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages

xxx xxx xxx

(9) The rights to be secure in one's person, house, papers, and effects against unreasonable searches and seizuresxxx xxx xxx

The indemnity shall include moral damages Exemplary damages may also be adjudged

Art 2219 Moral damages may be recovered in the following and analogous cases:xxx xxx xxx

(6) Illegal search;

(1) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35

Pursuant to the foregoing provisions, a person whose constitutional rights have been violated or impaired is entitled to actual and moral damages from the public officer or employee responsible therefor In addition, exemplary damages may also be awarded

xxx xxx xxx

The very nature of Article 32 is that the wrong may be civil or criminal It is not necessary therefore that there should be malice or bad faith To make such a requisite would defeat the main purpose of Article 32 which is the effective protection of individual rights Public officials in the past have abused their powers on the pretext of justifiable motives or good faith in the performance of their duties Precisely, the object of the Article is to put an end to official abuse by plea of the good faith In the United States this remedy is in the nature of a tort (emphasis supplied)

In the subsequent case of Aberca vs Ver, 10 the Court En Banc explained the liability of persons indirectly responsible,viz:

[T]he decisive factor in this case, in our view, is the language of Article 32 The law speaks of an officer or employee or person "directly or indirectly" responsible for the violation of the constitutional rights and liberties of another Thus, it is not the actor alone (ie, the one directly responsible) who must answer for damages under Article 32; the person indirectly responsible has also to answer for the damages or injury caused to the aggrieved party

xxx xxx xxx

While it would certainly be too naive to expect that violators of human rights would easily be deterred by the prospect of facing damages suits, it should nonetheless be made clear in no uncertain terms that Article 32 of the Civil Code makes the persons who are directly, as well as indirectly, responsible for the transgression joint tortfeasors

xxx xxx xxx

[N]either can it be said that only those shown to have participated "directly" should be held liable Article 32 of the Civil Code encompasses within the ambit of its provisions those directly, as well as indirectly, responsible for its violations (emphasis supplied)

Applying the aforecited provisions and leading cases, the respondent court correctly granted damages to private respondents Petitioners were indirectly involved in transgressing the right of private respondents against unreasonable search and seizure Firstly, they instigated the raid pursuant to their covenant in the Memorandum Agreement to undertake the prosecution in court of all illegal sources of scouting supplies 11 As correctly observed by respondent court:

Indeed, the acts committed by the PC soldiers of unlawfully seizing appellees' (respondents') merchandise and of filing the criminal complaint for unfair competition against appellees (respondents) were for the protection and benefit of appellant (petitioner) corporation Such being the case, it is, thus, reasonably fair to infer from those acts that it was upon appellant (petitioner) corporation's instance that the PC soldiers conducted the raid and effected the illegal seizure These circumstances should answer the trial court's query — posed in its decision now under consideration — as to why the PC soldiers immediately turned over the seized merchandise to appellant (petitioner) corporation 12

The raid was conducted with the active participation of their employee Larry de Guzman did not lift a finger to stop the seizure of the boy and girl scouts items By standing by and apparently assenting thereto, he was liable to the same extent as the officers themselves 13 So with the petitioner corporation which even received for safekeeping the goods unreasonably seized by the PC raiding team and de Guzman, and refused to surrender them for quite a time despite the dismissal of its complaint for unfair competition

Secondly, Letter of Instruction No 1299 was precisely crafted on March 9, 1983 to safeguard not only the privilege of franchise holder of scouting items but also the citizen's constitutional rights, to wit:

TITLE: APPREHENSION OF UNAUTHORIZED MANUFACTURERS AND DISTRIBUTORS OF SCOUT PARAPHERNALIA AND IMPOUNDING OF SAID PARAPHERNALIA

ABSTRACT:

Directs all law enforcement agencies of the Republic of the Philippines, to apprehend immediately unauthorized manufacturers and distributors of Scout paraphernalia, upon proper application by the Boy Scouts of the Philippines and/or Girl Scouts of the Philippines for warrant of arrest and/or search warrant with a judge, or such other responsible officer as may be authorized by law; and to impound the said paraphernalia to be used as evidence in court or other appropriate administrative body Orders the immediate and strict compliance with the Instructions 14

Under the above provision and as aforediscussed, petitioners miserably failed to report the unlawful peddling of scouting goods to the Boy Scouts of the Philippines for the proper application of a warrant Private respondents' rights are immutable and cannot be sacrificed to transient needs 15 Petitioners did not have the unbridled license to cause the seizure of respondents' goods without any warrant

And thirdly, if petitioners did not have a hand in the raid, they should have filed a third-party complaint against the raiding team for contribution or any other relief,  16 in respect of respondents' claim for Recovery of Sum of Money with Damages Again, they did not

We have consistently ruled that moral damages are not awarded to penalize the defendant but to compensate the plaintiff for the injuries he may have suffered 17 Conformably with our ruling in Lim vs Ponce de Leon, op cit, moral damages can be awarded in the case at bench There can be no doubt that petitioners must have suffered sleepless nights, serious anxiety, and wounded feelings due the tortious raid caused by petitioners Private respondents' avowals of embarrassment and humiliation during the seizure of their merchandise were supported by their testimonies Respondent Cruz declared:

I felt very nervous I was crying to loss (sic) my goods and capital because I am doing business with borrowed money only, there was commotion created by the raiding team and they even stepped on some of the pants and dresses on display for sale All passersby stopped to watch and stared at me with accusing expressions I was trembling and terribly ashamed, sir 18

Respondent Lugatiman testified:

I felt very nervous I was crying and I was very much ashamed because many people have been watching the PC soldiers hauling my items, and many/I (sic) heard say "nakaw pala ang mga iyan" for which I am claiming P25,00000 for damages  19

While respondent Gonzalez stated thus:

