Credit Transactions to End

CREDIT TRANSACTIONS

1. Common Provisions2. Commodatum

Pajuyo vs CA

(2004)

Petitioner Colito T. Pajuyo (“Pajuyo”) paid P400 to a certain Pedro Perez for the rights over a 250-square meter lot in Barrio Payatas, Quezon City.  Pajuyo then constructed a house made of light materials on the lot. Pajuyo and private respondent Eddie Guevarra (“Guevarra”) executed a Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyo’s demand.In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that Guevarra vacate the house.  Guevarra refused. Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court of Quezon City, Branch 31 (“MTC”).

The RTC upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo and Guevarra. The terms of the Kasunduan bound Guevarra to return possession of the house on demand. Court of Appeals ruled that the Kasunduan is not a lease contract but a commodatum because the agreement is not for a price certain. 

We do not subscribe to the Court of Appeals’ theory that the Kasunduan is one of commodatum.

In a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it.[63] An essential feature ofcommodatum is that it is gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a certain period.[64] Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted.[65] If the bailor should have urgent need of the thing, he may demand its return for temporary use.[66] If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called aprecarium.[67] Under the Civil Code, precarium is a kind of commodatum.[68]

The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes the Kasunduan a contract different from a commodatum.  The effects of the Kasunduan are also different from that of a commodatum. Case law on ejectment has treated relationship based on tolerance as one that is akin to a landlord-tenant relationship where the withdrawal of permission would result in the termination of the lease.[69] The tenant’s withholding of the property would then be unlawful.  This is settled jurisprudence.

Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor.  The obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration and commodatum.[70] These contracts certainly involve the obligation to deliver or return the thing received.

3. Simple Loan or MutuumEquitable v. Ng Sheung Ngo

Respondents Ng Sheung Ngor,[4] Ken Appliance Division, Inc. and Benjamin E. Go filed an action for annulment and/or reformation of documents and contracts[5] against petitioner Equitable PCI Bank (Equitable) and its employees, Aimee Yu and Bejan Lionel Apas, in the Regional Trial Court (RTC), Branch 16 of Cebu City.[6]  They claimed that Equitable induced them to avail of its peso and dollar credit facilities by

The promissory notes were valid.  It is erroneous, however, to conclude that contracts of adhesion are invalid per se. They are, on the contrary, as binding as ordinary contracts . A party is in reality free to accept or reject it. A contract of adhesion becomes void only when the dominant party takes advantage of the weakness of the other party, completely depriving the latter of the opportunity to bargain on equal footing.[61]

           That was not the case here. As the trial court noted, if the terms and conditions offered by Equitable had been truly prejudicial to respondents, they would have walked out and negotiated with another bank at the first available instance. But they did not. Instead, they continuously availed of Equitable's credit facilities for five long years.

Equitable dictated the interest rates if the term (or period for repayment) of the loan was

offering low interest rates[7] so they accepted Equitable's proposal and signed the bank's pre-printed promissory notes on various dates beginning 1996. They, however, were unaware that the documents contained identical escalation clauses granting Equitable authority to increase interest rates without their consent.These were rebutted by the bank.  After trial, the RTC upheld the validity of the promissory notes. It found that, in 2001 alone, Equitable restructured respondents' loans amounting to US$228,200 andP1,000,000.[11] The trial court, however, invalidated the escalation clause contained therein because it violated the principle of mutuality of contracts.[12] Nevertheless, it took judicial notice of the steep depreciation of the peso during the intervening period[13] and declared the existence of extraordinary deflation.[14] Consequently, the RTC ordered the use of the 1996 dollar exchange rate in computing respondents' dollar-denominated loans.[15] Lastly, because the business reputation of respondents was (allegedly) severely damaged when Equitable froze their accounts,[16] the trial court awarded moral and exemplary damages to them.

ISSUE: Whether or not there was an extraordinary deflation 

extended. Respondents had no choice but to accept them. This was a violation of Article 1308 of the Civil Code. Furthermore, the assailed escalation clause did not contain the necessary provisions for validity, that is, it neither provided that the rate of interest would be increased only if allowed by law or the Monetary Board, nor allowed de-escalation. For these reasons, the escalation clause was void.           With regard to the proper rate of interest, in New Sampaguita Builders v. Philippine National Bank[71] we held that, because the escalation clause was annulled, the principal amount of the loan was subject to the original or stipulated rate of interest. Upon maturity, the amount due was subject to legal interest at the rate of 12% per annum.

Extraordinary inflation exists when there is an unusual decrease in the purchasing power of currency and such decrease could not be reasonably foreseen or was beyond the contemplation of the parties at the time of the obligation. Deflation is an inverse situation. 

Despite the devaluation of the peso, BSP never declared a situation of extraordinary inflation. Respondents should pay their dollar denominated loans at the exchange rate fixed by the BSP on the date of maturity. 

Decision of lower courts are reversed and set aside.

ALMEDA v. BATHALA

In 1997, Bathala (through its President) renewed its Lease Contract with the husband of Almeda. The rent was based on the assessed value of the property. The contract stipulated that the lessee shall pay for any additional charge or burden may be imposed on the property by the government. It also stipulated that should there be extraordinary inflation or devaluation, the value of the peso at the time of the establishment of the obligation shall be the basis of payment(similar to NCC 1250).

The lessors wanted the lessee to pay for the VAT charged on the property and also wanted to increase the rent by 73%.

ISSUE: Are lessees liable for VAT and should Article 1250 of the NCC apply given the aforementioned stipulations in their lease contract?

Petitioners' reliance on the sixth condition of the contract is, likewise, unavailing. This provision clearly states that respondent can only be held liable for new taxes imposed after the effectivity of the contract of lease, that is, after May 1997, and only if they pertain to the lot and the building where the leased premises are located. Considering that RA 7716 took effect in 1994, the VAT cannot be considered as a "new tax" in May 1997, as to fall within the coverage of the sixth stipulation.

Neither can petitioners legitimately demand rental adjustment because of extraordinary inflation or devaluation.

Petitioners contend that Article 1250 of the Civil Code does not apply to this case because the contract stipulation speaks of extraordinary inflation or devaluation while the Code speaks of extraordinary inflation or deflation.

While, indeed, condition No. 7 of the contract speaks of "extraordinary inflation or devaluation" as

Bathala (lessee) refused and filed a petition for declaratory relief in Makati RTC. Later on, the Almedas (lessors) filed an action for ejection, rescission and damages.

RTC ruled in favor of Bathala. CA affirmed.

compared to Article 1250's "extraordinary inflation or deflation," we find that when the parties used the term "devaluation," they really did not intend to depart from Article 1250 of the Civil Code. Condition No. 7 of the contract should, thus, be read in harmony with the Civil Code provision. That this is the intention of the parties is evident from petitioners' letter dated January 26, 1998, where, in demanding rental adjustment ostensibly based on condition No. 7, petitioners made explicit reference to Article 1250 of the Civil Code, even quoting the law verbatim.

Inflation has been defined as the sharp increase of money or credit, or both, without a corresponding increase in business transaction. There is inflation when there is an increase in the volume of money and credit relative to available goods, resulting in a substantial and continuing rise in the general price level.

Extraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.

The factual circumstances obtaining in the present case do not make out a case of extraordinary inflation or devaluation as would justify the application of Article 1250 of the Civil Code. We would like to stress that the erosion of the value of the Philippine peso in the past three or four decades, starting in the mid-sixties, is characteristic of most currencies. And while the Court may take judicial notice of the decline in the purchasing power of the Philippine currency in that span of time, such downward trend of the peso cannot be considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a given period, the effects of extraordinary inflation are not to be applied.

4. InterestCASTELO v. CA Petitioners entered into a contract named

Deed of Conditional Sale with Dela Rosa involving land located in Espana, Manila. Dela Rosa paid 106,000 upon signing the contract leaving a balance of 163,408. The contract stipulated that the BALANCE IS TO PAID ON OR BEFORE DECEMBER 31, 1982 WITHOUT INTEREST AND PENALTY CHARGES . She had a grace period of 6 months after December 31 and the interest shall be at 12% per annum and penalty charge shall be 1% per month.

Dela Rosa failed to pay the balance at the end of the grace period so the petitioners so petitioners filed a complaint for specific performance plus damages.

Petitioners eventually won and Dela Rosa was ordered to pay a total of 197,723

ISSUE: Date when the interest starts to run.

We believe and so hold that the phrase "to pay interest," found in the dispositive portion of the Castro-Bartolome decision must, under applicable law, refer to the interest stipulated by the parties in the Deed of Conditional Sale which they had entered into on 15 October 1982. We note, in the first place, that the phrase "to pay interest" comes close upon the heels of the preceding phrase "to comply with her obligation under the conditional sale to pay the balance — of P163,408.00." A strong inference thus arises that the "interest" required to be paid is the interest stipulated as part of the "obligation [of private respondent dela Rosa] under the conditional sale [agreement] to pay the balance of [the purchase price of the land]."

Under Article 2209, the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal to the regular or monetary interest , becomes due and payable. Finally, if no regular interest had been agreed upon by the contracting parties, then the damages payable will consist of payment of legal interest which is six percent (6%) or, in the case of loans or forbearances of money, twelve percent (12%)  per annum. Applying Article 2209 to the instant case, we must refer to the "Deed of Conditional Sale" which, as already noted, had specifically provided for "interest at the rate of 12% per annum" and a "1% penalty charge a month [to] be imposed on their remaining diminishing balance." The interest

representing the principal worth 163,408 and interestof 34,315 computed to be incurred from the date of the decision of the CA (Nov 1986).

Petitioners contend that the computation was erroneous because the 12%/annum interest and 1%/month penalty charge should be computed from January 1983, the date of the start of the grace period.

cannot be said to run from the date of the decision.

The contention of private respondent that Article 2209 of the Civil Code is not applicable in this case because the interest referred to therein is given as compensation for the use of money, not for the incurring of delay as in the instant case,  need not detain us for long. Article 2209 governs transactions involving the payment of indemnity in the concept of damages arising from delay in the discharge of obligations consisting of the payment of a sum of money. The "obligation consisting in the payment of a sum of money" referred to in Article 2209 is not confined to a loan or forbearance of money. The Court has, for instance, consistently applied Article 2209 in the determination of the interest properly payable where there was default in the payment of the price or consideration under a contract of sale  as in the case at bar. Article 2209 has also been applied by this Court in cases involving an action for damages for injury to persons and loss of property;  to actions for damages arising from unpaid insurance claims;  and an action involving the appropriate rate of interest on just compensation that is payable for expropriated lands.

The stipulation in the "Deed of Conditional Sale" requiring the payment of interest is not unlawful. The validity of the contract of conditional sale itself has not been put to question by private respondent dela Rosa and there is nothing in the record to suggest that the same may be contrary to law, morals, good custom, public order or public policy. Accordingly, the contractual stipulation must be regarded as binding and enforceable as the law between the parties. 

We believe that the contracting parties intended the latter view of their stipulation on interest; for if the parties had intended that during the grace period from 1 January 1983 to 30 June 1983, interest consisting of 12% per annum plus another 12% per annum (equivalent to 1% per month), or a total of 24% per annum, was payable, then they could have simply said so. Instead, the parties distinguished between interest at the rate of 12% per annum and the 1% a month penalty charge. The interpretation we adopt is also supported by the principle that in case of ambiguity in contract language, that interpretation which establishes a less onerous transmission of rights or imposition of lesser burdens which permits greater reciprocity between the parties, is to be adopted.  (why the court had to say this, I do not understand)

PILIPINAS BANK v. CA

Echaus filed a complaint against Pilipnas Bank and its president for a sum of money.

Echaus alleges that there was dacion en pago between Greatland and Pilipinas. Greatland assigned of the total consideration of the dacion in her favor. Despite demands, Pilipinas refused to pay in bad faith.

Pilipinas admits the dacion but claims that its former president had no authority to enter into such, that it never ratified the same and that even if the same was binding, the conditions for its effectivity were not fulfilled.

RTC ruled in favor of Echaus. It ordered Pilipinas to pay the principal, and among others, actual damages with legal interest until fully paid.

HELD: 6%

Presidential Decree No. 116 authorized the Monetary Board to prescribe the maximum rate or rates of interest for the loan or renewal thereof or the forbearance of any money, goods or credits and amended the Usury Law (Act No. 2655) for that purpose. Acting on the authority vested on it by the Usury Law, as amended by P.D. No. 116, the Monetary Board of Central Bank issued Central Bank Circular No. 416. Note that Circular No. 416, fixing the rate of interest at 12% per annum, deals with (1) loans; (2) forbearance of any money, goods or credit; and (3) judgments.

In Reformina v. Tomol, Jr., 139 SCRA 260 [1985], the Court held that the judgments spoken of and referred to in Circular No. 416 are "judgments in litigation involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with nor involving loans or forbearance of any money, goods or credits does not fall within the coverage of the said law for it is not, within the ambit of the authority granted to the Central Bank."

We held that Circular No. 416 does not apply to judgments involving damages and compensation in expropriation proceedings. We also held that payment of unliquidated cash advances to an employee by his employer and the return of money paid by a buyer of a leasehold right but which contract was voided due to the fault of the seller.

CA affirmed with modification and ruled that Pilipinas is liable for principal with legal interest starting from Jan 1981, the date of first demand. This decision became final and executory.There was an issue as to the interest rate to be applied. The CA clarified in a Resolution that the rate is 12% per annum according to Central Bank Circular. Pilipinas still argues that NCC 2209 should apply, and the interest should be 6%.

The said amount was a portion of the P7,776,335.69 which petitioner was obligated to pay Greatland as consideration for the sale of several parcels of land by Greatland to petitioner. The amount of P2,300,000.00 was assigned by Greatland in favor of private respondent. The said obligation therefore AROSE FROM A CONTRACT OF PURCHASE AND SALE AND NOT FROM A CONTRACT OF LOAN OR MUTUUM. HENCE, WHAT IS APPLICABLE IS THE RATE OF 6% PER ANNUM AS PROVIDED IN ARTICLE 2209 of the Civil Code of the Philippines and not the rate of 12% per annum as provided in Circular No. 416.

PAN PACIFIC v. EQUITABLE PCI

Pan Pacific and its president Del Rosario entered into a contract with Equitable PCI for mechanical works on airconditioning system. They stipulated that the total consideration is P23.3M subject to price adjustment in case of increase in labor cost and price of materials. There was an increase in such in 1990 so the price was adjusted. But this caused the operational capital of Pan pacific to be inadequate for the project.

Equitable withheld payment and offered a loan of 1.8M to Pan Pacific. . Against its will and on the strength of respondent’s promise that the price adjustment would be released soon, Pan Pacific, through Del Rosario, was constrained to execute a promissory note in the amount of P1.8 million as a requirement for the loan. Pan Pacific also posted a surety bond. The P1.8 million was released directly to laborers and suppliers and not a single centavo was given to Pan Pacific. Pan Pacific made several demands for payment on the price adjustment but respondent merely kept on promising to release the same. Meanwhile, the P1.8 million loan matured and respondent demanded payment plus interest and penalty. Pan Pacific refused to pay the loan. Pan Pacific insisted that it would not have incurred the loan if respondent released the price adjustment on time.

On 6 May 1994, Pan pacific filed a complaint for declaration of

ISSUE: 12% or 18%.a

Under Article 2209 of the Civil Code, the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal to the regular monetary interest becomes due and payable. Finally, if no regular interest had been agreed upon by the contracting parties, then the damages payable will consist of payment of legal interest which is 6%, or in the case of loans or forbearances of money, 12% per annum.  It is only when the parties to a contract have failed to fix the rate of interest or when such amount is unwarranted that the Court will apply the 12% interest per annum on a loan or forbearance of money.

The written agreement entered into between petitioners and respondent provides for an interest at the current bank lending rate in case of delay in payment and the promissory note charged an interest of 18%.

To prove petitioners’ entitlement to the 18% bank lending rate of interest, petitioners presented the promissory note prepared by respondent bank itself. This promissory note, although declared void by the lower courts because it did not express the real intention of the parties, is substantial proof that the bank lending rate at the time of default was 18% per annum. Absent any evidence of fraud, undue influence or any vice of consent exercised by petitioners against the respondent , the interest rate agreed upon is binding on them.

nullity/annulment of the promissory note, sum of money, and damages against Equitable.

RTC ruled that Equitable is to pay Pan pacific 1.3M representing unpaid balance of the adjusted price with interest of 12% starting May 1994, the filing of the complaint. CA affirmed this.