I do not like the way the raid was conducted by the team sir because it looked like that what I have been selling were stolen items that they should be confiscated by uniformed soldiers Many people were around and the more the confiscation was made in a scandalous manner; every clothes, T-shirts, pants and dresses even those not wrapped dropped to the ground I was terribly shamed in the presence of market goers that morning  20

Needles to state, the wantonness of the wrongful seizure justifies the award of exemplary damages 21 It will also serve as a stern reminder to all and sundry that the constitutional protection against unreasonable search and seizure is a virile reality and not a mere burst of rhetoric The all encompassing protection extends against intrusions directly done both by government and indirectly by private entities

IN VIEW WHEREOF, the appealed decision is AFFIRMED WITH MODIFICATION We impose a SIX PERCENT (6%) interest from January 9, 1987 on the TWO THOUSAND PESOS (P2,00000) for the unreturned twenty-six (26) pieces of girl scouts items and a TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), on the said amount upon finality of this Decision until the payment thereof 22 Costs against petitioners SO ORDERED

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

GR No L-13505            February 4, 1919

GEO W DAYWALT, plaintiff-appellant, vsLA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS, ET AL, defendants-appellees

C C Cohn and Thos D Aitken for appellantCrossfield & O'Brien for appellee

STREET, J:

In the year 1902, Teodorica Endencia, an unmarried woman, resident in the Province of Mindoro, executed a contract whereby she obligated herself to convey to Geo W Daywalt, a tract of land situated in the barrio of Mangarin, municipality of Bulalacao, now San Jose, in said province It was agreed that a deed should be executed as soon as the title to the land should be perfected by proceedings in the Court of Land Registration and a Torrens certificate should be produced therefore in the name of Teodorica Endencia A decree recognizing the right of Teodorica as owner was entered in said court in August 1906, but the Torrens certificate was not issued until later The parties, however, met immediately upon the entering of this decree and made a new contract with a view to carrying their original agreement into effect This new contract was executed in the form of a deed of conveyance and bears date of August 16, 1906 The stipulated price was fixed at P4,000, and the area of the land enclosed in the boundaries defined in the contract was stated to be 452 hectares and a fraction

The second contract was not immediately carried into effect for the reason that the Torrens certificate was not yet obtainable and in fact said certificate was not issued until the period of performance contemplated in the contract had expired Accordingly, upon October 3, 1908, the parties entered into still another agreement, superseding the old, by which Teodorica Endencia agreed upon receiving the Torrens title to the land in question, to deliver the same to the Hongkong and Shanghai Bank in Manila, to be forwarded to the Crocker National Bank in San Francisco, where it was to be delivered to the plaintiff upon payment of a balance of P3,100

The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the proceedings relative to the registration of the land, it was found by official survey that the area of the tract inclosed in the boundaries stated in the contract was about 1248 hectares of 452 hectares as stated in the contract In view of this development Teodorica Endencia became reluctant to transfer the whole tract to the purchaser, asserting that she never intended to sell so large an amount of land and that she had been misinformed as to its area

This attitude of hers led to litigation in which Daywalt finally succeeded, upon appeal to the Supreme Court, in obtaining a decree for specific performance; and Teodorica Endencia was ordered to convey the entire tract of land to Daywalt pursuant to the contract of October 3, 1908, which contract was declared to be in full force and effect This decree appears to have become finally effective in the early part of the year 19141

The defendant, La Corporacion de los Padres Recoletos, is a religious corporation, with its domicile in the city of Manila Said corporation was formerly the owner of a large tract of land, known as the San Jose Estate, on the island of Mindoro, which was sold to the Government of the Philippine Islands in the year 1909 The same corporation was at this time also the owner of another estate on the same island immediately adjacent to the land which Teodorica Endencia had sold to Geo W Daywalt; and for many years the Recoletos Fathers had maintained large herds of cattle on the farms referred to Their representative, charged with management of these farms, was father Isidoro Sanz, himself a members of the order Father Sanz had long been well acquainted with Teodorica Endencia and exerted over her an influence and ascendency due to his religious character as well as to the personal friendship which existed between them Teodorica appears to be a woman of little personal force, easily subject to influence, and upon all the important matters of business was accustomed to seek, and was given, the advice of father Sanz and other members of his order with whom she came in contact

Father Sanz was fully aware of the existence of the contract of 1902 by which Teodorica Endencia agreed to sell her land to the plaintiff as well as of the later important developments connected with the history of that contract and the contract substituted successively for it; and in particular Father Sanz, as well as other members of the defendant corporation, knew of the existence of the contract of October 3, 1908, which, as we have already seen finally fixed the rights of the parties to the property in question When the Torrens certificate was finally issued in 1909 in favor of Teodorica Endencia, she delivered it for safekeeping to the defendant corporation, and it was then taken to Manila where it remained in the custody and under the control of P Juan Labarga the procurador and chief official of the defendant corporation, until the deliver thereof to the plaintiff was made compulsory by reason of the decree of the Supreme Court in 1914

When the defendant corporation sold the San Jose Estate, it was necessary to bring the cattle off of that property; and, in the first half of 1909, some 2,368 head were removed to the estate of the corporation immediately adjacent to the property which the plaintiff had purchased from Teodorica Endencia As Teodorica still retained possession of said property Father Sanz entered into an arrangement with her whereby large numbers of cattle belonging to the defendant corporation were pastured upon said land during a period extending from June 1, 1909, to May 1, 1914

Under the first cause stated in the complaint in the present action the plaintiff seeks to recover from the defendant corporation the sum of P24,000, as damages for the use and occupation of the land in question by reason of the pasturing of cattle thereon during the period stated The trial court came to the conclusion that the defendant corporation was liable for damages by reason of the use and occupation of the premises in the manner stated; and fixed the amount to be recovered at P2,497 The plaintiff appealed and has assigned error to this part of the judgment of the court below, insisting that damages should have been awarded in a much larger sum and at least to the full extent of P24,000, the amount claimed in the complaint

As the defendant did not appeal, the property of allowing damages for the use and occupation of the land to the extent o P2,497, the amount awarded, is not now in question an the only thing here to be considered, in connection with this branch of the case, is whether the damages allowed under this head should be increased The trial court rightly ignored the fact that the defendant corporation had paid Teodorica Endencia of ruse and occupation of the same land during the period in question at the rate of P425 per annum, inasmuch as the final decree of this court in the action for specific performance is conclusive against her right, and as the defendant corporation had notice of the rights of the plaintiff under this contract of purchase, it can not be permitted that the corporation should escape liability in this action by proving payment of rent to a person other than the true owner

With reference to the rate of which compensation should be estimated the trial court came to the following conclusion:

As to the rate of the compensation, the plaintiff contends that the defendant corporation maintained at leas one thousand head of cattle on the land and that the pasturage was of the value of forty centavos per head monthly, or P4,800 annually, for the whole tract The court can not accept this view It is rather improbable that 1,248 hectares of wild Mindoro land would furnish sufficient pasturage for one thousand head of cattle during the entire year, and, considering the locality, the rate of forty centavos per head monthly seems too high The evidence shows that after having recovered possession of the land the plaintiff rented it to the defendant corporation for fifty centavos per hectares annually, the tenant to pay the taxes on the land, and this appears to be a reasonable rent There is no reason to suppose that the land was worth more for grazing purposes during the period from 1909 to 1913, than it was at the later period Upon this basis the plaintiff is entitled to damages in the sum of p2,497, and is under no obligation to reimburse the defendants for the land taxes paid by either of them during the period the land was occupied by the defendant corporation It may be mentioned in this

connection that the Lontok tract adjoining the land in question and containing over three thousand hectares appears to have been leased for only P1,000 a year, plus the taxes

From this it will be seen that the trial court estimated the rental value of the land for grazing purposes at 50 centavos per hectare per annum, and roughly adopted the period of four years as the time for which compensation at that rate should be made As the court had already found that the defendant was liable for these damages from June, 1, 1909, to May 1, 1914, or a period of four years and eleven months, there seems some ground for the contention made in the appellant's first assignment of error that the court's computation was erroneous, even accepting the rule upon which the damages were assessed, as it is manifest that at the rate of 50 centavos per hectare per annum, the damages for four years and eleven months would be P3,090

Notwithstanding this circumstance, we are of the opinion that the damages assessed are sufficient to compensate the plaintiff for the use and occupation of the land during the whole time it was used There is evidence in the record strongly tending to show that the wrongful use of the land by the defendant was not continuous throughout the year but was confined mostly to the reason when the forage obtainable on the land of the defendant corporation was not sufficient to maintain its cattle, for which reason it became necessary to allow them to go over to pasture on the land in question; and it is not clear that the whole of the land was used for pasturage at any time Considerations of this character probably led the trial court to adopt four years as roughly being the period during which compensation should be allowed But whether this was advertently done or not, we see no sufficient reason, in the uncertainty of the record with reference to the number of the cattle grazed and the period when the land was used, for substituting our guess for the estimate made by the trial court

In the second cause of action stated in the complaint the plaintiff seeks to recover from the defendant corporation the sum of P500,000, as damages, on the ground that said corporation, for its own selfish purposes, unlawfully induced Teodorica Endencia to refrain from the performance of her contract for the sale of the land in question and to withhold delivery to the plaintiff of the Torrens title, and further, maliciously and without reasonable cause, maintained her in her defense to the action of specific performance which was finally decided in favor of the plaintiff in this court The cause of action here stated is based on liability derived from the wrongful interference of the defendant in the performance of the contract between the plaintiff and Teodorica Endencia; and the large damages laid in the complaint were, according to the proof submitted by the plaintiff, incurred as a result of a combination of circumstances of the following nature: In 1911, it appears, the plaintiff, as the owner of the land which he had bought from Teodorica Endencia entered into a contract (Exhibit C) with S B Wakefield, of San Francisco, for the sale and disposal of said lands to a sugar growing and milling enterprise, the successful launching of which depended on the ability of Daywalt to get possession of the land and the Torrens certificate of title In order to accomplish this end, the plaintiff returned to the Philippine Islands, communicated his arrangement to the defendant,, and made repeated efforts to secure the registered title for delivery in compliance with said agreement with Wakefield Teodorica Endencia seems to have yielded her consent to the consummation of her contract, but the Torrens title was then in the possession of Padre Juan Labarga in Manila, who refused to deliver the document Teodorica also was in the end contract with the plaintiff, with the result that the plaintiff was kept out of possession until the Wakefield project for the establishment of a large sugar growing and milling enterprise fell through In the light of what has happened in recent years in the sugar industry, we feel justified in saying that the project above referred to, if carried into effect, must inevitably have proved a great success

The determination of the issue presented in this second cause of action requires a consideration of two points The first is whether a person who is not a party to a contract for the sale of land makes himself liable for damages to the vendee, beyond the value of the use and occupation, by colluding with the vendor and maintaining him in the effort to resist an action for specific performance The second is whether the damages which the plaintiff seeks to recover under this head are too remote and speculative to be the subject of recovery