Petitioners filed a Motion for Partial Reconsideration seeking a reconsideration of the CA’s Decision imposing the legal rate of 12%. Petitioners claimed that the interest rate applicable should be the 18% bank lending rate.

Specifically, petitioners invoke Section 2.5 of the Agreement and Section 60.10 of the General Conditions as follows:Agreement2.5 If any payment is delayed, the CONTRACTOR may charge interest thereon at the current bank lending rates, without prejudice to OWNER’S recourse to any other remedy available under existing law.

5. Chattel MortgagePNB v MANILA INVESTMENT

(1971)

In a decision rendered by CFI of Manila, the defendants were ordered to pay PNB. In case of non-payment of the amounts adjudged, the decision also provided for the sale at public auction of the personal properties covered by the chattel mortgage executed by the defendants in favor of PNB. Instead of a public auction, the parties agreed to have them sold, and were in fact sold, at a private sale. The net proceeds were applied to the partial satisfaction of the said judgment. More than five years but less than 10 years from the date when the decision become executory, the PNB, filed an action to revive the judgment claiming for the deficiency.

The private sale was valid.

As the disposition of the mortgaged properties in a private sale was by agreement between the parties, it is clear that appellants are now in estoppels to question it except on the ground of fraud or duress – pleas that they do not invoke. They do not even claim that the private sale had caused them substantial prejudice.

In Ablaza vs Ignacio (GR No L-11466), the Court said “Mr. Justice Kent, in the 12 th edition of his Commentaries, as well as other authors in the question of chattel mortgages, have said, that in case of a sale under a foreclosure of a chattel mortgage, there is no question that the mortgagee or creditor may maintain an action for the deficiency, if any should occur. And the fact that Act 1508 permits a private sale, such sale is not in fact, a satisfaction of the debt, to any greater extent than the value of the property at the time of the sale. The amount received at the time of the sale, of course, always requiring good faith and honesty in the sale, is only a payment, pro tanto and an action may be maintained for a deficiency in the debt.

It is clear, therefore, that the proceeds of the sale of the mortgaged properties of the herein appellants constitute only a pro tanto satisfaction of the monetary award made by the court and the appellee bank is entitled to collect the balance.

PAMECA v CA

(1999)

PAMECA obtained a loan from DBP. As a security for the said loan, a chattel mortgage was also executed over

PAMECA is entitled to the deficiency.

Whereas, in pledge, the sale of the thing pledged extinguishes the entire principal obligation,

PAMECA’S properties. PAMECA failed to pay so DBP extrajudicially foreclosed the chattel mortgage and as sole bidder in the public auction, purchased the foreclosed properties. Since the proceeds were not enough to pay the entire obligation, dbp filed a complaint for the collection for the collection of the balance.

such that the pledgor may no longer recover proceeds of the sale in excess of the amount of the principal obligation, Section 14 of the Chattel Mortgage law expressly entitled the mortgagor to the balance of the proceeds, upon satisfaction of the principal obligation and costs. Since the Chattel Mortgage Law bars the creditor-mortgagee from retaining the excess of the sale proceeds there is a corollary obligation on the part of the debtor-mortgagor to pay the deficiency in case of a reduction in the price a public auction.

Although Article 1484, paragraph (3) expressly bars any further action against the purchaser to recover an unpaid balance of the price, where the vendor opts to foreclose the chattel mortgage on the thing sold, should the vendee’s failure to pay cover 2 or more installments, this provision is specifically applicable to a sale on installments.

The mere fact that respondent bank was the sole bidder in the public sale does not warrant the conclusion that the transaction was attended with fraud. Fraud is a serious allegation that requires full and convincing evidence, and may not be inferred from the lone circumstance that it was only respondent bank that bid in the sale of the foreclosed properties.

6. Real Estate MortgageISAGUIRRE v DE LARA

(2000)

Alejandro de Lara was the original applicant-claimant over a parcel of land. On this lot stands a two-story residential-commercial apartment declared for taxation purposes in the name of Felicitas, the wife of Alejandro. A deed of sale and special cession of rights and interests was executed by respondent and petitioner whereby the former sold a 250 square meter portion the lot, together with the two-story structure. Petitioner filed a sales application over the subject property on the basis of the deed of sale. His application was approved resulting in the issuance of an OCT in his name. Meanwhile, the sales application of respondent was also given due course resulting in the issuance of OCT in the name of respondent. Due to the overlapping of titles, petitioner filed an action for quieting of title and damages. The trial court ruled in favor of petitioner. However, the CA reversed the ruling of the trial court and held that the contract between the parties was an equitable mortgage, not a sale. The appellate court also held that the title in the name of petitioner is null and void. This decision was affirmed by the Supreme Court. Subsequently, respondent filed a motion for execution and she also moved for a writ of possession.

The respondent is entitled to possession.

The decision of the appellate court, which was affirmed by the SC, served as more than adequate basis for the issuance of the writ of possession in favor of respondent since these decisions affirmed respondent’s title over the subject property. Corollary to such right, respondent also has the right to exclude from the possession of her property any other person to whom she has not transmitted such property

A mortgage is a contract entered into in order to secure the fulfillment of a principal obligation. It is constituted by recording the document in which it appears with the proper Registry of Property, although, even if it is no recorded, the mortgage is nevertheless binding between the parties. Thus, the only right granted by law in favor of the mortgagee is to demand the execution and the recording of the document in which the mortagge is formalized. As a genral rule, the mortgagor retains possession of the mortgaged property since a mortgage is merely alien and title to the property does not pass to the mortgagee . However, even though a mortgagee does not have possession of the property, there is no impairment of his security since the mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. If the debtor is unable to pay his debt, the mortgage creditor may institute an action to foreclose the mortgage, whether judicially or extrajudicially, whereby the mortgaged proverty will then be sold at a public auction and the proceeds therefrom givem to the creditor to the extent necessary to discharge the mortgage loan. Apparently, petitioner’s contention that “to require him to deliver possession of the property to respondent prior to the full payment of the latter’s mortgage loan would be equivalent to the cancellation of the mortgage” is without basis. Regardless of its possessor, the mortgaged property may still be sold, with the prescribed formalities, in the event of the debtor’s default in the payment of his loan obligation.

7. PledgeONG v ROBAN LENDING

(1971)

Spouses Ong obtained several loans from Roban Lending. These loans were secured by a real estate mortgage on petitioners’ parcels of land. Then, the parties executed a Dacion in Payment wherein petitioners assigned the properties to respondent in settlement of their total obligation. Subsequently, petitioners filed a complaint for declaration of mortgage contract as abandoned, annulment of deeds, illegal exaction, unjust enrichment, accounting and damages, alleging that the Memorandum of Agreement and the Dacion in payment executed are void for being pactum commsissorium.

The Memorandum of Agreement and Dacion in Payment constitute pactum commisorium which is prohibited under Article 2088 of the Civil Code.

The elements of pactum commisorium are:1) There should be a property mortgaged by way of security for the payment of the

principal obligation, and2) There should be a stipulation for automatic appropriation by the creditor of the thing

mortgaged in case of non-payment of the principal obligation within the stipulated period.

The Memorandum of Agreement and the Dacion in Payment contain no provisions for foreclosure proceedings nor redemption. Under the MOA, the failure by the petitioners to pay their debt within the one-year period gives respondent the right to enforce the Dacion in Payment transferring to it ownership of the properties. Respondent, in effect, automatically acquires ownership of the properties upon petitioner’s failure to pay their debt within the stipulated period. In a true dacion en pago, the assignment of the property extinguishes the monetary debt. In the case at bar, the alienation of the properties was by way of security, and not by way of satisfying the debt.

8. Guaranty or SuretyshipPHIL-AM GENERAL INSURANCE CO., INC. V. RAMOS

(1966)

ARDC executed a PN in favor of Gen. Acceptance & Finance Corp. On the same date, Phil-Am General Ins. Co. executed a surety bond to secure said PN. The Ramos spouses later signed a counter-guaranty agreement with REM in favor of Phil-Am against its liability under the surety bond. The Ramoses and ARDC executed an indemnity agreement in favor of Phil-Am binding themselves “jointly and severally” to indemnify the latter for whatever it may suffer under the surety bond.ARDC failed to pay its obligation under the PN. Phil-Am filed a complaint against the Ramoses, asking that the spouses be ordered to jointly and severally pay Phil-Am the amount owed plus 12% interest, attorney’s fees and costs. The Ramoses claimed there was no cause of action, since they were guarantors only so that Phil-Am must first exhaust the properties of ARDC, the principal debtor, before proceeding against them.

Phil-Am has a valid cause of action against the Ramos spouses.

The indemnity agreement, which was the last agreement executed by the parties, provides that the liability shall be joint and several, primary, and “the same as that of the principal, and shall be exigible upon the occurrence of such default”.

Even as counter-guarantors, the Ramoses aren’t entitled to demand exhaustion of the properties of the principal debtor. They executed a counter-guaranty with real estate mortgage. It is accepted that guarantors have no right to demand exhaustion of the properties of the principal debtor, under Article 2058 of the New Civil Code, where a pledge or mortgage has been given as a special security (Saavedra vs. Price, 68 Phil. 688; Southern Motors vs. Barbosa, 53 O.G. 137).

TOH V. SOLID BANK

(2003)

Solid Bank extended an omnibus credit facility worth P10M in favor of FBPC through a “letter-advise”. 30 days later, spouses Toh (Chairman and VP of FBPC) and spouses Ng Li (Pres. and

The Continuing Guaranty is a valid and binding contract as it is a public document that enjoys the presumption of authenticity and due execution. 

Nothing in the Continuing Guaranty restricts the Tohs’ responsibility; they are still liability under it even if they are no longer stockholders of FBPC. In fact the obligations assumed by them

GM) signed the Continuing Guaranty required under the letter-advise. The contract was defined therein as a surety agreement and provided that the signatories would be solidarily liable for and in consideration of loans or advances and “credit in any other manner to, or at the request or for the account” of FBPC. FBPC took out L/Cs, which were secured by trust receipts signed by the Ng Lis. When the Bank found that the Ng Lis had fraudulently departed from their conjugal home, they sent a demand letter to FBCP and the Tohs, invoking the acceleration clause.The Tohs claimed that the Continuing Guaranty was not legally valid ang binding against them since it was executed long after they had withdrawn from FBPC.

therein subsist “upon the undersigned, the heirs, executors, administrators, successors and assigns of the undersigned, and shall inure to the benefit of, and be enforceable by you, your successors, transferees and assigns,” and that their commitment “shall remain in full force and effect until written notice shall have been received by [the Bank] that it has been revoked by the undersigned.”  Verily, if the Tohs intended not to be charged as sureties after their withdrawal from FBPC, they could have simply terminated the agreement by serving the required notice of revocation upon the Bank as expressly allowed therein.

However, since the Bank is guilty of making extensions prohibited under C2079, the Tohs as sureties are released from their obligation. CC2055 provides that the liability of a surety is measured by the terms of his contract, and while he is liable to the full extent thereof, his accountability is strictly limited to that assumed by its terms.

AUTOCORP GROUP V. INTRA STRATA

(2008)

Duty of guarantor: Principle

must first pay, it is only when the principal cant pay that the guarantor pays.

In this case it is a surety.

Autocorp, represented by its President Rodriguez, secured two ordinary re-export bonds from Intra Stata (ISAC) in favor of the Bureau of Customs. Autocorp executed two Indemnity Agreements with identical stipulations in favor of ISAC, which Rodriguez signed both as President and in his personal capacity. Autocorp failed to re-export the items and the BOC considered the bonds forfeited. ISAC sued when Autocorp failed to pay the face value of the two bonds. Autocorp claims that the obligation to ISAC is not yet due and demandable since there was no actual forfeiture of the bonds yet (no writ of execution has been issued against said bonds). Rodriguez claims that he is a guarantor and can only be held liable if Autocorp fails to pay the obligation and that they should not be held liable since there was a modification as to the effectivity of the bonds.

The obligation to indemnify ISAC became due and demandable the moment the bonds became answerable for non-compliance with the undertaking with the BOC.

The Indemnity Agreements give ISAC the right to recover the face value of the subject bonds plus attorney’s fees at the time ISAC becomes liable on the said bonds to the BOC, regardless of whether the BOC had actually forfeited the bonds, demanded payment thereof and/or received such payment. The Indemnity Agreements explicitly provide that petitioners shall be liable to indemnify ISAC "whether or not payment has actually been made" and ISAC may proceed against petitioners by court action or otherwise "even prior to making payment to the [BOC] which may hereafter be done by [ISAC]." This provision is but a slightly expanded contractual expression of CC2071 which provides, inter alia, that the guarantor may proceed against the principal debtor the moment the debt becomes due and demandable.

Both Autocorp and Rodriguez assumed liability as regular parties and obligated themselves as sureties.

THE USE OF THE TERM “GUARANTEE” IN A CONTRACT DOES NOT   IPSO FACTO MEAN THAT THE CONTRACT IS ONE OF GUARANTY. A modification as to the bonds’ effectivity would not absolve either surety from liability, since the ISAC was given authority to do so under the Indemnity Agreements.

Philippine American General Insurance Co., Inc. v. Mutuc: an agreement whereby the sureties bound themselves to be liable in case of an extension or renewal of the bond, without the necessity of executing another indemnity agreement for the purpose and without the necessity of being notified of such extension or renewal, is valid ; and that there is nothing in it that militates against the law, good customs, good morals, public order or public policy.

9. DepositYHT REALTY V. CA McLoughlin used to stay at Sheraton

during his trips to the PH until 1984, The provisions of the Undertaking are null and void for being contrary to CC2003.

(2005) when Tan convinced him to transfer to Tropicana. In 1987, McLoughlin stayed at Tropicana and rented a safety deposit box, which could only be opened through the use of two keys, one of which was kept by the guest and the other remaining with hotel management. McLoughlin discovered that some items he had kept in the safety deposit box were missing. He found out that Tan took his key and opened the box with the assistance of her friends who worked at the hotel. McLoughlin insisted that the hotel must assume responsibility for the loss, but the management invoked the Undertaking for the Use of Safety Deposit Box which provided that the hotel would be free from any liability arising from any loss in the contents and/or use of the safety deposit box for any cause whatsoever.

CC2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations such as that presented in this case. The hotel business like the common carrier's business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.

CC2002, which exempts the hotel-keeper from liability if the loss is due to the acts of his guest, his family, or visitors, does not apply to this case because this provision presupposes that the hotel-keeper is not guilty of concurrent negligence or has not contributed in any degree to the occurrence of the loss. A depositary is not responsible for the loss of goods by theft, unless his actionable negligence contributes to the loss.

In the case at bar, the responsibility of securing the safety deposit box was shared not only by the guest himself but also by the management since two keys are necessary to open the safety deposit box. Without the assistance of hotel employees, the loss would not have occurred.

10. Truth in Lending ActUCPB vs Beluso

(2007)

UCPB granted the spouses Beluso a Promissory Notes Line under a Credit Agreement whereby the spouses could avail from the UCPB, credit of up to a maximum amount of P1.2 M for a term ending on Apr. 30, 1997. The spouses executed three promissory notes which were renewed several times. In 1997, the payment of the principal and interest of the latter two promissory notes were debited from the spouses Beluso’s account with UCPB; yet, a consolidated loan for P 1.3 Million was again released to the spouses Beluso under one promissory note with a due date of Feb. 28, 1998. During the term of these promissory notes, the spouses were able to pay the total sum of about P 763,692.03. However, they failed to pay for the interest and penalty on their obligations. As a result, UCPB demanded that they pay their total obligation of P 2.9 million but the spouses Beluso failed to comply therewith.

The stipulation in the promissory notes subjecting the interest rate to review does not render the imposition by UCPB of interest rates on the obligations of the spouses Beluso valid. According to said stipulation:

The interest rate shall be subject to review and may be increased or decreased by the LENDER considering among others the prevailing financial and monetary conditions; or the rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or the resulting profitability to the LENDER after due consideration of all dealings with the BORROWER.

It should be pointed out that the authority to review the interest rate was given UCPB alone as the lender. Moreover, UCPB may apply the considerations enumerated in this provision as it wishes. As worded in the above provision, UCPB may give as much weight as it desires to each of the following considerations:

(1) The prevailing financial and monetary condition; (2) The rate of interest and charges which other banks or financial institutions charge or offer to charge for similar accommodations; and/or (3) The resulting profitability to the LENDER (UCPB) after due consideration of all dealings with the BORROWER (the spouses Beluso).