As preliminary to a consideration of the first of these questions, we deem it well it dispose of the contention that the members of the defendants corporation, in advising and prompting Teodorica Endencia not to comply with the contract of sale, were actuated by improper and malicious motives The trial court found that this contention was not sustained, observing that while it was true that the circumstances pointed to an entire sympathy on the part of the defendant corporation with the efforts of Teodorica Endencia to defeat the plaintiff's claim to the land, the fact that its officials may have advised her not to carry the contract into effect would not constitute actionable interference with such contract It may be added that when one considers the hardship that the ultimate performance of that contract entailed on the vendor, and the doubt in which the issue was involved — to the extent that the decision of the Court of the First Instance was unfavorable to the plaintiff and the Supreme Court itself was divided — the attitude of the defendant corporation, as exhibited in the conduct of its  procurador, Juan Labarga, and other members of the order of the Recollect Fathers, is not difficult to understand To our mind a fair conclusion on this feature of the case is that father Juan Labarga and his associates believed in good faith that the contract cold not be enforced and that Teodorica would be wronged if it should be carried into effect Any advice or assistance which they may have given was, therefore, prompted by no mean or improper motive It is not, in our opinion, to be denied that Teodorica would have surrendered the documents of title and given possession of the land but for the influence and promptings of members of the defendants corporation But we do not credit the idea that they were in any degree influenced to the giving of such advice by the desire to secure to themselves the paltry privilege of grazing their cattle upon the land in question to the prejudice of the just rights of the plaintiff

The attorney for the plaintiff maintains that, by interfering in the performance of the contract in question and obstructing the plaintiff in his efforts to secure the certificate of tittle to the land, the defendant corporation made itself a co-participant with Teodorica Endencia in the breach of said contract; and inasmuch as father Juan Labarga, at the time of said unlawful intervention between the contracting parties, was fully aware of the existence of the contract (Exhibit C) which the plaintiff had made with S B Wakefield, of San Francisco, it is insisted that the defendant corporation is liable for the loss consequent upon the failure of the project outlined in said contract

In this connection reliance is placed by the plaintiff upon certain American and English decisions in which it is held that a person who is a stranger to contract may, by an unjustifiable interference in the performance thereof, render himself liable for the damages consequent upon non-performance It is said that the doctrine of these cases was recognized by this court in Gilchrist vs Cuddy (29 Phil Rep, 542); and we have been earnestly pressed to extend the rule there enunciated to the situation here presente

Somewhat more than half a century ago the English Court of the Queen's Bench saw its way clear to permit an action for damages to be maintained against a stranger to a contract wrongfully interfering in its performance The leading case on this subject is Lumley vs Gye ([1853], 2 El & Bl, 216) It there appeared that the plaintiff, as manager of a theatre, had entered into a contract with Miss Johanna Wagner, an opera singer,, whereby she bound herself for a period to sing in the plaintiff's theatre and nowhere else The defendant, knowing of the existence of this contract, and, as the declaration alleged, "maliciously intending to injure the plaintiff," enticed and produced Miss Wagner to leave the plaintiff's employment It was held that the plaintiff was entitled to recover damages The right which was here recognized had its origin in a rule, long familiar to the courts of the common law, to the effect that any person who entices a servant from his employment is liable in damages to the master The master's interest in the service rendered by his employee is here considered as a distinct subject of juridical right It being thus accepted that it is a legal wrong to break up a relation of personal service, the question now arose whether it is illegal for one person to interfere with any contract relation subsisting between others Prior to the decision of Lumley vs Gye [supra] it had been supposed that the liability here under consideration was limited to the cases of the enticement of menial servants, apprentices, and others to whom the English Statutes of Laborers were applicable But in the case cited the majority of the judges concurred in the opinion that the principle extended to all cases of hiring This doctrine was followed by the Court of Appeal in Bowen vs Hall ([1881], 6 Q B, Div, 333); and in Temperton vs Russell ([1893], Q B, 715), it was held that the right of action for maliciously procuring a breach of contract is not confined to contracts for personal services, but extends to contracts in general In that case the contract which the defendant had procured to be breached was a contract for the supply of building material

Malice in some form is generally supposed to be an essential ingredient in cases of interference with contract relations But upon the authorities it is enough if the wrong-doer, having knowledge of the existence of the contract relations, in bad faith sets about to break it up Whether his motive is to benefit himself or gratify his spite by working mischief to the employer is immaterial Malice in the sense of ill-will or spite is not essential

Upon the question as to what constitutes legal justification, a good illustration was put in the leading case If a party enters into contract to go for another upon a journey to a remote and unhealthful climate, and a third person, with a bona fide purpose of benefiting the one who is under contract to go, dissuades him from the step, no action will lie But if the advice is not disinterested and the persuasion is used for "the indirect purpose of benefiting the defendant at the expense of the plaintiff," the intermedler is liable if his advice is taken and the contract broken

The doctrine embodied in the cases just cited has sometimes been found useful, in the complicated relations of modern industry, as a means of restraining the activities of labor unions and industrial societies when improperly engaged in the promotion of strikes An illustration of the application of the doctrine in question in a case of this kind is found in South Wales Miners Federation vs Glamorgan Coal Co ([1905]), A C, 239) It there appeared that certain miners employed in the plaintiff's collieries, acting under the order of the executive council of the defendant federation, violated their contract with the plaintiff by abstaining from work on certain days The federation and council acted without any actual malice or ill-will towards the

plaintiff, and the only object of the order in question was that the price of coal might thereby be kept up, a factor which affected the miner's wage scale It was held that no sufficient justification was shown and that the federation was liable

In the United States, the rule established in England by Lumley vs Gye [supra] and subsequent cases is commonly accepted, though in a few of the States the broad idea that a stranger to a contract can be held liable upon its is rejected, and in these jurisdictions the doctrine, if accepted at all, is limited to the situation where the contract is strictly for personal service (Boyson vs Thorn, 98 Cal, 578; Chambers & Marshall vs Baldwin 91 Ky, 121; Bourlier vs Macauley, 91 Ky, 135; Glencoe Land & Gravel Co vs Hudson Bros Com Co, 138 Mo, 439)