11. Usury Law and CB Circular No. 416

Carpo vs. Chua

(2005)

Sps. Carpo borrowed from respondents Eleanor Chua and Elma Dy Ng the sum of P175,000, payable within 6 months with an interest rate of 6% per month, secured by a mortgage the spouses executed over their residential house and lot. For failure to pay, the said property was extra-judicially foreclosed and sold at public auction to the respondents, who were the only bidders for the amount of P367,457.80. Upon failure of the petitioners to exercise their right of redemption, a certificate of sale was issued and the old title over the property was cancelled and a new one issued in the name of respondents. Petitioners continued to occupy the premises, prompting the respondents to file a petition for writ of possession with the RTC, which was granted and an order was issued on March 23, 1999.It was only on July 23, 1999 that petitioners filed a complaint for annulment of real estate mortgage and the consequent foreclosure proceedings, and thereupon consigned the amount of P257,197.26 with the RTC.

The invalidation of the interest rate is congruent with the rule that a usurious loan transaction is not a complete nullity but defective only with respect to the agreed interest. Art. 1420, CC allows the severance of the illegal terms of a divisible contract, thereby allowing the legal ones to be enforced. In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract (Article 1350, Civil Code) is not illegal. The illegality lies only as to the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal.

Since the principal obligation still stands and remains valid and the mortgage contract derives its validity from the validity of the principal obligation, the invalid stipulation on interest rate is similarly insufficient to render void the ancillary mortgage contract.

Since an excessive stipulated interest rate may be void for being contrary to public policy, an action to annul said interest rate does not prescribe. Such indeed is the remedy; it is not the action for annulment of the ancillary real estate mortgage. Note that the general rule is that an action to annul an excessive stipulated (usurious) interest does not provide, for such interest rate is void for being contrary to public policy. However, in this case, since the petitioners assailed the validity of the interest rate only when the writ of possession was issued, the Court held that the petitioners slept on their rights.

12. Solution IndebitiMIAA vs. COA

(2012)

The MIAA Board of Directors issued a resolution granting a signing bonus in the amount of P30, 000 to all MIAA Officials and Employees but such grant was disputed by COA stating that the payment of said contract signing bonus was previously declared “improper and without legal basis” by the Supreme Court in the case of SSS vs. COA. Now, the COA is demanding a refund of the paid signing bonus from the MIAA Officials and employees who received it.

This is not a case of solutio indebiti. The elements of solutio indebiti are the following: (1) there must be payment given with the intent to fulfil an obligation which is believed to exist; (2) there must be the absence of a cause for payment; and (3) the person must have paid under the mistaken belief that such debt was due by him. Therefore, the existence of solutio indebiti is FOUNDED ON THE MISTAKE OF FACT ON THE PART OF THE SUPPOSED OBLIGOR. In this case, the MIAA Board of Directors who approved the payment of the signing bonus are clearly in bad faith when they approved the disbursement. Thus, such bad faith on their part cannot be equated with mistake of fact.

Their authority under Section 8 of the MIAA charter is not absolute as their exercise thereof is “subject to existing laws, rules and regulations” and they cannot deny knowledge of SSS v. COA and the various issuances of the Executive Department prohibiting the grant of the signing bonus. In fact, they are duty-bound to understand and know the law that they are tasked to implement and their unexplained failure to do so barred them from claiming that they were acting in good faith in the performance of their duty.

SO?!

PNB vs. CHONG In doing a friend a favor to help the latter’s Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the principle of

(2012)friend collect the proceeds of a foreign check, Ofelia deposited the check in her and her husband’s dollar account. The local bank accepted the check for collection and immediately credited the proceeds thereof to said spouses’ account even before the lapse of the clearing period. And just when the money had been withdrawn and distributed among different beneficiaries, it was discovered that all along, to the horror of Ofelia whose intention to accommodate a friend’s friend backfired, she and her bank had dealt with a bounced check.

solutio indebiti, which is laid down in Article 2154 of the Civil Code:Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.The indispensable requisites of the juridical relation known as solutio indebiti, are, (a) that he who paid was not under obligation to do so; and (b) that the payment was made by reason of an essential mistake of fact. In the case at bench, PNB cannot recover the proceeds of the check under the principle it invokes. In the first place, the gross negligence of PNB, as earlier discussed, can never be equated with a mere mistake of fact, which must be something excusable and which requires the exercise of prudence. No recovery is due if the mistake done is one of gross negligence.

TORTS

1. Definition of TortVinzons-Chato. Fortune Tobacco

2007

Tort cf QD- 1st line of

2176 is tort. Contract not required

- 2nd line: QD-no contract between the parties.

Internal Revenue Commissioner Liwayway Vinzons-Chato issued a rule reclassifying Fortune-manufactured cigarettes “Champion”, “Hope” and “More” as locally-manufactured but bearing foreign brands. Later, Congress passed a law RA 7654 raising the ad valorem tax rate from 55% to “55% provided that the maximum tax shall not be less than P5 per pack”.

Fortune filed a suit against her for violating its constitutional right against deprivation of property with due process and the right to equal protection.

Vinzons-Chato interposed as defense, the performance of official duty within scope of authority, and that she merely acted as an agent of the State. More so, there is not cause of action for lack of allegation of malice or bad faith.

MTD elevated to CA, which denied it saying that under Article 32 liability may arise even without malice or bad faith.

The rule in this jurisdiction is that a public officer may be validly sued in his/her private capacity for acts done in the course of the performance of the functions of the office, where he : (1) acted with malice, bad faith, or negligence; or (2) where he violated a constitutional right of the plaintiff. The SC also ruled that the decisive provision is Article 32, it being a special law, which prevails over a general law (the Administrative Code where civil liability may arise where there is bad faith, malice, or gross negligence on the part of a superior public officer.).

Article 32 was patterned after the “tort” in American law. A tort is a wrong, a tortious act which has been defined as the commission or omission of an act by one, without right, whereby another receives some injury, directly or indirectly, in person, property or reputation. There are cases in which it has been stated that civil liability in tort is determined by the conduct and not by the mental state of the tortfeasor, and there are circumstances under which the motive of the defendant has been rendered immaterial. The reason sometimes given for the rule is that otherwise, the mental attitude of the alleged wrongdoer, and not the act itself, would determine whether the act was wrongful. Presence of good motive, or rather, the absence of an evil motive, does not render lawful an act which is otherwise an invasion of another’s legal right; that is, liability in tort in not precluded by the fact that defendant acted without evil intent.

2. Elements of TortGarcia v. Salvador Ranida Salvador, a trainee at Limay

Bulk Handling Terminal, was required Garcia failed to meet the industry and thus legal, standards of diligence. He is guilty of gross negligence and liable to pay damages.

2007 to undergo medical examination at the Community Diagnostic Center (CDC). Orlando Garcia, a medical technologist, conducted the tests and issued the result that Ranida was positive for Hepatitis B, and told by the company doctor that she had a liver disease. Ranida was terminated for failing the physical exam. When Ranida told her father Ramon about her disease, he suffered a heart attack.

In the hospital, Ranida undertook another exam which turned out negative. The company doctor however said that the test by the diagnostic center was more reliable because of the Micro-Elisa method. Ranida went back to the CDC, and to another hospital, all which came back negative.

Ranida was rehired, but she and her father filed a complaint for damages against Garcia and the pathologist

The lower court found Garcia liable for damages, which the CA affirmed but exonerated Castro for lack of participation in the issuance of the results.

The elements of an actionable conduct are: 1) duty, 2) breach, 3) injury, and 4) proximate causation. First, the statutory duty is in Section 2 of RA 4677, The Clinical Laboratory Law in conjunction with three other sections of the DOH Administrative Order 49-B, Series of 1998, the Revised Rules Governing the Registration, Operation and Maintenance of Clinical Laboratories in the Philippines. 1) CDC was not administered, directed and supervised by a licensed physician; 2) Garcia conducted the test without the supervision of pathologist Castro; and 3) the test result was released without authorization of Castro. Thus, second, Ranida suffered injury as a direct consequence of Garcia’s failure to comply with the mande of the laws and rules. And as Section 20 states: every person who who negligently causes damage to another shall indemnify the other.

DEFINITION: Negligence is the failure to observe for the protection of the interest of another person that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury. For health care providers, the test of the existence of negligence is: did the health care provider either fail to do something which a reasonably prudent health care provider would have done, or that he or she did something that a reasonably prudent health care provider would not have done; and that failure or action caused injury to the patient; if yes, then he is guilty of negligence.

Ocean Builders v. Cubacub

2011

Latest Case on the Elements

Bladmir Cubacub worked as a maintenance man for Ocean Builder Construction. When he got chicken pox, he was told by the general manager Dennis Hao to rest for three days in the company “barracks”. On the third day, we started to work again, but in the afternoon asked to be brought home to Tarlac. GM Hao instead told his friends to bring him to the nearest hospital. After being summoned, Bladimir’s parents transferred him to QC General Hospital, where Bladimir died within two days.

The death certificate issued by the QC General Hospital mentioned pneumonia as the antecedent cause, while the doctor attributed the death to among others, septicemia and chicken pox.

Bladimir’s parents filed a complaint for damages against Ocean Builders citing

Hao and the company are not guilty of negligence and thus the decisions of the lower courts are reversed and the petition dismissed.

This case is for damages based on torts, the employer-employee relationship being merely incidental. Three elements must be present, viz: (1) DUTY (2) BREACH (3) INJURY AND PROXIMATE CAUSATION. The CA held that it was the duty of petitioners to provide adequate medical assistance to the employees under Art. 161 of the Labor Code, failing which a breach is committed. But the SC found that the actions of Hao – granting a three-day rest, bringing Bladimir to the nearest hospital –amounted to the “necessary assistance” to ensure “adequate and immediate medical attendance” as required.

And contrary to the lower courts’ findings, Hao as a layman cannot be expected to know that Bladimir needed to be brought to a hospital with better facilities.

In any case, the alleged negligence of Hao cannot be considered to be the proximate cause of the death of Bladimir.

DEFINITION: Proximate cause is that which, in natural and continuous sequence, unbroken by an efficient intervening cause, produces injury, and without which, the result would not have occurred. An injury or damage is proximately caused by an act or failure to act, whenever it appears from the evidence in the case that the act or omission played a substantial part in bringing about or actually causing the injury or damage, and that the injury or damage was either a direct result or a reasonably probable consequence of the act or omission.

the negligence of GM Hao. They asserted that Hao’s failure to bring Bladimir to a better-equipped hospital – like St. Lukes, Capitol Med, PGH and the like – violated Article 161 of the Labor Code.

The lower court and the CA agreed that Ocean Builders was liable but differed as to the amount awarded.

Other issues:The duly-registered death certificate is considered a public document. (Here the hospital’s certificate is considered binding. The doctor also was not the attending physician all throughout, and only orderd the transfer of the deceased to the general hospital and was not around at the time of death.)

3. Tort/Quasi-DelictCoca-cola v. CA

1993They should have used tort and not the term quasi delict.

Lydia Geronimo owned and operated Kindergarten Wonderland Canteen, which sold soft drinks and other goods to the students of Kindergarten Wonderland and to the public.

In August 1989, some parents of the students complained that the Coke and Sprite soft drinks contained fiber-like matter and other foreign substances. She discovered the presence of some fiber-like substances in the contents of some unopened Coke bottles and a plastic matter in the contents of an unopened Sprite bottle. The Department of Health informed her that the samples she submitted are adulterated. Her sales of soft drinks plummeted, and not long after that, she had to close shop. She became jobless and destitute.

She demanded from Coca-Cola the payment of damages but was rebuffed, so she filed a complaint before the RTC of Dagupan City. The court granted an MTD filed by petitioner, on the ground that the complaint is based on contract, and not on quasi-delict, as there exists pre-existing contractual relation between the parties. Thus, on the basis of Article 1571, in relation to Article 1562, the complaint should have been filed within six months from the delivery of the thing sold. The CA reversed the RTC decision and held that Geronimo’s complaint is one for quasi-delict because of petitioner’s act of negligently manufacturing adulterated food items intended to be sold for public consumption; and that

The action in based on quasi-delict, therefore, it prescribes in four years. The allegations in the complaint makes a reference to the reckless and negligent manufacture of “adulterated food items intended to be sold for public consumption.” The vendee’s remedies are not limited to those prescribed in Article 1567 of the Civil Code. The vendor could be liable for quasi-delict under Article 2176, and an action based thereon may be brought by the vendee.

The existence of a contract between the parties does not bar the commission of a tort by the one against the other and the consequent recovery of damages therefor. Liability for quasi-delict may still exist despite the presence of contractual relations.

the existence of contractual relations between the parties does not absolutely preclude an action by one against the other for quasi-delict arising from negligence in the performance of a contract.

Spouses Viloria v. Continental Airlines

(2012)

In 1997 Fernando Viloria purchased for himself and his wife Lourdes two roundtrip tickets from San Diego, California to Newark, New Jersey on board Continental Airlines. Fernando bought tickets at $400.00 from Holiday Travel agency and was attended by a certain Margaret Mager, who convinced him to buy the tickets after being informed that the train is no longer available. Fernando asked Mager to rebook them to an earlier flight. However, Mager informed him that all flights to Newark via Continental Airlines were already fully booked. Mager offered tickets from Frontier Air, which were worth $526.00 and entailed traveling at night. Fernando asked for a refund, but was denied. Mager said the only option Continental Airlines can offer is the reissuance of new tickets one year from the date of the issue of the subject tickets. Fernando found out that the Amtrak trains were not really full, and went to Holiday Travel to confront Mager about deluding him into buying Continental tickets by misrepresenting that Amtrak trains were already full. He demanded a refund. Hence the complaint.

Continental Airlines is not vicariously liable for quasi-delict under Article 2180 of the Civil Code for the negligence of the employee of its agent, Holiday Travel agency.

If the passenger’s cause of action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by the employee of the airline company’s agent, there must be an independent showing that the airline company was at fault or negligent or has contributed to the negligence or tortuous conduct committed by the employee of its agent. The mere fact that the employee of the airline company’s agent has committed a tort is not sufficient to hold the airline company liable. There is no vinculum juris between the airline company and its agent’s employees and the contractual relationship between the airline company and its agent does not operate to create a juridical tie between the airline company and its agent’s employees . Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed by its agent’s employees and the principal-agency relationship per se does not make the principal a party to such tort; hence, the need to prove the principal’s own fault or negligence.

4. Doctrine of Proximate CauseCalalas v. Court of Appeals

(2009)

In 1989, Eliza Jejeurche G. Sunga, then a college freshman at Siliman University, boarded a passenger jeepney owned and operated by Vicente Calalas. The jeep was filled to capacity of about 24 passengers, and she was made to sit on a wooden extension seat at the back door at the rear end of the jeepney. Eventually, the vehicle stopped to let a passenger off, so Sunga decided to give way. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. Sunga was injured and was confined in the

Calalas, as the common carrier of Sunga, was bound under contract to carry the latter to her destination safely and cannot interpose the defense of Verena’s negligence as the proximate cause of Sunga’s injuries.

It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause IS APPLICABLE ONLY IN ACTIONS FOR QUASI-DELICT, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers.

hospital. Sunga sued Calalas for damages arising from breach of contract of carriage. Calalas filed a third-party complaint against Salva. The trial court ruled against Salva, but was reversed by the Court of Appeals. Before the Supreme Court Calalas interposes the defense that it was Verena’s negligence which was the proximate cause of the injuries sustained by Sunga.

Consolidated Bank v. Court of Appeals

(2003)

Here negligence is Solidbank, not on the check bouncing

In 1976, L.C. Diaz and Co. opened a savings account with Consolidated Bank (Solidbank). In 1991, L.C. Diaz, through its cashier Mercedes Macaraya filled up a savings deposit slips. Macaraya instructed Ismael Calapre, L.C. Diaz’s messenger, to deposit the money with Solidbank. Macaraya also gave Calapre the passbook. Calapre went to Solidbank, but since the transaction took some time, he went to Allied Bank to make another deposit and left the passbook with Solidbank. When Calapre returned, he was informed that someone else had taken the passbook. Teller No. 6 could not remember to whom she gave the passbook.

The Supreme Court was unconvinced of the theory of the Court of Appeals that the proximate cause of the unauthorized withdrawal was the teller’s failure to call up L.C. Diaz to verify the withdrawal.

L.C. Diaz was not at fault that the passbook landed in the hands of the impostor.     Solidbank was in possession of the passbook while it was processing the deposit.     After completion of the transaction, Solidbank had the contractual obligation to return the passbook only to Calapre, the authorized representative of L.C. Diaz.     Solidbank failed to fulfill its contractual obligation because it gave the passbook to another person.

Solidbank’s failure to return the passbook to Calapre made possible the withdrawal of the   P 300,000 by the impostor who took possession of the passbook.

Solidbank did not have the duty to call up L.C. Diaz to confirm the withdrawal . There is no arrangement between Solidbank and L.C. Diaz to this effect. Even the agreement between Solidbank and L.C. Diaz pertaining to measures that the parties must observe whenever withdrawals of large amounts are made does not direct Solidbank to call up L.C. Diaz.There is no law mandating banks to call up their clients whenever their representatives withdraw significant amounts from their accounts. L.C. Diaz therefore had the burden to prove that it is the usual practice of Solidbank to call up its clients to verify a withdrawal of a large amount of money. L.C. Diaz failed to do so.

5. NegligencePNR v Ethel Brunty

(2006)

At 12 midnight, while on their way to Baguio on board a Mercedes Benz, Ethel and Rhonda Brunty met an accident where the Benz collided with the train. The driver was killed instantly while Rhonda died in the hospital. Ethel filed a complaint against PNR (operator of the train) for damages alleging that the death of the driver and Rhonda as well as the physical injuries suffered by another passenger were the direct and proximate result of the gross and reckless negligence of PNR in not providing the necessary equipment at the railroad crossing in Barangay Rizal, Tarlac. They pointed out that there was no flagger or red light signal to warn motorists who

W/N the train driver was negligent and PNR should pay for damages

Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do. It is defined as the want of the care required by the circumstances. It is a relative or comparative, not an absolute, term and its application depends upon the situation of the parties and the degree of care and vigilance which the circumstances reasonably require.

In determining whether or not there is negligence on the part of the parties in a given situation, jurisprudence has laid down the following test: Did defendant, in doing the alleged negligent act, use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, the person is guilty of negligence.

Both RTC and CA found that PNR was negligent because of its failure to provide the necessary safety device to ensure the safety of motorists in crossing the railroad trace. It is liable for violating Art

were about to cross the railroad track, and that the flagman or switchman was only equipped with a hand flashlight. Plaintiffs likewise averred that PNR failed to supervise its employees in the performance of their respective tasks and duties, more particularly the pilot and operator of the train.

Defense: it had the right of way on the railroad crossing and that it has no legal duty to put up a bar or red light signal in any such crossing. There were already adequate, visible, clear warning signs strategically posted on the sides of the road before the railroad crossing. It countered that the immediate and proximate cause of the accident was Mercelita's negligence and that he had the last clear chance to avoid the accident. The driver disregarded the warning signs, the whistle blasts of the oncoming train and the flashlight signals to stop given by the guard.

2176.

In order to sustain a claim based on quasi-delict, the following requisites must concur: (1) damage to plaintiff; (2) negligence, by act or omission, of which defendant, or some person for whose acts he must respond was guilty; and (3) connection of cause and effect between such negligence and damage

Here, it was found out that there was the 1) absence of flaggers or safety railroad bars, 2) inadequacy of the installed warning signals and 3) lack of proper lighting within the area. Even with the flagman around, it would still be impossible to know or see that there is a railroad crossing/tracks ahead.

Such failure is evidence of negligence and disregard of the safety of the public, even if there is no law or ordinance requiring it because public safety demands that said device or equipment be installed

As to contributory negligence, the driver of the Benz was guilty. it was also established that Mercelita was then driving the Mercedes Benz at a speed of 70 km/hr and, in fact, had overtaken a vehicle a few yards before reaching the railroad track. Mercelita should not have driven the car the way he did. However, while his acts contributed to the collision, they nevertheless do not negate petitioner’s liability.

Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection.

Pursuant to Article 2179 of the New Civil Code, the only effect such contributory negligence could have is to mitigate liability, which, however, is not applicable in this case . The record is bereft of any allegation and proof as to the relationship between Mercelita (the driver) and Rhonda Brunty. Hence, the earlier finding of contributory negligence on the part of Mercelita, which generally has the effect of mitigation of liability, does not apply.

As to the doctrine of last clear chance: The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss. Stated differently, the antecedent negligence of plaintiff does not preclude him from recovering damages caused by the supervening negligence of defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence. The proximate cause of the injury having been established to be the negligence of petitioner, this doctrine is not applicable.

PNR v CA, Amores

(2007)

What if there are signs but vcuctim tried to beat the

One early afternoon, Jose Amores was traversing the railroad traces, before crossing, he stopped for a while then proceeded accordingly. Unfortunately, just as Amores was at the intersection, PNR train collided with the car. At the time of the mishap, there was neither a signal nor a crossing bar at the intersection to warn motorists of an approaching train.

RTC/CA already ascertained beyond quandary that the proximate cause of the collision is the negligence and imprudence of the petitioner PNR and its locomotive driver, Borja, in operating the passenger train.

Negligence has been defined as “the failure to observe for the protection of the interests of another person that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.”

All that the law requires is that it is perpetually compelling upon a person to use that care and

light? Doctrine of last clear chance

Degree of diligence

Sensible man.

Aside from the railroad track, the only visible warning sign at the time was the defective standard sign board, "STOP, LOOK AND LISTEN" where the sign "LISTEN" was lacking. No whistle from the train was heard. After impact, the car was dragged about 10 meters beyond the center of the crossing. Amores died. His heirs filed a complaint for damages against PNR and the driver. collection of a sum of money with damages.

Defense: Proximate cause of death was his own careless and negligence. He wantonly disregarded traffic rules.

diligence expected of sensible men under comparable circumstances.

The transcript of stenographic notes reveals that the train was running at a fast speed because notwithstanding the application of the ordinary and emergency brakes, the train still dragged the car some distance away from the point of impact. Evidence likewise unveils the inadequate precautions taken by petitioner PNR to forewarn the public of the impending danger. Aside from not having any crossing bar, no flagman or guard to man the intersection at all times was posted on the day of the incident. A reliable signaling device in good condition, not just a dilapidated “Stop, Look and Listen” signage because of many years of neglect, is needed to give notice to the public. It is the responsibility of the railroad company to use reasonable care to keep the signal devices in working order.  Failure to do so would be an indication of negligence.

The obligation to bring to a full stop vehicles moving in public highways before traversing any “through street” only accrues from the time the said “through street” or crossing is so designated and sign-posted. From the records of the case, it can be inferred that Amores exercised all the necessary precautions required of him as to avoid injury to himself and to others. The witnesses’ testimonies showed that Amores slackened his speed, made a full stop, and then proceeded to cross the tracks when he saw that there was no impending danger to his life. Under these circumstances, we are convinced that Amores did everything, with absolute care and caution, to avoid the collision.

Liability of PNR as employer of the driver: The employer is actually liable on the assumption of juris tantum  that the employer  failed to exercise  diligentissimi patris families in the selection and supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual matter that has not been demonstrated

6. Degree of Negligence gross negligence is similar to notoriously negligent, willful, intentional, conscious indifference.Ilao - Oreta v Ronquillo

(2007)

Because spouses Ronquillo were childless for a long time, Eva Ronquillo agreed to undergo a laparoscopic procedure where a laparoscope would be inserted through her abdominal wall upon consultation with Dr. Ilao-Oreta. This procedure would enable the doctor to get a direct view of her internal reproductive organ to determine the cause of her infertility. However, on the day of the scheduled procedure, Dr. Ilao-Oreta didn't arrive because she was still on her honeymoon in Hawaii. Apparently, she failed to consider the time difference between Hawaii and the Philippines so she erroneously estimated the time she would arrive in the Philippines. Spouses filed a complain for breach of professional and service contract and for damages against her.

W/N she was grossly negligent NO

Dr. Ilao-Oreta was negligent when she scheduled the procedure without considering the time difference between the Philippines and the US. She should have been aware and conscious of the difference having travelled to the US twice already when she obtained her fellowship.

However, she was not grossly negligent. Gross negligence implies a want or absence of or failure to exercise slight care or diligence or the entire absence of care. It evinces a thoughtless disregard of consequences without exercising any effort to avoid them. It is characterized by want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequences in so far as other persons may be affected.

Evidence show that the doctor left an admitting order with her secretary including instructions for the necessary preparations Eva would have to undergo before the procedure. These acts reflect an earnest intntion to perform the procedure on the day and time scheduled. Upon missing her scheduled procedure, Dr. Ilao-Oreta upon arrival in Manila, immediately called the hospital and asked the nurses about the spouses. She called them the next day when she found their number in her chart.

Her negligence could be attributed to human frailty which rules out its characterization as gross. Remember, she had just gotten married and was preparing for her honeymoon when she scheduled

the procedure date.

7. Standard of ConductSicam v Jorge

(2007)

Orinary prudence

Jorge pawned several pieces of jewelry with Agencia de R.C. Sicam to secure a loan for 59,500. Afterwards, 2 armed men entered the pawnshop and took away whatever cash and jewelry were found inside the pawnshop vault. Sican sent Jorge a letter informing her of the loss of her jewelry. She then filed a complaint against Sican seeking indemnification for the loss of pawned jewelry and payment of actual, moral and exemplary damages for the lost jewelry.

RTC: robbery is a fortuitous event which exempts the victim from liability for the loss. CA: Sicam liable coz robberies and hold-ups are foreseeable risks. guilty of contributory negligence.

Sicam is liable. Article 1174 of the Civil Code provides:Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen or which, though foreseen, were inevitable.

Fortuitous events are extraordinary events not foreseeable or avoidable. it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same.

To constitute a fortuitous event, the following elements must concur: (a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations must be independent of human will; (b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal manner; and, (d) the obligor must be free from any participation in the aggravation of the injury or loss.

An act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss. One's negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result of a person's participation -- whether by active intervention, neglect or failure to act -- the whole occurrence is humanized and removed from the rules applicable to acts of God

Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault with the nearby bank for the purpose of safekeeping the valuables but was discouraged by the Central Bank since pawned articles should only be stored in a vault inside the pawnshop. The very measures which petitioners had allegedly adopted show that to them the possibility of robbery was not only foreseeable, but actually foreseen and anticipated.

A review of the records clearly shows that petitioners failed to exercise reasonable care and caution that an ordinarily prudent person would have used in the same situation. Petitioners were guilty of negligence in the operation of their pawnshop business.

There was no clear showing that there was any security guard at all. Or if there was one, that he had sufficient training in securing a pawnshop. There is no showing that the alleged security guard exercised all that was necessary to prevent any untoward incident or to ensure that no suspicious individuals were allowed to enter the premises . In fact, it is even doubtful that there was a security guard, since it is quite impossible that he would not have noticed that the robbers were armed with which were allegedly poked at the employees. The alleged security guard was not presented at all to corroborate petitioner Sicam's claim.

Sicam's admission that the vault was open at the time of robbery is clearly a proof of petitioners' failure to observe the care, precaution and vigilance that the circumstances justly demanded.

Petitioner Sicam testified that once the pawnshop was open, the combination was already off.Instead of taking the precaution to protect them, they let open the vault, providing no difficulty for the robbers to cart away the pawned articles.

Petitioners failed to exercise the diligence required of them under the Civil Code.

Article 2123 of the Civil Code provides that with regard to pawnshops and other establishments which are engaged in making loans secured by pledges, the special laws and regulations concerning them shall be observed, and subsidiarily, the provisions on pledge, mortgage and antichresis.

The provision on pledge, particularly Article 2099 of the Civil Code, provides that the creditor shall take care of the thing pledged with the diligence of a good father of a family. This means that petitioners must take care of the pawns the way a prudent person would as to his own property.

Corinthian Gardens v. Sps. Tanjangco

(2008)

Ordinary intelligence and prudence

The Tanjangcos own Lots 68 and 69 located at Corinthian Gardens Subdivision, Quezon City, which is managed by petitioner Corinthian Gardens Association, Inc. (Corinthian). On the other hand, respondents-spouses Frank and Teresita Cuaso (the Cuasos) own Lot 65 which is adjacent to the Tanjangcos’ lots.

Before the Cuasos constructed their house on Lot 65, a relocation survey was necessary. As Geodetic Engineer Democrito De Dios (Engr. De Dios), operating under the business name D.M. De Dios Realty and Surveying, conducted all the previous surveys for the subdivision's developer, Corinthian referred Engr. De Dios to the Cuasos. Before, during and after the construction of the said house, Corinthian conducted periodic ocular inspections in order to determine compliance with the approved plans pursuant to the Manual of Rules and Regulations of Corinthian. Unfortunately, after the Cuasos constructed their house employing the services of C.B. Paraz & Construction Co., Inc. (C.B. Paraz) as builder, their perimeter fence encroached on the Tanjangcos’ Lot 69 by 87 square meters.

Eventually, the Cuasos filed a Third-Party Complaint against Corinthian, C.B. Paraz and Engr. De Dios. The Cuasos ascribed

The instant case is obviously one for tort, as governed by Article 2176 of the Civil Code.

In every tort case filed under this provision, plaintiff has to prove by a preponderance of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the defendant or some other person for whose act he must respond; and (3) the connection of cause and effect between the fault or negligence and the damages incurred.

Undeniably, the perimeter fence of the Cuasos encroached on Lot 69 owned by the Tanjangcos by 87 square meters as duly found by both the RTC and the CA in accordance with the evidence on record. As a result, the Tanjangcos suffered damage in having been deprived of the use of that portion of their lot encroached upon. Thus, the primordial issue to be resolved in this case is whether Corinthian was negligent under the circumstances and, if so, whether such negligence contributed to the injury suffered by the Tanjangcos.

A negligent act is an inadvertent act; it may be merely carelessly done from a lack of ordinary prudence and may be one which creates a situation involving an unreasonable risk to another because of the expectable action of the other, a third person, an animal, or a force of nature. A negligent act is one from which an ordinary prudent person in the actor's position, in the same or similar circumstances, would foresee such an appreciable risk of harm to others as to cause him not to do the act or to do it in a more careful manner.

The test to determine the existence of negligence in a particular case may be stated as follows: Did the defendant in committing the alleged negligent act use that reasonable care and caution which an ordinary person would have used in the same situation? If not, then he is guilty of negligence. The law, in effect, adopts the standard supplied by the imaginary conduct of the discreet paterfamilias in Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in a man of ordinary intelligence and prudence, and determines liability according to that standard.

By this test, we find Corinthian negligent. Corinthian cannot and should not be allowed to justify or excuse its negligence by claiming that its approval of the Cuasos’ building plans was only limited to a so-called "table inspection;" and not actual site measurement . To accept some such postulate is to put a premium on negligence. Corinthian was not organized solely for the defendants Cuasos. It is also the subdivision of the plaintiffs-spouses Tanjangcos - and of all others who have

negligence to C.B. Paraz for its failure to ascertain the proper specifications of their house, and to Engr. De Dios for his failure to undertake an accurate relocation survey, thereby, exposing them to litigation. The Cuasos also faulted Corinthian for approving their relocation survey and building plans without verifying their accuracy and in making representations as to Engr. De Dios' integrity and competence. The Cuasos alleged that had Corinthian exercised diligence in performing its duty, they would not have been involved in a boundary dispute with the Tanjangcos. Thus, the Cuasos opined that Corinthian should also be held answerable for any damages that they might incur as a result of such construction.

their dwelling units or abodes therein. 

By its Manual of Rules and Regulations, it is reasonable to assume that Corinthian, through its representative, in the approval of building plans, and in the conduct of periodic inspections of on-going construction projects within the subdivision, is responsible in insuring compliance with the approved plans, inclusive of the construction of perimeter walls, which in this case is the subject of dispute between the Tanjangcos and the Cuasos.41 It is not just or equitable to relieve Corinthian of any liability when, by its very own rules, it imposes its authority over all its members to the end that "no new construction can be started unless the plans are approved by the Association and the appropriate cash bond and pre-construction fees are paid." Moreover, Corinthian can impose sanctions for violating these rules. Thus, the proposition that the inspection is merely a "table inspection" and, therefore, should exempt Corinthian from liability, is unacceptable. After all, if the supposed inspection is merely a "table inspection" and the approval granted to every member is a mere formality, then the purpose of the rules would be defeated. Compliance therewith would not be mandatory, and sanctions imposed for violations could be disregarded. Corinthian's imprimatur on the construction of the Cuasos' perimeter wall over the property of the Tanjangcos assured the Cuasos that everything was in order.In sum, Corinthian’s failure to prevent the encroachment of the Cuasos’ perimeter wall into Tanjangcos’ property – despite the inspection conducted – constitutes negligence and, at the very least, contributed to the injury suffered by the Tanjangcos.