It should be observed in this connection that, according to the English and American authorities, no question can be made as to the liability to one who interferes with a contract existing between others by means which, under known legal cannons, can be denominated an unlawful means Thus, if performance is prevented by force, intimidation, coercion, or threats, or by false or defamatory statements, or by nuisance or riot, the person using such unlawful means is, under all the authorities, liable for the damage which ensues And in jurisdictions where the doctrine of Lumley vs Gye [supra] is rejected, no liability can arise from a meddlesome and malicious interference with a contract relation unless some such unlawful means as those just indicated are used (See cases last above cited)

This brings us to the decision made by this court in Gilchrist vs Cuddy (29 Phil Rep, 542) It there appeared that one Cuddy, the owner of a cinematographic film, let it under a rental contract to the plaintiff Gilchrist for a specified period of time In violation of the terms of this agreement, Cuddy proceeded to turn over the film also under a rental contract, to the defendants Espejo and Zaldarriaga Gilchrist thereupon restored to the Court of First Instance and produced an injunction restraining the defendants from exhibiting the film in question in their theater during the period specified in the contract of Cuddy with Gilchrist Upon appeal to this court it was in effect held that the injunction was not improperly granted, although the defendants did not, at the time their contract was made, know the identity of the plaintiff as the person holding the prior contract but did know of the existence of a contract in favor of someone It was also said arguendo, that the defendants would have been liable in damages under article 1902 of the Civil Code, if the action had been brought by the plaintiff to recover damages The force of the opinion is, we think, somewhat weakened by the criticism contain in the concurring opinion, where it is said that the question of breach of contract by inducement was not really involved in the case Taking the decision upon the point which was rally decided, it is authority for the proposition that one who buys something which he knows has been sold to some other person can be restrained from using that thing to the prejudice of the person having the prior and better right

Translated into terms applicable to the case at bar, the decision in Gilchrist vs Cuddy (29 Phil Rep, 542), indicates that the defendant corporation, having notice of the sale of the land in question to Daywalt, might have been enjoined by the latter from using the property for grazing its cattle thereon That the defendant corporation is also liable in this action for the damage resulting to the plaintiff from the wrongful use and occupation of the property has also been already determined But it will be observed that in order to sustain this liability it is not necessary to resort to any subtle exegesis relative to the liability of a stranger to a contract for unlawful interference in the performance thereof It is enough that defendant use the property with notice that the plaintiff had a prior and better right

Article 1902 of the Civil Code declares that any person who by an act or omission, characterized by fault or negligence, causes damage to another shall be liable for the damage so done Ignoring so much of this article as relates to liability for negligence, we take the rule to be that a person is liable for damage done to another by any culpable act; and by "culpable act" we mean any act which is blameworthy when judged by accepted legal standards The idea thus expressed is undoubtedly broad enough to include any rational conception of liability for the tortious acts likely to be developed in any society Thus considered, it cannot be said that the doctrine of Lumley vs Gye [supra] and related cases is repugnant to the principles of the civil law

Nevertheless, it must be admitted that the codes and jurisprudence of the civil law furnish a somewhat uncongenial field in which to propagate the idea that a stranger to a contract may sued for the breach thereof Article 1257 of the Civil Code declares that contracts are binding only between the parties and their privies In conformity with this it has been held that a stranger to a contract has no right of action for the nonfulfillment of the contract except in the case especially contemplated in the second paragraph of the same article (Uy Tam and Uy Yet vs Leonard, 30 Phil Rep, 471) As observed by this court in Manila Railroad Co vs Compañia Transatlantica, R G No 11318 (38 Phil Rep, 875), a contract, when effectually entered into between certain parties, determines not only the character and extent of the liability of the contracting parties but also the person or entity by whom the obligation is exigible The same idea should apparently be applicable with respect to the person against whom the obligation of the contract may be enforced; for it is evident that there must be a certain mutuality in the obligation, and if the stranger to a contract is not permitted to sue to enforce it, he cannot consistently be held liable upon it

If the two antagonistic ideas which we have just brought into juxtaposition are capable of reconciliation, the process must be accomplished by distinguishing clearly between the right of action arising from the improper interference with the contract by a stranger thereto, considered as an independent act generate of civil liability, and the right of action  ex contractu against a party to the contract resulting from the breach thereof However, we do not propose here to pursue the matter further, inasmuch as, for reasons presently to be stated, we are of the opinion that neither the doctrine of Lumley vs Gye [supra] nor the application made of it by this court in Gilchristvs Cuddy (29 Phil Rep, 542), affords any basis for the recovery of the damages which the plaintiff is supposed to have suffered by reason of his inability to comply with the terms of the Wakefield contract

Whatever may be the character of the liability which a stranger to a contract may incur by advising or assisting one of the parties to evade performance, there is one proposition upon which all must agree This is, that the stranger cannot become more extensively liable in damages for the nonperformance of the contract than the party in whose behalf he intermeddles To hold the stranger liable for damages in excess of those that could be recovered against the immediate party to the contract would lead to results at once grotesque and unjust In the case at bar, as Teodorica Endencia was the party directly bound by the contract, it is obvious that the liability of the defendant corporation, even admitting that it has made itself coparticipant in the breach of the contract, can in no even exceed hers This leads us to consider at this point the extent of the liability of Teodorica Endencia to the plaintiff by reason of her failure to surrender the certificate of title and to place the plaintiff in possession

It should in the first place be noted that the liability of Teodorica Endencia for damages resulting from the breach of her contract with Daywalt was a proper subject for adjudication in the action for specific performance which Daywalt instituted against her in 1909 and which was litigated by him to a successful conclusion in this court, but without obtaining any special adjudication with reference to damages Indemnification for damages resulting from the breach of a contract is a right inseparably annexed to every action for the fulfillment of the obligation (art 1124, Civil Code); and its is clear that if damages are not sought or recovered in the action to enforce performance they cannot be recovered in an independent action As to Teodorica Endencia, therefore, it should be considered that the right of action to recover damages for the breach of the contract in question was exhausted in the prior suit However, her attorneys have not seen fit to interpose the defense of res judicata in her behalf; and as the defendant corporation was not a party to that action, and such defense could not in any event be of any avail to it, we proceed to consider the question of the liability of Teodorica Endencia for damages without refernce to this point

The most that can be said with refernce to the conduct of Teodorica Endencia is that she refused to carry out a contract for the sale of certain land and resisted to the last an action for specific performance in court The result was that the plaintiff was prevented during a period of several years from exerting that control over the property which he was entitled to exert and was meanwhile unable to dispose of the property advantageously Now, what is the measure of damages for the wrongful detention of real property by the vender after the time has come for him to place the purchaser in possession?