8. Special CircumstancesHeirs of Completo v. Albayda

(2010)

Employers

Even if he is not inside the vehicle he can still be held liable for failure to exercise diligence in supervision and selection of employees

Respondent Amando C. Albayda, Jr. (Albayda) is a Master Sergeant of the Philippine Air Force. Petitioner Redentor Completo (Completo), now represented by his heirs, was the taxi driver of a Toyota Corolla, bearing Plate No. PYD-128, owned and operated by co-petitioner Elpidio Abiad (Abiad). Albayda and Completo figured in an accident along the intersection of 8th and 11th Streets, VAB. Albayda filed a complaint for damages before the Regional Trial Court (RTC) of Pasay City. 

The amended complaint alleged that, on August 27, 1997, while Albayda was on his way to the office to report for duty, riding a bicycle along 11th Street, the taxi driven by Completo bumped and sideswiped him, causing serious physical injuries.

Albayda alleged that the proximate cause of the incident which necessitated his stay in the hospital for approximately seven (7) months was the negligence of Completo who, at the time of the accident, was in the employ of Abiad.

The instant case involved a collision between a taxicab and a bicycle which resulted in serious physical injuries to the bicycle rider, Albayda. It is a rule in negligence suits that the plaintiff has the burden of proving by a preponderance of evidence the motorist’s breach in his duty of care owed to the plaintiff, that the motorist was negligent in failing to exercise the diligence required to avoid injury to the plaintiff, and that such negligence was the proximate cause of the injury suffered.

Article 2176 of the Civil Code provides that 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 preexisting contractual relation between the parties, is called a quasi-delict. In this regard, the question of the motorist's negligence is a question of fact.

It was proven by a preponderance of evidence that Completo failed to exercise reasonable diligence in driving the taxicab because he was over-speeding at the time he hit the bicycle ridden by Albayda. Such negligence was the sole and proximate cause of the serious physical injuries sustained by Albayda. Completo did not slow down even when he approached the intersection of 8th and 11th Streets of VAB. It was also proven that Albayda had the right of way, considering that he reached the intersection ahead of Completo.The bicycle occupies a legal position that is at least equal to that of other vehicles lawfully on the highway, and it is fortified by the fact that usually more will be required of a motorist than a bicyclist in discharging his duty of care to the other because of the physical advantages the automobile has over the bicycle.

Under Article 2180 of the Civil Code, the obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those persons for whom one is responsible . Employers shall be liable for the damages caused by their employees, but the employers’ responsibility shall cease upon proof that they observed all the diligence of a good father of the family in the selection and supervision of their employees.

When an injury is caused by the negligence of an employee, a legal presumption instantly

arises that the employer was negligent. This presumption may be rebutted only by a clear showing on the part of the employer that he exercised the diligence of a good father of a family in the selection and supervision of his employee. If the employer successfully overcomes the legal presumption of negligence, he is relieved of liability. In other words, the burden of proof is on the employer.

The trial court’s finding that Completo failed to exercise reasonable care to avoid collision with Albayda at the intersection of 11th and 8th Streets of VAB gives rise to liability on the part of Completo, as driver, and his employer Abiad. The responsibility of two or more persons who are liable for quasi-delict is solidary. The civil liability of the employer for the negligent acts of his employee is also primary and direct, owing to his own negligence in selecting and supervising his employee.  The civil liability of the employer attaches even if the employer is not inside the vehicle at the time of the collision.In the selection of prospective employees, employers are required to examine them as to their qualifications, experience, and service records. On the other hand, with respect to the supervision of employees, employers should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. To establish these factors in a trial involving the issue of vicarious liability, employers must submit concrete proof, including documentary evidence.Abiad testified that before he hired Completo, he required the latter to show his bio-data, NBI clearance, and driver’s license and that he would wake up early to personally check the condition of the vehicle before it is used. The protestation of Abiad to escape liability is short of the diligence required under the law.

Pacis v. Morales

(2010)

Gunshop owners

On 17 January 1995, petitioners Alfredo P. Pacis and Cleopatra D. Pacis (petitioners) filed with the trial court a civil case for damages against respondent Jerome Jovanne Morales (respondent). Petitioners are the parents of Alfred Dennis Pacis, Jr. (Alfred), a 17-year old student who died in a shooting incident inside the Top Gun Firearms and Ammunitions Store (gun store) in Baguio City. Respondent  is the owner of the gun store.     

Alfred Dennis, then minor, died due to a gunshot wound in the head which he sustained while he was at the gun store owned and operated by defendant Jerome Jovanne Morales. With Alfred Pacis at the time of the shooting were Aristedes Matibag and Jason Herbolario. They were sales agents of the defendant, and the caretakers of the gun store.The bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a customer of the gun store for repair. The gun was left by defendant Morales in a drawer of a table located inside the gun store.

This case for damages arose out of the accidental shooting of petitioners’ son.  Under Article 1161 of the Civil Code, petitioners may enforce their claim for damages based on the civil liability arising from the crime under Article 100 of the Revised Penal Code or they may opt to file an independent civil action for damages under the Civil Code. In this case, instead of enforcing their claim for damages in the homicide case filed against Matibag, petitioners opted to file an independent civil action for damages against respondent whom they alleged was Matibag’s employer. Petitioners based their claim for damages under Articles 2176 and 2180 of the Civil Code. Unlike the subsidiary liability of the employer under Article 103 of the Revised Penal Code, the liability of the employer, or any person for that matter, under Article 2176 of the Civil Code is primary and direct, based on a person’s own negligence This case involves the accidental discharge of a firearm inside a gun store. Under PNP Circular No. 9, entitled the “Policy on Firearms and Ammunition Dealership/Repair,” a person who is in the business of purchasing and selling of firearms and ammunition must maintain basic security and safety requirements of a gun dealer, otherwise his License to Operate Dealership will be suspended or canceled.

Indeed, A HIGHER DEGREE OF CARE IS REQUIRED OF SOMEONE WHO HAS IN HIS POSSESSION OR UNDER HIS CONTROL AN INSTRUMENTALITY EXTREMELY DANGEROUS IN CHARACTER, SUCH AS DANGEROUS WEAPONS OR SUBSTANCES. Such person in possession or control of  dangerous instrumentalities has the duty TO TAKE EXCEPTIONAL PRECAUTIONS TO PREVENT ANY INJURY BEING DONE THEREBY. UNLIKE THE ORDINARY AFFAIRS OF LIFE OR BUSINESS WHICH INVOLVE LITTLE OR NO RISK, A BUSINESS DEALING WITH DANGEROUS WEAPONS REQUIRES THE EXERCISE OF A HIGHER DEGREE OF CARE. As a gun store owner, respondent is presumed to be knowledgeable about firearms safety and should have known never to keep a loaded weapon in his store to avoid unreasonable risk of harm or injury to others.  Respondent has the duty to ensure that all the guns in his store are not

 Defendant Morales was in Manila at the time. His employee Armando Jarnague, who was the regular caretaker of the gun store was also not around. He left earlier and requested sales agents Matibag and Herbolario to look after the gun store while he and defendant Morales were away. Jarnague entrusted to Matibag and Herbolario a bunch of keys used in the gun store which included the key to the drawer where the fatal gun was kept. It appears that Matibag and Herbolario later brought out the gun from the drawer and placed it on top of the table. Attracted by the sight of the gun, the young Alfred Dennis Pacis got hold of the same. Matibag  asked Alfred Dennis Pacis to return the gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the young Alfred in the head.

loaded. Firearms should be stored unloaded and separate from ammunition when the firearms are not needed for ready-access defensive use.   With more  reason, guns accepted by the store for repair should not be loaded precisely because they are defective and may cause an accidental discharge such as what happened in this case. Respondent was clearly negligent when he accepted the gun for repair and placed it inside the drawer without ensuring first that it was not loaded. In the first place, the defective gun should have been stored in a vault. Before accepting the defective gun for repair, respondent should have made sure that it was not loaded to prevent any untoward accident. Indeed, respondent should never accept a firearm from another person, until the cylinder or action is open and he has personally checked that the weapon is completely unloaded. For failing to insure that the gun was not loaded, respondent himself was negligent. Furthermore, it was not shown in this case whether respondent had a License to Repair which authorizes him to repair defective firearms to restore its original composition or enhance or upgrade firearms.              Clearly, respondent did not exercise the degree of care and diligence required of a good father of a family, much less the degree of care required of someone dealing with dangerous weapons, as would exempt him from liability in this case.

9. Res Ipsa Loquitur- need not be provden. All that is needed is that the thing is under the control of defendant.PROFESSIONAL SERVICES VS. AGANA

(2007)

After an anterior resection surgery and hysterectomy performed by Dr. Ampil and Dr. Fuentes at the Medical City, Natividad suffered excruciating pain in the following days, even during another medical trip to the US. Upon her return, Natividad’s daughter discovered a piece of gauze protruding from her vagina. Upon being informed about it, Dr. Ampil proceeded to her house where he managed to extract by hand a piece of gauze measuring 1.5 inches in width.

Respondents filed a case for damages against PSI, Dr. Ampil and Dr. Fuentes. The RTC ruled in favor of respondents but on appeal to the CA, Dr. Fuentes was absolved from responsibility.

The Aganas now maintain that the Court of Appeals erred in finding that Dr. Fuentes is not guilty of negligence or medical malpractice, invoking the doctrine of res ipsa loquitur. They contend that the pieces of gauze are prima facie proofs that the operating surgeons have been negligent.

The element of "control and management of the thing which caused the injury" is absent in this case hence, the doctrine of res ipsa loquitur will not lie.

Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the occurrence of an injury, taken with the surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiff’s prima facie case, and present a question of fact for defendant to meet with an explanation. Stated differently, where the thing which caused the injury, without the fault of the injured, is under the exclusive control of the defendant and the injury is such that it should not have occurred if he, having such control used proper care, it affords reasonable evidence, in the absence of explanation that the injury arose from the defendant’s want of care, and the burden of proof is shifted to him to establish that he has observed due care and diligence.

The requisites for the applicability of the doctrine of res ipsa loquitur are: (1) the occurrence of an injury; (2) the thing which caused the injury was under the control and management of the defendant; (3) the occurrence was such that in the ordinary course of things, would not have happened if those who had control or management used proper care; and (4) the absence of explanation by the defendant. Of the foregoing requisites, the most instrumental is the "control and management of the thing which caused the injury."

In this case, Dr. Ampil was the lead surgeon during the operation of Natividad. He requested the assistance of Dr. Fuentes only to perform hysterectomy when he (Dr. Ampil) found that the malignancy in her sigmoid area had spread to her left ovary. Dr. Fuentes performed the surgery and thereafter reported and showed his work to Dr. Ampil. The latter examined it and finding everything to be in order, allowed Dr. Fuentes to leave the operating room. Dr. Ampil then resumed operating on Natividad. He was about to finish the procedure when the attending nurses informed him that two pieces of gauze were missing. A "diligent search" was

conducted, but the misplaced gauzes were not found. Dr. Ampil then directed that the incision be closed. During this entire period, Dr. Fuentes was no longer in the operating room and had, in fact, left the hospital.

It was this act of ordering the closure of the incision notwithstanding that two pieces of gauze remained unaccounted for, that caused injury to Natividad’s body. Clearly, the control and management of the thing which caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.

NOTE: In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se create or constitute an independent or separate ground of liability, being a mere evidentiary rule. In other words, mere invocation and application of the doctrine does not dispense with the requirement of proof of negligence. Here, the negligence was proven to have been committed by Dr. Ampil and not by Dr. Fuentes.

CAP VS. BELFRANTL

(2007)

Belfranlt Development, Inc. (respondent) is the owner of Belfranlt Building in Angeles City, Pampanga. It leased to petitioners College Assurance Plan Phil., Inc. (CAP) and Comprehensive Annuity Plans and Pension Corporation (CAPP) several units on the second and third floors of the building.

A fire destroyed portions of the building, including the third floor units being occupied by petitioners. The report of the arson investigator showed that the origin of the fire was from an overheated percolator located in the storeroom occupied by CAP.

Respondent demanded reparation from CAP but the latter refused to pay so an action for damages was filed.

Both the RTC and CA ruled in favor of respondent.

The doctrine of res ipsa loquitur applies.

Under this doctrine, expert testimony may be dispensed with to sustain an allegation of negligence if the following requisites obtain: a) the accident is of a kind which does not ordinarily occur unless someone is negligent; b) the cause of the injury was under the exclusive control of the person in charge and c) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured.

The fire that damaged Belfranlt Building was not a spontaneous natural occurrence but the outcome of a human act or omission. It originated in the store room which petitioners had possession and control of. Respondent had no hand in the incident. Hence, the convergence of these facts and circumstances speaks for itself: petitioners alone having knowledge of the cause of the fire or the best opportunity to ascertain it, and respondent having no means to find out for itself, it is sufficient for the latter to merely allege that the cause of the fire was the negligence of the former and to rely on the occurrence of the fire as proof of such negligence. It was all up to petitioners to dispel such inference of negligence, but their bare denial only left the matter unanswered.

10. Contributory negligence of plaintiff Children below 9 cannot be held for contributory negligence.

NPC VS. HEIRS OF CASIONAN

(2008)

This is a review on certiorari of the Decision of the Court of Appeals (CA) which found the National Power Corporation (NPC) liable for damages for the death of Noble Casionan due to electrocution from the company’s high tension transmission lines.Petitioner contends that the mere presence of the high tension wires above the trail did not cause the

There was no contributory negligence on Noble’s part.

The sagging high tension wires were an accident waiting to happen. As established during trial, the lines were sagging around 8 to 10 feet in violation of the required distance of 18 to 20 feet. If the transmission lines were properly maintained by petitioner, the bamboo pole carried by Noble would not have touched the wires. He would not have been electrocuted.

Negligence is the failure to observe, for the protection of the interest of another person, that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury. On the other hand, contributory negligence is conduct on the part of the injured

victim’s death. Instead, it was Noble’s negligent carrying of the bamboo pole that caused his death. It insists that Noble was negligent when he allowed the bamboo pole he was carrying to touch the high tension wires. This is especially true because other people traversing the trail have not been similarly electrocuted.

party, contributing as a legal cause to the harm he has suffered, which falls below the standard which he is required to conform for his own protection. There is contributory negligence when the party’s act showed lack of ordinary care and foresight that such act could cause him harm or put his life in danger. It is an act or omission amounting to want of ordinary care on the part of the person injured which, concurring with the defendant’s negligence, is the proximate cause of the injury.

The underlying precept on contributory negligence is that a plaintiff who is partly responsible for his own injury should not be entitled to recover damages in full but must bear the consequences of his own negligence. If indeed there was contributory negligence on the part of the victim, then it is proper to reduce the award for damages. This is in consonance with the Civil Code provision that liability will be mitigated in consideration of the contributory negligence of the injured party. Article 2179 of the Civil Code is explicit on this score.1

In Ma-ao Sugar Central, it was held that to hold a person as having contributed to his injuries, it must be shown that he performed an act that brought about his injuries in disregard of warnings or signs on an impending danger to health and body.

In this case, the trail where Noble was electrocuted was regularly used by members of the community. There were no warning signs to inform passersby of the impending danger to their lives should they accidentally touch the high tension wires. Also, the trail was the only viable way from Dalicon to Itogon. Hence, Noble should not be faulted for simply doing what was ordinary routine to other workers in the area.

Lambert v Heirs of Castillon

(2005)

Castillon after having dinner and drinking a bottle of beer went on a motorcycle ride with Sergio riding at the back. They figured in a vehicular accident with a Tamaraw jeepney owned by Lambert and driven by Gamot. This resulted to the death of Castillon and injuries to Sergio. Thus an action for damages was filed by his heirs.

The abrupt and sudden left turn by Gamot, without first establishing his right of way, was the proximate cause of the mishap which claimed the life of Castillon and injured Sergio. However, Castillon is guilty of contributory negligence. Castillon, at the time of the mishap: (1) was driving the motorcycle at a high speed; (2) was tailgating the Tamaraw jeepney; (3) has imbibed one or two bottles of beer; and (4) was not wearing a protective helmet which contributed to the result of the incident.

The underlying precept on contributory negligence is that a plaintiff who is partly responsible for his own injury should not be entitled to recover damages in full but must bear the consequences of his own negligence. The defendant must thus be held liable only for the damages actually caused by his negligence. The determination of the mitigation of the defendant’s liability varies depending on the circumstances of each case.

11. Fortuitous eventSoutheastern College v CA, De Jesus Etal.July 10, 1998Purisima J.

Petitioner owned a four-storey school building in Pasay City. When typhoon Saling hit Metro Manila, one part of the roof of the building was blown by the wind which landed and destroyed the roofing of the house of private respondent. Thus a suit for damages was filed against petitioners.

Fortuitous event or caso fortuito is defined as “an event which takes place by accident and could not have been foreseen.”

To exempt a person from liability, it is necessary that he be free from any previous negligence or misconduct by reason of which the loss may have been occasioned.   When a person’s negligence concurs with an act of God in producing damage or injury to another, such person is not exempt from liability by showing that the immediate or proximate cause   of the damage or injury was a fortuitous event.  When the effect is found to be partly the result of the participation of man – whether it be from active intervention, or neglect, or failure to act – the whole occurrence is hereby humanized, and removed from the rules applicable to acts of God

1 When the plaintiff’s own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant’s lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.

In the case at hand, private respondent failed to prove the negligence of petitioner. On the other hand, petitioners were able to prove through their witnesses that they have obtained both building permit and certificate of occupancy which are, at the very least, prima facie evidence of the regular and proper construction of the school building. Moreover, no other incident has been reported regarding the building despite other typhoons stronger than Saling have hit it.

12. Plaintiff’s assumption of risk/volenti non fit injuriaIlocos Norte Electric Company v CA

(1989)

During the onslaught of Typhoon Gening, Nana Belen ventured ought to see whether her merchandise has been damaged. While wading in waist deep water, and opening the gate of her house, she was electrocuted by a dangling electrical wire owned by petitioner Ilocos Norte Electric Company.

Thus an action for damages was brought by the heirs against the petitioner.

It is to be noted that Nana Belen installed a burglar deterrent using petitioner’s wires without their permission, to which petitioner argues to be the cause of her electrocution.

In the doctrine of volenti non fit injuria it is considered that when a person voluntarily assents to a known danger he must abide by the consequences resulting therefrom. However, this doctrine finds no application in the case at bar. A person is excused from the force of the rule, if an emergency is found to exist or if the life or property of another is in peril or when he seeks to rescue his endangered property

In this case at hand, Nana Belen tried to save her goods, which was the source of her livelihood, from being damaged by the flood. Furthermore, at the time the fatal incident occurred, she was at a place where she had a right to be without regard to petitioner's consent as she was on her way to protect her merchandise.

13. Doctrine of Last Clear Chance read: picart Lapanday vs Angala

(2007)

On 4 May 1993, at about 2:45 p.m., a Datsun crewcab driven by Apolonio Deocampo (Deocampo) bumped into a Chevy pick-up owned by Michael Raymond Angala (respondent) and driven by Bernulfo Borres (Borres). Lapanday Agricultural and Development Corporation (LADECO) owned the crewcab which was assigned to its manager Manuel Mendez (Mendez). Deocampo was the driver and bodyguard of Mendez. Both vehicles were running along Rafael Castillo St., Agdao, Davao City heading north towards Lanang, Davao City. The left door, front left fender, and part of the front bumper of the pick-up were damaged.

Respondent filed an action for Quasi-Delict, Damages, and Attorney’s Fees against LADECO, its administrative officer Henry Berenguel (Berenguel) and Deocampo. Respondent alleged that his pick-up was slowing down to about five to

Both parties were negligent in this case. Borres was at the outer lane when he executed a U-turn. Following Section 45(b) of RA 4136, which provides that:

(b) The driver of a vehicle intending to turn to the left shall approach such intersection in the lane for traffic to the right of and nearest to the center line of the highway, and, in turning, shall pass to the left of the center of the intersection, except that, upon highways laned for traffic and upon one- way highways, a left turn shall be made from the left lane of traffic in the direction in which the vehicle is proceeding.)

Borres should have stayed at the inner lane which is the lane nearest to the center of the highway. However, Deocampo was equally negligent. Borres slowed down the pick-up preparatory to executing the U-turn. Deocampo should have also slowed down when the pick-up slowed down. Deocampo admitted that he noticed the pick-up when it was still about 20 meters away from him. Vehicular traffic was light at the time of the incident. The pick-up and the crewcab were the only vehicles on the road. Deocampo could have avoided the crewcab if he was not driving very fast before the collision. Further, the crewcab stopped 21 meters from the point of impact. It would not have happened if Deocampo was not driving very fast.

Since both parties are at fault in this case, the doctrine of last clear chance applies. The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so is chargeable with the loss. In this case, Deocampo had the last clear chance to avoid the collision. Since Deocampo was driving the rear vehicle, he had full control of the situation since he was in a position to observe the vehicle in front of him. Deocampo had the responsibility of avoiding

ten kilometers per hour (kph) and was making a left turn preparatory to turning south when it was bumped from behind by the crewcab which was running at around 60 to 70 kph. The crewcab stopped 21 meters from the point of impact. Respondent alleged that he heard a screeching sound before the impact. Respondent was seated beside the driver and was looking at the speedometer when the accident took place. Respondent testified that Borres made a signal because he noticed a blinking light while looking at the speedometer.Deocampo alleged that the pick-up and the crewcab he was driving were both running at about 40 kph. The pick-up was running along the outer lane. The pick-up was about 10 meters away when it made a U-turn towards the left. Deocampo testified that he did not see any signal from the pick-up. Deocampo alleged that he tried to avoid the pick-up but he was unable to avoid the collision. Deocampo stated that he did not apply the brakes because he knew the collision was unavoidable. Deocampo admitted that he stepped on the brakes only after the collision.

bumping the vehicle in front of him. A U-turn is done at a much slower speed to avoid skidding and overturning, compared to running straight ahead. Deocampo could have avoided the vehicle if he was not driving very fast while following the pick-up. Deocampo was not only driving fast, he also admitted that he did not step on the brakes even upon seeing the pick-up. He only stepped on the brakes after the collision.

14. Vicarious Liabilitya. Parents/Guardians does not apply to parents guardians. See FC provisions. 221

Libi vs IAC

(1992)

Deceased Julie Ann Gotiong, 18 years old, and deceased Wendell Libi, between 18 to 19 years old, were sweethearts for two years prior to the incident. After Julie decided to end the relationship finding the guy sadistic and irresponsible, Wendell incessantly pursued her and prayed that they be together again. This made him resort to threats. But, Julie hold steadfast to her decision. In order to avoid the Wendell, Julie lived with her best friend. On the day of the incident, the two were found shot dead by a Smith and Wesson revolver. The parents of the Julie instituted this case against the parents of Wendell for damages. 

The subsidiary liability of parents for damages caused by their minor children imposed under Art 2180 of the Civil Code and Art. 101 of Revised Penal Code covered obligations arising from both quasi-delicts and criminal offenses.  The court held that the civil liability of the parents for quasi-delict of their minor children is primary and not subsidiary and that responsibility shall cease when the persons can prove that they observe all the diligence of a good father of a family to prevent damage.  However, Wendell’s mother testified that her husband owns a gun which he kept in a safety deposit box inside a drawer in their bedroom.  Each of the spouses had their own key.  She likewise admitted that during the incident, the gun was no longer in the safety deposit box.  Wendell could not have gotten hold of the gun unless the key was left negligently lying around and that he has free access of the mother’s bag where the key was kept.  The spouses failed to observe and exercise the required diligence of a good father to prevent such damage.

b. Teachers

St. Joseph’s College vs Miranda

(2010)

While inside the premises of St. Joseph’s College, the class where respondent Jayson Miranda belonged was conducting a science experiment about fusion of sulphur powder andiron fillings under the tutelage of Rosalinda Tabugo, she being the teacher and the employee, while the adviser is Estafania Abdan.

Tabugo left her class while it was doing the experiment without having adequately secured it from any untoward incident or occurrence. In the middle of the experiment, Jayson, who was the assistant leader of one of the class groups, checked the result of the experiment by looking into the test tube with magnifying glass. The test tube was being held by one of his group mates who moved it close and towards the eye of Jayson. At that instance, the compound in the test tube spurted out and several particles of which hit Jayson’s eye and the different parts of the bodies of some of his group mates.

As a result thereof, Jayson’s eyes were chemically burned, particularly his left eye, for which he had to undergo surgery and had to spend for his medication.

The proximate cause of the Jason’s injury was the concurrent failure of petitioners to prevent to foreseeable mishap that occurred during the conduct of the science experiment. Petitioners were negligent by failing to exercise the higher degree of care, caution and foresight incumbent upon the school, its administrators and teachers. Petitioners’ negligence and failure to exercise the requisite degree of care and caution is demonstrated by the following:

Petitioner school did not take affirmative steps to avert damage and injury to its students although it had full information on the nature of dangerous science experiments conducted by the students during class;

Petitioner school did not install safety measures to protect the students who conduct experiments in class;

Petitioner school did not provide protective gears and devices, specifically goggles, to shield students from expected risks and dangers; and

Petitioner Tabugo was not inside the classroom the whole time her class conducted the experiment, specifically, when the accident involving Jayson occurred. In any event, the size of the class—fifty (50) students— conducting the experiment is difficult to monitor.

Moreover, petitioners cannot simply deflect their negligence and liability by insisting that petitioner Tabugo gave specific instructions to her science class not to look directly into the heated compound.The defense of due diligence of a good father of a family raised by petitioner St. Joseph College will not exculpate it from liability because it has been shown that it was guilty of inexcusable laxity in the supervision of its teachers (despite an apparent rigid screening process for hiring) and in the maintenance of what should have been a safe and secured environment for conducting dangerous experiments. Petitioner school is still liable for the wrongful acts of the teachers and employees because it had full information on the nature of dangerous science experiments but did not take affirmative steps to avert damage and injury to students. The fact that there has never been any accident in the past during the conduct of science experiments is not a justification to be complacent in just preserving the status quo and do away with creative foresight to install safety measures to protect the students. Schools should not simply install safety reminders and distribute safety instructional manuals. More importantly, schools should provide protective gears and devices to shield students from expected risks and anticipated dangers.

AQUINAS SCHOOL v INTON

(2011)

In 1998, Jose Luis Inton was a 3rd grade student at Aquinas. Sister Yamyamin taught his religion class. During one class, he left his seat and went over to his classmate to surprise him. Yamyamin saw him and sent him back to his seat. After a while, Jose Luis stood up again and went to his classmate. Yamyamin kicked him on the legs several times, pulled and shoved his head and made him copy the notes on the blackboard while seated on the floor.

Jose Luis’ parents filed an action for damages on behalf of their son against Yamyamin and Aquinas.

The Court applied the “four-fold test” in determining the existence of an employer-employee relationship to absolve Aquinas of liability. The school directress’ testimony that Aquinas had an agreement with a congregation of sisters under which, in order to fulfill its ministry, the congregation would send religion teachers to Aquinas to provide catechesis to its students. Aquinas insisted that it wasn’t the school which chose Yamyamin to teach but her religious congregation. On the basis of such testimony, the Court held that Aquinas had no control over Yamyamin’s teaching methods.

The Court likewise held that Aquinas took the necessary steps to ensure that only qualified outside catechists are allowed to teach its young students.

c. Owners/Managers of Establishments/Employers

MERCURY DRUG v HUANG

(2007)

Diligence: Bonus paterfamilias

Selection supervision

Mercury Drug is the registered owner of a Mitsubishi truck, with petitioner del Rosario as driver. Respondent Sps. Huang are parents of respondent Stephen Huang, who owned a Sedan.

The 2 vehicles got into an accident as they were traversing a highway. The Sedan was on the left innermost lane while the truck was on the next lane to its right when the latter swerved to its left and slammed the front right side of the sedan. As a consequence, the car was wrecked and Stephen incurred massive injuries and became paralyzed.

Respondents faulted Del Rosario for committing fross negligence and reckless imprudence and Mercury Drug for failing to exercise the diligence of a good father of a family in the selection and supervision of its driver.

Mercury Drug is jointly and severally liable with Del Rosario as the employer.

In order to be relieved of such liability, Mercury should show that it exercised the diligence of a good father of a family, both in the selection and supervision of the employee in the performance of his duties. Mercury failed in both respects.

In selecting employees, the employer is required to examine them as to their qualifications, experience and service records. With respect to supervision, the employer should formulate standard operating procedures, monitor their implementation and impose disciplinary measures for their breach. To establish such, concrete proof, such as documentary evidence must be submitted by him.

In the case at bar, it was shown that Del Rosario didn't take driving tests and psychological exams when he applied for the position of a Truck Man. In addition, Mercury didn't present Del Rosario's NBI and police clearances. Next, the last seminar attended by the driver occurred a long 12 years before the accident occurred. Lastly, Mercury didn't have a backup driver for long trips. When the accident happened Del Rosario has been out on the road for more than 13 hours.

 As to negligence with regard to supervision over its employees, Mercury didn'timpose any sanction on Del Rosario when the latter reported to the former about the incident. Hence, Mercury didn't exercise due diligence

15. Interference with contractual realtionsLAGON v CA

(2000)

Lagon purchased from the estate of Bai Tonina Sepi, through an intestate court, two parcels of land located at Tacurong, Sultan Kudarat. A few months after the sale, private respondent Lapuz filed a complaint for torts and damages against petitioner. Respondent claimed that he entered into a contract of lease with the late Bai Tonina Sepi Mengelen Guiabar over three parcels of land. One of the provisions agreed upon was for private respondent to put up commercial buildings which would, in turn, be leased to new tenants. The rentals to be paid by those tenants would answer for the rent private respondent was obligated to pay Bai Tonina Sepi for the lease.

When Bai Tonina Sepi died, private respondent started remitting his rent to thecourt-appointed administrator of her estate. But when the administrator advised him to stop collecting rentals from the tenants of the buildings he constructed, he discovered that petitioner, representing himself as the new owner of the property, had been collecting rentals from the tenants. He thus filed a complaint against the latter.

Petitioner claimed that before he bought the property, he went to Atty. Benjamin Fajardo, the lawyer who allegedly notarized the lease contract between private respondent and Bai Tonina Sepi, to verify if the parties indeed renewed the lease contract after it expired in 1974. Petitioner averred that Atty. Fajardo showed him 4 copies of the lease renewal but these were all unsigned.

The purchase by petitioner of the property during the existence of respondent’s lease does not constitute tortuous interference.

NCC 1314 provides that any third person who induces another to violate his contract shall be liable for damages to the other contracting party. The tort recognized in that provision is known as interference with contractual relations. The interference is penalized because it violates the property rights of a party in a contract to reap the benefits that should result therefrom.

The Court, in the case of So Ping Bun v. Court of Appeals, down the elements of tortuous interference with contractual relations: (a) existence of a valid contract; (b) knowledge on the part of the third person of the existence of the contract and (c) interference of the third person without legal justification or excuse.

The 2nd and 3rd elements are not present. Petitioner conducted his own personal investigation and inquiry, and unearthed no suspicious circumstance that would have made a cautious man probe deeper and watch out for any conflicting claim over the property. An examination of the entire property’s title bore no indication of the leasehold interest of private respondent. Even the registry of property had no record of the same.

The records do not support the allegation of private respondent that petitionerinduced the heirs of Bai Tonina Sepi to sell the property to him. Records show

that the decision of the heirs of the late Bai Tonina Sepi to sell the property was completely of their own volition and that petitioner did absolutely nothing to influence their judgment. Private respondent himself did not proffer any evidence to support his claim.

In short, even assuming that private respondent was ableto prove the renewal of his lease contract with Bai Tonina Sepi, the fact was that he was unable to prove malice or bad faith on the part of petitioner in purchasing the property. Therefore, the claim of tortuous interference was never established.

Petitioner’s purchase of the subject property was merely an advancement of his financial or economic interests, absent any proof that he was enthused by improper motives. In the very early case of Gilchrist v. Cuddy, the Court declared that a person is not a malicious interferer if his conduct is impelled by a proper business interest. In other words,a financial or profit motivation will not necessarily make a person an officious interferer liable for damages as long as there is no malice or bad faith involved. 