The damages ordinarily and normally recoverable against a vendor for failure to deliver land which he has contracted to deliver is the value of the use and occupation of the land for the time during which it is wrongfully withheld And of course where the purchaser has not paid the purchaser money, a deduction may be made in respect to the interest on the money which constitutes the purchase price Substantially the same rule holds with respect to the liability of a landlord who fails to put his tenant in possession pursuant to contract of lease The measure of damages is the value of the leasehold interest, or use and occupation, less the stipulated rent, where this has not been paid The rule that the measure of damages for the wrongful detention of land is normally to be found in the value of use and occupation is, we believe, one of the things that may be considered certain in the law (39 cyc, 1630; 24 Cyc, 1052 Sedgewick on Damages, Ninth ed, sec 185) — almost as wellsettled, indeed, as the rule that the measure of damages for the wrongful detention of money is to be found in the interest

We recognize the possibility that more extensive damages may be recovered where, at the time of the creation of the contractual obligation, the vendor, or lessor, is aware of the use to which the purchaser or lessee desires to put the property which is the subject of the contract, and the contract is made with the eyes of the vendor or lessor open to the possibility of the damage which may result to the other party from his own failure to give possession The case before us is not this character, inasmuch as at the time when the rights of the parties under the contract were determined, nothing was known to any to them about the San Francisco capitalist who would be willing to back the project portrayed in Exhibit C

The extent of the liability for the breach of a contract must be determined in the light of the situation in existence at the time the contract is made; and the damages ordinarily recoverable are in all events limited to such as might be reasonable are in all events limited to such as might be reasonably foreseen in the light of the facts then known to the contracting parties Where the purchaser desires to protect himself, in the contingency of the failure of the vendor promptly to give possession, from the possibility of incurring other damages than such as the incident to the normal value of the use and occupation, he should cause to be inserted in the contract a clause providing for stipulated amount to the paid upon failure of the vendor to give possession; and not case has been called to our attention where, in the absence of such a stipulation, damages have been held to be recoverable by the purchaser in excess of the normal value of use and occupation On the contrary, the most fundamental conceptions of the law relative to the assessment of damages are inconsistent with such idea

The principles governing this branch of the law were profoundly considered in the case Hadley vs Baxendale (9 Exch, 341), decided in the English Court of Exchequer in 1854; and a few words relative to the principles governing will here be found instructive The decision in that case is considered a leading authority in the jurisprudence of the common law The plaintiffs in that case were proprietors of a mill in Gloucester, which was propelled by steam, and which was engaged in grinding and supplying meal and flour to customers The shaft of the engine got broken, and it became necessarily that the broken shaft be sent to an engineer or foundry man at Greenwich, to serve as a model for casting or manufacturing another that would fit into the machinery The broken shaft could be delivered at Greenwich on the second day after its receipts by the carrier it It was delivered to the defendants, who were common carriers engaged in that business between these points, and who had told plaintiffs it would be delivered at Greenwich on the second day after its delivery to them, if delivered at a given hour The carriers were informed that the mill was stopped, but were not informed of the special purpose for which the broken shaft was desired to forwarded, They were not told the mill would remain idle until the new shaft would be returned, or that the new shaft could not be manufactured at Greenwich until the broken one arrived to serve as a model There was delay beyond the two days in delivering the broken shaft at Greenwich, and a corresponding delay in starting the mill No explanation of the delay was offered by the carriers The suit was brought to recover damages for the lost profits of the mill, cause by the delay in delivering the broken shaft It was held that the plaintiff could not recover

The discussion contained in the opinion of the court in that case leads to the conclusion that the damages recoverable in case of the breach of a contract are two sorts, namely, (1) the ordinary, natural, and in a sense necessary damage; and (2) special damages

Ordinary damages is found in all breaches of contract where the are no special circumstances to distinguish the case specially from other contracts The consideration paid for an unperformed promise is an instance of this sort of damage In all such cases the damages recoverable are such as naturally and generally would result from such a breach, "according to the usual course of things" In case involving only ordinary damage no discussion is ever indulged as to whether that damage was contemplated or not This is conclusively presumed from the immediateness and inevitableness of the damage, and the recovery of such damage follows as a necessary legal consequence of the breach Ordinary damage is assumed as a matter of law to be within the contemplation of the parties

Special damage, on the other hand, is such as follows less directly from the breach than ordinary damage It is only found in case where some external condition, apart from the actual terms to the contract exists or intervenes, as it were, to give a turn to affairs and to increase damage in a way that the promisor, without actual notice of that external condition, could not reasonably be expected to foresee Concerning this sort of damage, Hadley vsBaxendale (1854) [supra] lays down the definite and just rule that before such damage can be recovered the plaintiff must show that the particular condition which made the damage a possible and likely consequence of the breach was known to the defendant at the time the contract was made

The statement that special damages may be recovered where the likelihood of such damages flowing from the breach of the contract is contemplated and foreseen by the parties needs to be supplemented by a proposition which, though not enunciated in Hadley vs Baxendale, is yet clearly to be drawn from subsequent cases This is that where the damage which a plaintiff seeks to recover as special damage is so far speculative as to be in contemplation of law remote, notification of the special conditions which make that damage possible cannot render the defendant liable therefor To bring damages which would ordinarily be treated as remote within the category of recoverable special damages, it is necessary that the condition should be made the subject of contract in such sense as to become an express or implied term of the engagement Horne vs Midland R Co (L R, 8 C P, 131) is a case where the damage which was sought to be recovered as special damage was really remote, and some of the judges rightly places the disallowance of the damage on the ground that to make such damage recoverable, it must so far have been within the contemplation of the parties as to form at least an implied term of the contract But others proceeded on the idea that the notice given to the defendant was not sufficiently full and definite The result was the same in either view The facts in that case were as follows: The plaintiffs, shoe manufacturers at K, were under contract to supply by a certain day shoes to a firm in London for the French government They delivered the shoes to a carrier in sufficient time for the goods to reach London at the time stipulated in the contract and informed the railroad agent that the shoes would be thrown back upon their hands if they did not reach the destination in time The defendants negligently failed to forward the good in due season The sale was therefore lost, and the market having fallen, the plaintiffs had to sell at a loss

In the preceding discussion we have considered the plaintiff's right chiefly against Teodorica Endencia; and what has been said suffices in our opinion to demonstrate that the damages laid under the second cause of action in the complaint could not be recovered from her, first, because the damages laid under the second cause of action in the complaint could not be recovered from her, first, because the damages in question are special damages which were not within contemplation of the parties when the contract was made, and secondly, because said damages are too remote to be the subject of recovery This conclusion is also necessarily fatal to the right of the plaintiff to recover such damages from the defendant corporation, for, as already suggested, by advising Teodorica not to perform the contract, said corporation could in no event render itself more extensively liable than the principle in the contract

Our conclusion is that the judgment of the trial court should be affirmed, and it is so ordered, with costs against the appellant

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

GR No L-50911 August 21, 1987

MIGUEL PEREZ RUBIO, petitioner, vsCOURT OF APPEALS, ROBERTO O PHILLIPS & SONS, INC, MAGDALENA YSMAEL PHILLIPS, MANUFACTURERS BANK & TRUST CO, INC, HACIENDA BENITO, INC, ET AL, respondents

Daniel M Malabonga for petitionerArgel-Guevarra & Associates for respondent Hacienda Benito, IncMeer, Meer & Meer Law Office for respondent Victoria ValleyMagtanggol C Gunigundo for respondents Robert O Phillips & Sons, Inc, Magdalena Ysmael Phillips and Heirs of Robert PhillipsAmbrosia Padilla, Mempin & Reyes Law Office for respondent Manufacturers Bank & Trust Co Inc

 

GUTIERREZ, JR, J:

Before us for reconsideration are the various motions for reconsideration of the March 12, 1986 decision, the dispositive portion of which reads:

WHEREFORE, the petition is GRANTED The decision of the former Court of Appeals is hereby REVERSED and SET ASIDE The respondents Phillips and Sons and the Phillips spouses are declared to be jointly and severally liable to the petitioner for the outstanding debt of Phillips and Sons in the amount of FOUR MILLION TWO HUNDRED FIFTY THOUSAND PESOS (P4,250,00000) with interest at the rate of eight (8%) percent per annum from April 30, 1964 until fully paid as provided for in the parties' agreement dated August 13, 1963 Costs against the respondents (p 869, rollo)

The petitioner asks that the decision be reconsidered insofar as it makes no finding against respondent Phillips for moral and exemplary damages as well as attorney's fees and to the extent that the same decision absolves from joint and solidary liability respondents Manufacturers Bank and Trust Company (hereinafter called MBTC), Hacienda Benito (hereinafter called HB, and Victoria Valley Development Corporation (hereinafter called VVDC)

The petitioner restates his position that the respondents conspired amongst themselves to put the properties of Hacienda Benito beyond his reach and thus make it impossible for him to collect the sum of P4,250,00000 still unpaid on the purchase price of his shares of stock in Hacienda Benito

It may be recalled that on June 5, 1965, respondent Hacienda Benito, Inc, represented by Robert O Phillips, president and Victoria Valley Development Corporation which was in the process of incorporation and represented by Alfonso Yuchengco with the conformity of Manufacturers Bank and Trust Company represented by Galicano Calapatia executed a "MEMORANDUM AGREEMENT (Exhibit "31" — Miguel Perez Rubio)

The thrust of the agreement is that respondent VVDC will acquire under conditions stated therein 1341668 hectares of land including account receivables belonging to respondent HBI Moreover, it was specifically provided in the agreement that " HB warrants that the properties to be acquired by VVDC are not subject to any other obligations, liens, encumbrances, charges or claims of whatever nature than those mentioned herein, including real estate taxes up to the first semester of 1965" (Memorandum Agreement, supra, pp 3-4)

Included in this 1341668 hectares are the 78 hectares mortgaged to MBTC These parcels of land were mortgaged to MBTC to secure obligation and liabilities incurred by HBI and other affiliate companies owned by the Phillips Of the P7,419,13019 amount due from these companies, only P1,456,27648 was the liability of HBI

Under this agreement, MBTC will institute judicial foreclosure of mortgage after which all the companies would confess judgment and enter into a compromise agreement in full satisfaction of the claim of MBTC under the several deeds of mortgage It was further provided that HBI will convey all the 78 hectares in favor of MBTC after which VVDC will purchase from MBTC the same parcels of land together with the receivables A final proviso was to the effect that VVDC and HBI will enter into a separate agreement whereby HBI will expressly assign in favor of VVDC its right to redeem the properties foreclosed by MBTC

The consideration of the agreement amounted to Pl1,621,88911 which VVDC agreed to assume in order to settle the obligations of HBI and the other Phillips companies