This case is one of damnun absque injuria or damage without injury. “Injury” is the legal invasion of a legal right while “damage” is the hurt, loss or harm which results from the injury.

Go v Cordero (2010)

Robinson signed documents appointing Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in the Philippines.  After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of ACG Express Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for the purchase of two (2) SEACAT 25. However, Cordero later discovered that Go was dealing directly with Robinson when he was informed by Dennis Padua of Wartsila Philippines that Go was canvassing for a second catamaran engine from their company which provided the ship engine for the first SEACAT 25.

From the time petitioner Go and respondent Landicho directly dealt with respondent Robinson in Brisbane, and ceased communicating through petitioner Cordero as the exclusive distributor of AFFA in the Philippines, Cordero was no longer informed of payments remitted to AFFA in Brisbane. When Cordero complained to Go, Robinson, Landicho and Tecson about their acts prejudicial to his rights and demanded that they respect his exclusive distributorship, Go simply let his lawyers led by Landicho and Tecson handle the matter and tried to settle it by promising to pay a certain amount and to purchase high-speed catamarans through Cordero. However, Cordero was not paid anything and worse, AFFA through its lawyer in Australia even terminated his exclusive dealership insisting that his services were engaged for only one (1) transaction, that is, the purchase of the first SEACAT 25 in August 1997.

WON the acts constituted an interference with contractual relations. Yes. While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach contractual provisions, a contracting party may sue a third person not for breach but for inducing another to commit such breach.Article 1314 of the Civil Code provides:Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of a contract; and (3) interference of the third person is without legal justification.The presence of the first and second elements is not disputed.

The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into another contract directly with ACG Express Liner to obtain a lower price for the second vessel resulted in AFFA’s breach of its contractual obligation to pay in full the commission due to Cordero and unceremonious termination of Cordero’s appointment as exclusive distributor. The attendant circumstances demonstrated that respondents transgressed the bounds of permissible financial interest to benefit themselves at the expense of Cordero.

Thus, the trial and appellate courts correctly ruled that the actuations of Go, Robinson, Tecson and Landicho were without legal justification and intended solely to prejudice Cordero.

16. DamagesCustodio v CA The plaintiff owns a parcel of land with a WON plaintiff is entitled to a right of way. Yes

(1996) two-door apartment erected thereon situated at Interior P. Burgos St., Palingon, Tipas, Tagig, Metro Manila. Said property may be described to be surrounded by other immovables pertaining to defendants herein. 

When said property was purchased by Mabasa, there were tenants occupying the premises and who were acknowledged by plaintiff Mabasa as tenants. However, sometime in February, 1982, one of said tenants vacated the apartment and when plaintiff Mabasa went to see the premises, he saw that there had been built an adobe fence in the first passageway making it narrower in width. Said adobe fence was first constructed by defendants Santoses along their property which is also along the first passageway. Defendant Morato constructed her adobe fence and even extended said fence in such a way that the entire passageway was enclosed. And it was then that the remaining tenants of said apartment vacated the area.

WON plaintiff is entitled to damages. NoIn the case at bar, although there was damage, there was no legal injury. Contrary to the claim of private respondents, petitioners could not be said to have violated the principle of abuse of right. In order that the principle of abuse of right provided in Article 21 of the Civil Code can be applied, it is essential that the following requisites concur: (1) The defendant should have acted in a manner that is contrary to morals, good customs or public policy; (2) The acts should be willful; and (3) There was damage or injury to the plaintiff.

The act of petitioners in constructing a fence within their lot is a valid exercise of their right as owners, hence not contrary to morals, good customs or public policy. The law recognizes in the owner the right to enjoy and dispose of a thing, without other limitations than those established by law.  It is within the right of petitioners, as owners, to enclose and fence their property. Article 430 of the Civil Code provides that "(e)very owner may enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon."At the time of the construction of the fence, the lot was not subject to any servitudes

17. Actual or CompensatoryOceeaneering Contractors Inc. v Nestor N. Barretto (2011)

Nestor N. Barretto (Barretto) is the owner of the Barge "Antonieta" which was last licensed and permitted to engage in coastwise trading. , Barretto and petitioner Oceaneering Contractors (Phils.), Inc. (Oceaneering) entered into a Time Charter Agreement for the purpose of transporting construction materials from Manila to Ayungon, Negros Oriental. Brokered by freelance ship broker Manuel Velasco, the agreement included Oceaneering’s acknowledgment of the seaworthiness of the barge.

The barge eventually left Manila for Negros Oriental. On 5 December 1997, however, Barretto’s Bargeman, Eddie La Chica, executed a Marine Protest under which the barge reportedly capsized in the vicinity of Cape Santiago, Batangas. Barreto filed a case claiming that the capsizing was

WON Oceeaneering is entitled to actual/compensatory damages. YesThe rule is long and well settled that there must be pleading and proof of actual damages suffered for the same to be recovered. In addition to the fact that the amount of loss must be capable of proof, it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. The burden of proof of the damage suffered is, consequently, imposed on the party claiming the same. We find that Oceaneering correctly fault the CA for not granting its claim for actual damages or, more specifically, the portions thereof which were duly pleaded and adequately proved before the RTC. While concededly not included in the demand letters dated 12 March 1998 and 13 July 1998 Oceaneering served Barretto, the former’s counterclaims for the value of its lost cargo in the sum of P4,055,700.00 and salvaging expenses in the sum of P125,000.00 were distinctly pleaded and prayed for in the 26 January 1999 answer it filed a quo. For lack of sufficient showing of bad faith on the part of Barretto, we find that the CA, finally, erred in granting Oceaneering’s claim for attorney’s fees.

due to the negligence of Oceeaneering employees. Oceeaneering filed a compulsory counterclaim alleging that it was due to the unseaworthiness of the vessel. It claimed actual, exemplary and attorney’s fees. The CA ruled that a common carrier legally charged with extraordinary diligence in the vigilance over the goods transported by him; and, that the sinking of the vessel created a presumption of negligence and/or unseaworthiness. However, the CA disallowed the counterclaims for the value of the construction materials which were lost as a consequence of the sinking of the barge.

18. Death by crime or quasi-delictPeople vs Apacible

(2010)

From the account of prosecution witness Mylene Vizconde (Mylene), widow of Arnold Vizconde (the victim), the following transpired on the day her husband died:On May 23, 1999, starting at about 2:00 p.m., her husband, her uncle and appellant, who is her first cousin, had a drinking spree at a neighbor’s house. The spree lasted up to 8:30 p.m. following which her husband returned home and slept in their room. She thereupon placed their eight-month old child beside him and went to the kitchen to prepare milk for the child. Shortly thereafter, she, from a distance of about three to four meters, heard appellant utter "Putang ina mo, papatayin kita!" and then saw appellant, through the open door to the room, stab her husband several times

Appelant was found guilty and charged with reclusion perpetua. The RTC awarded Php 75,000 in damages, which the CA reduced to Php 50,000

Php 50,000 is the proper amount of damages.

The Court thus affirms the appellate court’s Decision, with modification, however. The Court reduces the amount of civil indemnity awarded by the appellate court from P75,000 to P50,000, as determined by the trial court. People v. Anod explains why the award of P75,000 as civil indemnity lies only in cases where the proper imposable penalty is deat h , viz:It is worth stressing that, at the outset, the appellant, together with Lumbayan, was sentenced by the RTC to suffer the penalty of reclusion perpetua. Thus, the CA’s reliance on our ruling in People v. dela Cruz was misplaced. In dela Cruz, this Court cited our ruling in People v. Tubongbanua, wherein we held that the civil indemnity imposed should be P75,000.00. However, the instant case does not share the same factual milieu as dela Cruz and Tubongbanua. In the said cases, at the outset, the accused were sentenced to suffer the penalty of death. However, in view of the enactment of Republic Act No. 9346 or the Act Prohibiting the Imposition of the Death Penalty on June 24, 2006, the penalty meted to the accused was reduced to reclusion perpetua. This jurisprudential trend was followed in the recent case of People of the Philippines v. Generoso Rolida y Moreno, etc., where this Court also increased the civil indemnity from P50,000.00 to P75,000.00. Based on the foregoing disquisitions and the current applicable jurisprudence, we hereby reduce the civil indemnity awarded herein to P50,000.00. x x x As reflected earlier, appellant was sentenced by the trial court to reclusion perpetua.

Crisostomo vs People

(2010)

On February 12, 2001, at around 12:20 in the afternoon, Rodelio Pangilinan (Rodelio) was working at a gasoline station owned by Jose Buencamino (Jose) at Buliran, San Miguel, Bulacan. He was by the gasoline tank which was two or three arms length from the cashier’s office when three armed men on board a motorcycle arrived. Two of the men

The Civil LiabilitiesIn robbery with homicide, civil indemnity and moral damages in the amount of P50,000.00 each is granted automatically in the absence of any qualifying aggravating circumstances . These awards are mandatory without need of allegation and evidence other than the death of the victim owing to the fact of the commission of the crime. In this case, the CA properly awarded the amount of P50,000.00 as civil indemnity. In addition, we also award the amount of P50,000.00 as moral damages.To be entitled to compensatory damages, it is necessary to prove the actual amount of loss with a reasonable degree of certainty, premised upon competent proof and the best evidence obtainable to

immediately went to the cashier while the driver stayed on the motorcycle. Inside the office, one of the men pulled out a fan knife while the other, armed with a gun, fired a shot at Janet Ramos (Janet), the cashier. They forcibly took the money in the cash register and the man with the gun fired a second shot that fatally hit Janet in the right side of her head. The two armed men returned to their companion waiting by the motorcycle and together sped away from the scene of the crime.Rodelio gave a description of the driver of the motorcycle but not of the two armed men who entered the cashier’s office since they had their backs turned to him. The National Bureau of Investigation (NBI) prepared a cartographic sketch based on the information provided by Rodelio. Jose, the owner of the gas station, stated that the stolen money was worth P40,000.00. Receipts in the amount of P14,500.00 were presented as funeral expenses.On February 23, 2001, the petitioner was detained after being implicated in a robbery that occurred in San Miguel, Bulacan. During his detention, Rodelio and another gasoline boy arrived and identified him in a police lineup as one of the three robbers who killed Janet.to two public roads or highways.

RTC: reclusion perpetua, ordered to indemnify the heirs of victim Janet Ramos in the amount of P75,000.00, the owner or operator, Jose Buencamino, Jr., of the gasoline station that was robbed, in the amount of P40,000.00 plus P14,500.00 as funeral expenses.

CA: Lowered indemnity from 75,000 to 50,000

the injured party. "[R]eceipts should support claims of actual damages." Thus, as correctly held by the trial court and affirmed by the CA, the amount of P14,500.00 incurred as funeral expenses can be sustained since these are expenditures supported by receipts. Also, the courts below correctly held petitioner liable to return the amount of P40,000.00 which was stolen from the gas station before the victim was shot and killed.

Philippine Hawk vs Lee

(2010)

Or read Ochoa

On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of Quezon City a Complaint against petitioner Philippine Hawk Corporation and defendant Margarito Avila for damages based on quasi-delict, arising from a vehicular accident that occurred on March 17, 1991 in Barangay Buensoceso, Gumaca, Quezon. The

In the computation of loss of earning capacity, only net earnings, not gross earnings, are to be considered; that is, the total of the earnings less expenses necessary for the creation of such earnings or income, less living and other incidental expenses . In the absence of documentary evidence, it is reasonable to peg necessary expenses for the lease and operation of the gasoline station at 80 percent of the gross income, and peg living expenses at 50 percent of the net income (gross income less necessary expenses).In this case, the computation for loss of earning capacity is as follows:

Net Earning = Life Expectancy x Gross Annual – Reasonable and

accident resulted in the death of respondent’s husband, Silvino Tan, and caused respondent physical injuries.On June 18, 1992, respondent filed an Amended Complaint, in her own behalf and in behalf of her children, in the civil case for damages against petitioner. Respondent sought the payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral and interment expenses, medical and hospitalization expenses, the cost of the motorcycle’s repair, attorney’s fees, and other just and equitable reliefs.The accident involved a motorcycle, a passenger jeep, and a bus with Body No. 119. The bus was owned by petitioner Philippine Hawk Corporation, and was then being driven by Margarito Avila.Respondent’s husband died due to the vehicular accident. The immediate cause of his death was massive cerebral hemorrhage.Respondent further testified that her husband was leasing and operating a Caltex gasoline station in Gumaca, Quezon that yielded one million pesos a year in revenue. They also had a copra business, which gave them an income of P3,000.00 a month or P36,000.00 a year.Driver of Philippine Hawk found negligent, damages awarded.

Capacity[2/3 (80-age at the

time of death)]Income (GAI)

Necessary Expenses

(80% of GAI)

The Court of Appeals also awarded actual damages for the expenses incurred in connection with the death, wake, and interment of respondent’s husband in the amount of P154,575.30, and the medical expenses of respondent in the amount of P168,019.55.Actual damages must be substantiated by documentary evidence, such as receipts, in order to prove expenses incurred as a result of the death of the victim or the physical injuries sustained by the victim. A review of the valid receipts submitted in evidence showed that the funeral and related expenses amounted only to P114,948.60, while the medical expenses of respondent amounted only to P12,244.25, yielding a total of P127,192.85 in actual damages.

Further, the Court of Appeals correctly awarded respondent civil indemnity for the death of her husband, which has been fixed by current jurisprudence at P50,000.00. The award is proper under Art. 2206 of the Civil Code.

19. Attorney’s fees is an exception. Memorize when attorney’s fees can be awarded. Memorize 2217 and 2219 for moral damages.Sps. Moises Andrada vs. Pilhilno Sales Corp

(2011)

Pilhino Sales Corporation (Pilhino) sued Jose Andrada, Jr. and his wife, Maxima, to recover money, plus interest and incidental charges. Upon Pilhino’s application, the RTC-Davao City issued a writ of preliminary attachment, which came to be implemented against a Hino truck and a Fuso truck both owned by Jose. However, the levies on attachment were lifted after Jose filed a counter-attachment bond.

The RTC rendered a decision against Jose and his wife. Pilhino opted to

The SC found no merit in the petition for review.

The CA found that Pilhino acted in good faith in filing a case to annul the deed of sale involving the Hino truck between Jose and Moises, considering that Pilhino had “believed that the sale in favor of Moises was resorted to so that Jose [might] evade his obligations.” The CA concluded that no remedy was available for any damages that the petitioners sustained from the filing of the case against them because “the law affords no remedy for such damages resulting from an act which does not amount to a legal injury or wrong.” The CA’s finding and conclusion rested on the RTC’s own persuasion that the sale of the Hino truck to Moises Andrada had been simulated.

The petitioners further seek attorney’s fees based on Article 2208 (4) of the   Civil Code,   which provides that “ in the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except xxx (4) in cases of   clearly unfounded civil action or proceeding   against the plaintiff xxx. ”

enforce the writ of execution against the properties of the Andradas instead of claiming against the counter-attachment bond considering that the premium on the bond had not been paid. However, the Hino truck could not be transferred to Pilhino’s name due to its having been already sold to and registered in the name of petitioner Moises Andrada,

Moises Andrada and his wife claim that they had already acquired the Hino truck from Jose free from any lien or encumbrance prior to its seizure by the sheriff; that their acquisition had been made in good faith, considering that at the time of the sale the preliminary attachment had already been lifted; and that Pilhino’s recourse was to proceed against the counter-attachment bond.

RTC dismissed complaint of Pilhino and all counterclaims. Moises appealed with respect to his counterclaim.

CA affirmed RTC. Moises then filed petition for certiorari (ayaw pa kasi tumigil) claiming damages from Pilhilno’s levy of the truck.

The petitioners are not entitled to attorney’s fees.

It is well accepted in this jurisdiction that no premium should be placed on the right to litigate and that not every winning party is entitled to an automatic grant of attorney’s fees.

Indeed, before the effectivity of the new Civil Code, such fees could not be recovered in the absence of a stipulation. It was only with the advent of the new Civil Code that the right to collect attorney’s fees in the instances mentioned in Article 2208 was recognized, and such fees are now included in the concept of actual damages. One such instance is where the defendant is guilty of gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim. This is a corollary of the general principle expressed in Article 19 of the Civil Code that everyone must, in the performance of his duties, observe honesty and good faith and the rule embodied in Article 1170 that anyone guilty of fraud (bad faith) in the performance of his obligation shall be liable for damages. But, as noted by the Court in Morales v. Court of Appeals, the award of attorney’s fees is the exception rather than the rule. The power of a court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification; its basis cannot be left to speculation and conjecture. The general rule is that attorney’s fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate.