The Memorandum Agreement was executed under the following factual background: (1) Respondent ROPSI had still to pay its outstanding P4,25000000 debt to the petitioner as the result of the latter's sale of his shares of stock of HBI; (2) Negotiations had broken down between the Phillips spouses, ROPSI and Alfonso Yuchengco as regards the sale of the shares of stock of Hacienda Benito, Inc; and (3) Petitioner had threatened to rescind the contract of sale of his shares of stock of Hacienda Benito

Obviously, Hacienda Benito through Robert O Phillips, and VVDC through Alfonso Yuchengco were fully aware of the petitioner's still being unpaid the P4,250,00000 balance on his shares of stocks of Hacienda Benito sold to ROPSI MBTC, too, because of the unrebutted evidence that its top officers are also the top officers of VVDC is conclusively presumed to know the petitioner's predicament These same personalities figures prominently in the negotiations involving the shares of stock of Hacienda Benito including the unpaid P4,250,00000 collectibles of the petitioner from the ROPSI as full payment for the sale of his shares of stock in Hacienda Benito

Hence, the scheme provided for in the Memorandum Agreement wherein all the properties of Hacienda Benito will be ultimately transferred to VVDC without any mention at all and completely ignoring the petitioner's interest in said Hacienda placed the petitioner's rightful claim to the payment of his shares of stock in clear jeopardy

The fact that the Memorandum Agreement was not fully implemented is immaterial The intent to defraud the petitioner and the damage which led to the filing of this case was present in the execution of the Memorandum Agreement

Therefore, an award for damages in favor of the petitioner is in order against respondents Hacienda Benito, VVDC and MBTC

Article 19 of the New Civil Code provides that:

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

while Article 20 thereof provides that:

Every person who, contrary to law, wilfully or negligently causes damage to another shall indemnify the latter for the same

Parenthetically, these respondents did not observe honesty and good faith in dealing with the rightful claim of the petitioner to the still unpaid P4,250,00000 collectibles from ROPSI The respondents' acts are tortious pursuant to Articles 19 and 20 of the New Civil Code Hence, these respondents are obliged to pay for the damage done to the petitioner (See Article 2176, New Civil Code)

In the case at bar, the tortious and fraudulent scheme of the private respondents made it impossible for the petitioner to collect the P4,250,00000 still unpaid purchase price of his shares of stock in Hacienda Benito All the respondents are, therefore, solidarity liable for these actual damages suffered by the petitioner (See Article 2194 of the New Civil Code)

Consequently, we rule that Hacienda Benito, VVDC and MBTC together with ROPSI and the Phillips spouses are solidarity liable to the petitioner for the outstanding debt of ROPSI in the amount of P14,250,00000 with interest at the rate of eight (8 % per cent per annum from April 30, 1964 until fully paid as provided for in the parties' agreement dated August 13,1963

Also, an award for moral damages in favor of the petitioner is in order against respondents Hacienda Benito, VVDC and MBTC The planned transfer of all the assets of Hacienda Benito to VVDC which the respondents sought to accomplish through the Memorandum Agreement created further anguish and anxiety on the part of the petitioner who at that time was still trying to collect the P4,250,00000 full payment of his shares of stock in Hacienda Benito

Considering the circumstances under which the respondents executed the Memorandum Agreement and the social status of the parties herein, the amount of P100,00000 as moral damages in favor of the petitioner is awarded

However, we find no reasonable ground to set aside our findings in the March 12, 1986 decision that respondents Phillips spouses are not liable for moral and exemplary damages and attorney's fees

Juan Miguel Phillips also filed a motion to intervene in the instant case stating therein that Robert O Phillips had died leaving as heirs respondent Magdalena Ysmael Phillips and four legitimate children; that he is one of the four (4) children; that as such legal heir, he has a legal interest in the subject matter of the instant case and will be favored or prejudiced in his interest depending on the final outcome of the instant case He cites Rule 12, Section 2, Rules of Court

The right of the movant-intervenor proceeds only from the fact of heirship Hence his interest to specific portions of the property of the deceased is, if not conjectural, stin contingent and expectant At this point, he cannot specify any property nor segregate any as his own before the liquidation of the estate is completed This is in accordance with Article 657 of the Civil Code (Article 777, Civil Code) which provides that the rights to succession of a person are transmitted from the moment of death

Thus, the heir has the right to impugn the validity of the decedent's transaction only when he is made answerable or when his specific right or property would be affected thereby The instant case is a personal action against Robert O Phillips, filed while he was still alive It is Robert O Phillips and his estate which are sought to be made liable, not the movant-intervenor or any of his legal heirs

WHEREFORE, the petitioners motion for reconsideration is GRANTED in that respondent's Hacienda Benito, Victoria Valley Development Corporation and Manufacturers Bank and Trust Company (now Filipinas Bank) together with respondents Robert 0 Phillips & Sons and the Phillips spouses are declared to be jointly and severally liable to the petitioner for the outstanding debt of Phillips and Sons in the amount of FOUR MILLION TWO HUNDRED FIFTY THOUSAND PESOS (P4,250,00000) with interest at the rate of eight (8%) per cent per annum from April 30, 1964 until fully paid as provided for in the parties' agreement dated August 13, 1963; that respondents Hacienda Benito, Inc, Victoria Valley Development Corporation and Manufacturers Bank and Trust Company (now Filipinas Bank) are jointly and severally liable to the petitioner in the amount of ONE HUNDRED THOUSAND PESOS (P100,00000) as moral damages Juan Miguel Phillips' motion for reconsideration is DENIED for lack of merit The motions for reconsideration filed by Robert O Phillips and Sons, Magdalena Ysmael Phillips and the heirs of Robert O Phillips, Hacienda Benito, Inc, and Manufacturers Bank and Trust Company are DENIED it appearing that no new substantial reasons have been invoked to warrant reconsideration of the said decision as far as these parties' motions are concerned, and this DENIAL is FINAL

SO ORDERED