Pan Pacific vs. Equitable PCI Bank

2010

Pan Pacific entered into a contract of mechanical works with EPCIB. The Contract stipulated, among others, that Pan Pacific shall be entitled to a price adjustment in case of increase in labor costs and prices of materials (escalation clause)

The project (PCIB Tower II extension building in Makati City) was completed in June 1992. In accordance with the escalation clause, Pan Pacific claimed a price adjustment of P5,165,945.52. Respondent asked for a reduction in the price adjustment. To show goodwill, Pan Pacific reduced the price adjustment to P4,858,548.67. EPCIB wanted the price adjustment reduced to P3,730,957.07. 

EPCIB withheld the payment of the price adjustment despite Pan Pacific’s repeated

Under Article 2209 of the Civil Code, the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal to the regular monetary interest becomes due and payable. Finally, if no regular interest had been agreed upon by the contracting parties, then the damages payable will consist of payment of legal interest which is 6%, or in the case of loans or forbearances of money, 12% per annum. It is only when the parties to a contract have failed to fix the rate of interest or when such amount is unwarranted that the Court will apply the 12% interest per annum on a loan or forbearance of money. The written agreement entered into between petitioners and respondent provides for an interest at the current bank lending rate in case of delay in payment and the promissory note charged an interest of 18%. To prove petitioners’ entitlement to the 18% bank lending rate of interest, petitioners presented the promissory note   prepared by respondent bank itself. This promissory note, although declared void by the lower courts because it did not express the real intention of the parties, is substantial proof that the bank lending rate at the time of default was 18% per annum. Absent any evidence of fraud, undue influence or any vice of consent exercised by petitioners against the respondent, the interest rate agreed upon is binding on them.

demands. Instead, EPCIB offered Pan Pacific a loan of P1.8 million. Against its will and on the strength of the promise that the price adjustment would be released soon, Pan Pacific executed a promissory note in the amount of P1.8 million as a requirement for the loan. The P1.8 million was released directly to laborers and suppliers and not a single centavo was given to Pan Pacific.

(Note) CA computed the remaining balance due from EPCIB in favor of Pan Pacific to be P1,516,015.07. EPCIB did not appeal this ruling, but appealed only with regard to the applicable interest rate.

Dispositive: WHEREFORE, we GRANT the petition. We SET ASIDE the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 63966. We ORDER respondent to pay petitioners P1,516,015.07 with interest at the bank lending rate of 18% per annum starting 6 May 1994 until the amount is fully paid.

20. Moral damagesSps. Valenzuela vs. Sps. Magno

2010

Petitioner Federico Valenzuela (Federico) is the son of Andres Valenzuela (Andres) who was the owner and possessor of a parcel of land in Pulilan, Bulacan. Andres died and the possession of said property was transferred to Federico. The heirs of Andres waived all their rights to the property in favor of Federico.

Meanwhile, a Deed of Conditional Sale was executed between Feliciano Geronimo (Feliciano) and herein respondent Jose Mano, Jr. (Jose), wherein the former agreed to sell to the latter a parcel of land in Pulilan. Jose applied for a Free Patent and an Original Certificate of Title (OCT) No. P-351 was issued in his name. Jose sold a part of this land to a 3rd party. Apparently, the title involved in this sale included the area covered by the land owned by Petitioner.

Petitioner constructed a fence on his property. Respondent claims he owns the property based on his OCT.

We rule that Federico is the owner of the disputed 447 square meter lot.  

The Deed of Conditional Sale did not include the area covered by the land owned by Petitioner. However, subsequent surveys showed that Lot No. 10176-A with an area of 447 square meters had been made to appear as part of the lot sold by Feliciano to Jose.

We rule that Jose committed fraud in obtaining title to the disputed property.  The chain of events leading to the issuance of title in his name shows beyond cavil the bad faith or a fraudulent pattern on his part.  The evidence on record disclosed that even before Jose purchased the 2,056 square meters from Feliciano, he had already caused on January 30, 1991 the survey of a 2,739 square meters lot.  Although the document of sale expressly stated that the area sold was 2,056 square meters and is located at Dampol 1st, Pulilan, Bulacan, however, when he filed his application for free patent in March 1991, he used the survey on the 2,739 square meters and indicated the same to be located at Dampol II, Pulilan, Bulacan . Also, in his application, he stated that the land described and applied for is not claimed or occupied by any person when in reality the same is owned and possessed by Federico.

Article 2217of the Civil Code defines what are included in moral damages while Article 2219 enumerates the cases where they may be recovered.  Moral damages are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. “The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes good faith .  It is not enough that one merely suffered sleepless nights, mental anguish, serious anxiety as the result of the actuations of the other party. Invariably such action must be shown to have been willfully done in bad faith or with ill motive.” In the same fashion, to warrant the award of exemplary damages, the wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in wanton, fraudulent, reckless or malevolent manner. As regards attorney’s fees, the law is clear that in the absence of stipulation, attorney’s fees may be recovered as actual or compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code. Having ruled that Jose committed fraud in obtaining title to the disputed property then he should be liable for both moral and exemplary damages.  Likewise, since petitioners were compelled to litigate to protect their rights and having proved that Jose acted in bad faith, attorney’s fees should likewise be awarded.

21. Nominal damagesGUANIO v. MAKATI SHANGRI-LA HOTEL

Sps. Guanio booked at the Shangri-la Hotel Makati for their wedding

Respondents are ordered to pay P50,000 by way of nominal damages.

(2011)reception. During the initial food tasting, Shangri-La prepared for 6 persons but Sps. Guanio claimed that they requested for 7 persons. At the final food tasting, the salmon served was half the size they were served during the initial food tasting. During the reception, the catering director and sales manager did not show up; their guests complained of the delay in the service of the dinner; certain items listed in the published menu were unavailable; the hotel’s waiters were rude and unapologetic when confronted about the delay; and despite Alvarez’s promise that there would be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for the three-hour extension of the event up to 4:00 A.M. the next daySps. Guanio sent a letter-complaint to Shangri-la and received an apologetic reply from the hotel’s Executive Assistant Manager in charge of Food and Beverage. They nevertheless filed a complaint for breach of contract and damages before the RTC of Makati City.Makati RTC rendered judgment in favor of petitioners.

Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the failure, without legal excuse, to perform any promise which forms the whole or part of the contract. The appellate court, and even the trial court, observed that petitioners were remiss in their obligation to inform respondent of the change in the expected number of guests. Petitioners’ failure to discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the parties’ contract provide, respondent from liability for "any damage or inconvenience" occasioned thereby.Respecting the letter of Svensson on which the trial court heavily relied as admission of respondent’s liability but which the appellate court brushed aside, the Court finds the appellate court’s stance in order. It is not uncommon in the hotel industry to receive comments, criticisms or feedback on the service it delivers. It is also customary for hotel management to try to smooth ruffled feathers to preserve goodwill among its clientele.Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes.In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event. The Court recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind. Respondent’s lack of prudence is an affront to this right.

PEOPLE v. MARQUEZ

(2011)

Marquez was charged with Kidnapping. Marquez pleaded not guilty to the crime charged and alleged that Merano offered the child for adoption.

The award of nominal damages is correct.

The award of nominal damages is also allowed under Article 2221 of the New Civil Code which states that: Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.It took Merano almost a year to legally recover her baby. Justine was only three months old when this whole debacle began. She was already nine months old when Merano saw her again. She spent her first birthday at the Reception and Study Center for Children of the DSWD. Evidently, Merano’s right as a parent which was violated and invaded must be vindicated and recognized, thereby justifying the award of nominal damages.

22. Temperate damagesTAN v. OMC CARRIERS, INC.

(2011)

Petitioners filed a complaint for damages with the RTC against OMC and Arambala. The complaint states that Arambala was driving a truck with a trailer owned by OMC. When Arambala noticed that the truck had suddenly lost its brakes, he told his companion to jump

We begin by discussing the petitioners’ claim for actual damages arising from the damage inflicted on petitioner Leticia Tan’s house and tailoring shop, taking into account the sewing machines and various household appliances affected. Our basic law tells us that to recover damages there must be pleading and proof of actual damages suffered. The petitioners do not deny that they did not submit any receipt to support their claim for actual damages to prove the monetary value of the damage caused to the house and tailoring shop when the truck rammed into them. Thus, no actual damages for the destruction to petitioner Leticia Tan’s house and tailoring shop can be awarded.

out. Soon thereafter, he also jumped out and abandoned the truck. Driverless, the truck rammed into the house and tailoring shop owned by petitioner Leticia Tan and her husband Celedonio Tan, instantly killing Celedonio who was standing at the doorway of the house at the time. RTC found OMC and Arambala jointly and severally liable to the petitioners for damages. CA affirmed the RTC’s findings on the issues of the respondents’ negligence and liability for damages. However, the CA modified the damages awarded to the petitioners by reducing the actual damages award from P355,895.00 to P72,295.00. The CA observed that only the latter amount was duly supported by official receipts. The CA also deleted the RTC’s award for loss of earning capacity. The CA further reduced the exemplary damages from P500,000.00 to P200,000.00, and deleted the award of attorney’s fees because the RTC merely included the award in the dispositive portion of the decision without discussing its legal basis.

Nonetheless, absent competent proof on the actual damages suffered, a party still has the option of claiming temperate damages, which may be allowed in cases where, from the nature of the case, definite proof of pecuniary loss cannot be adduced although the court is convinced that the aggrieved party suffered some pecuniary loss.The photographs the petitioners presented as evidence show the extent of the damage done to the house, the tailoring shop and the petitioners’ appliances and equipment . Irrefutably, this damage was directly attributable to Arambala’s gross negligence in handling OMC’s truck. Unfortunately, these photographs are not enough to establish the amount of the loss with certainty. From the attendant circumstances and given the property destroyed, we find the amount of P200,000.00 as a fair and sufficient award by way of temperate damages.

Similarly, the CA was correct in disallowing the award of actual damages for loss of earning capacity. Damages for loss of earning capacity are awarded pursuant to Article 2206 of the Civil Code.As a rule, documentary evidence should be presented to substantiate the claim for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work, no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws. In the past, we awarded temperate damages in lieu of actual damages for loss of earning capacity where earning capacity is plainly established but no evidence was presented to support the allegation of the injured party’s actual income. In the present case, the income-earning capacity of the deceased was never disputed. Petitioners Mary Jane Tan, Mary Lyn Tan, Celedonio Tan, Jr., Mary Joy Tan and Mark Allan Tan were all minors at the time the petition was filed and they all relied mainly on the income earned by their father from his tailoring activities for their sustenance and support. Under these facts and taking into account the unrebutted annual earnings of the deceased, we hold that the petitioners are entitled to temperate damages in the amount of P300,000.00 [or roughly, the gross income for two (2) years] to compensate for damages for loss of the earning capacity of the deceased.

Exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. Celedonio Tan’s death and the destruction of the petitioners’ home and tailoring shop were unquestionably caused by the respondents’ gross negligence. The law allows the grant of exemplary damages in cases such as this to serve as a warning to the pubic and as a deterrent against the repetition of this kind of deleterious actions. The grant, however, should be tempered, as it is not intended to enrich one party or to impoverish another. From this perspective, we find the CA’s reduction of the exemplary damages awarded to the petitioners from P500,000.00 to P200,000.00 to be proper.

In view of the award of exemplary damages, we find it also proper to award the petitioners attorney's fees, in consonance with Article 2208(1) of the Civil Code. We find the award of attorney’s fees, equivalent to 10% of the total amount adjudged the petitioners, to be just and reasonable under the circumstances.

Finally, we impose legal interest on the amounts awarded, in keeping with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.

GIOVANI SERRANO y CERVANTES, Petitioner,

FACTS:The case stemmed from a brawl involving 15 to 18 members of two (2)

HELD:The SC convicted the accused but only for attempted homicide.We modify the CA decision with respect to the petitioner’s civil liability. The CA ordered actual

vs.PEOPLE OF THE PHILIPPINES, Respondent.July 5, 2010

rival groups that occurred at the University of the Philippines, Diliman, Quezon City (UP) on the evening of March 8, 1999. The incident resulted in the stabbing of Anthony Galang (victim). Pinpointed as the victim’s assailant, the petitioner was charged on March 11, 1999,5 with frustrated homicide.The CA awarded actual damages in the amount of P3,858.50;

damages to be paid in the amount of P3,858.50. This is erroneous and contrary to the prevailing jurisprudence. In People v. Andres,35 we held that if the actual damages, proven by receipts during the trial, amount to less than P25,000.00, the victim shall be entitled to temperate damages in the amount of P25,000.00, in lieu of actual damages. The award of temperate damages is based on Article 2224 of the New Civil Code which states that temperate or moderate damages may be recovered when the court finds that some pecuniary loss was suffered but its amount cannot be proven with certainty. In this case, the victim is entitled to the award of P25,000.00 as temperate damages considering that the amount of actual damages is only P3,858.50. The amount of actual damages shall be deleted.

23. Liquidated damagesPENTACAPITAL INVESTMENT CORPORATION, Petitioner, vs.MAKILITO B. MAHINAY, Respondent.July 5, 2010

FACTS:Petitioner filed a complaint for a sum of money against respondent Makilito Mahinay based on two separate loans obtained by the latter in the amount of P1,936,800.00.

HELD:The respondent is made to pay the principal amount of the loan plus penaltiesThe promissory notes likewise required the payment of a penalty charge of 3% per month or 36% per annum. We find such rates unconscionable. This Court has recognized a penalty clause as an accessory obligation which the parties attach to a principal obligation for the purpose of ensuring the performance thereof by imposing on the debtor a special prestation (generally consisting of the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled.46 However, a penalty charge of 3% per month is unconscionable;47 hence, we reduce it to 1% per month or 12% per annum, pursuant to Article 1229 of the Civil Code which states:Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.48

Lastly, respondent promised to pay 25% of his outstanding obligations as attorney’s fees in case of non-payment thereof. Attorney’s fees here are in the nature of liquidated damages. As long as said stipulation does not contravene law, morals, or public order, it is strictly binding upon respondent. Nonetheless, courts are empowered to reduce such rate if the same is iniquitous or unconscionable pursuant to the above-quoted provision.49 This sentiment is echoed in Article 2227 of the Civil Code, to wit:Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.Hence, we reduce the stipulated attorney’s fees from 25% to 10%.

24. Exemplary/Corrective damagesPEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, vs.RENATO DADULLA y CAPANAS, Defendant-Appellant.February 9, 2011BERSAMIN, J.:THIRD DIVISION

FACTS:Capanas was charged with simple rape in the Information for raping AAA. However, in the trial, it was proven that AAA was Capanas’ daughter. Capanas could therefore be liable for qualified rape.

HELD:Capanas could only be convicted for simple rape. The accused could not be convicted of the graver offense of qualified rape, although proven, because relationship was neither alleged nor necessarily included in the information.

However, the aggravating circumstance may be appreciated in awarding damages in favor of AAA

Under Article 2230 of the Civil Code,32 the attendance of any aggravating circumstance (generic, qualifying, or attendant) entitles the offended party to recover exemplary damages. Here, relationship was the aggravating circumstance attendant in both cases. We need to award P30,000.00 as exemplary damages in rape and of P10,000.00 as exemplary damages in acts of lasciviousness.Although, as earlier mentioned, an aggravating circumstance not specifically alleged in the

information (albeit established at trial) cannot be appreciated to increase the criminal liability of the accused, the established presence of one or two aggravating circumstances of any kind or nature entitles the offended party to exemplary damages under Article 2230 of the Civil Code because the requirement of specificity in the information affected only the criminal liability of the accused, not his civil liability. The term "aggravating circumstances" used by the Civil Code, the law not having specified otherwise, is to be understood in its broad or generic sense. The ordinary or qualifying nature of an aggravating circumstance is a distinction that should only be of consequence to the criminal, rather than to the civil, liability of the offender. In fine, relative to the civil aspect of the case, an aggravating circumstance, whether ordinary or qualifying, should entitle the offended party to an award of exemplary damages within the unbridled meaning of Article 2230 of the Civil Code.