Torts 2 - Copy

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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 128705 June 29, 2001

CONRADO AGUILAR, SR., petitioner,vs.COMMERCIAL SAVINGS BANK and FERDINAND BORJA, respondents.

QUISUMBING, J. :

This petition1 seeks to annul and set aside the decision dated October 16, 1996, of the Court of Appeals in CA-G.R. CV No. 48793, reversingthe decision of the Regional Trial Court of Makati, Branch 59, and dismissing the complaint insofar as respondent Commercial Savings Bankis concerned.

The facts in this case are uncomplicated.

Petitioner Conrado Aguilar, Sr. is the father of Conrado Aguilar, Jr., the victim in a vehicular accident involving a Lancer car registered in thename of respondent bank, but driven by co-respondent Ferdinand G. Borja.

On September 8, 1984, at around 11:15 P.M., Aguilar, Jr. and his companions, among them Nestor Semella, had just finished their snack atthe Uncle Watt‘s Bakery along Zapote-Alabang Road. As they crossed the road, a Lancer with plate no. NNP 349 and driven by FerdinandBorja, overtook a passenger jeepney. In so doing, the Lancer hit Aguilar and Semella. Aguilar was thrown upwards and smashed against thewindshield of the Lancer, which did not stop. Aguilar and Semella were then brought to the Perpetual Help Hospital at Pamplona, Las Piñas,where Aguilar was pronounced dead on arrival.

On July 29, 1985, petitioner filed a complaint for damages against respondents in the Regional Trial Court of Makati, Branch 59. Borja did notfile his answer within the reglementary period, hence, he was declared in default by the trial court.

At the trial, respondent bank admitted that the Lancer was registered in its name at the time of the incident. Petitioner‘s counsel also showedthat Borja was negligent in driving the car.

On June 14, 1991, the trial court held defendants (herein respondents) liable for Aguilar‘s death, in its decision that reads:

Premises considered, judgment is hereby rendered ordering the defendants, jointly and severally, to pay to the plaintiff thefollowing:

1. The amount of P18,900.00 representing actual expenses incurred by the plaintiff;

2. The amount of P50,000.00 representing moral damages;

3. The amount of P100,000.00 representing loss of earning capacity of the deceased victim, Conrado Aguilar, Jr.

4. The sum of P20,000.00 representing attorney‘s fees; and

5. With costs against the defendants.

Defendant bank‘s counterclaim is ordered DISMISSED for lack of merit.

On the cross-claim of the defendant bank, the cross-defendant Ferdinand Borja is hereby ordered to pay the cross-claimantComsavings Bank whatever amount the latter may have paid or is required to pay to the plaintiff by virtue of this decision.

SO ORDERED.2

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The trial court declared that Borja‘s negligence, carelessness and imprudence caused the victim‘s death. It also found that Borja was anassistant vice president of respondent bank at the time of the incident. It held that under Art. 21803 of the Civil Code, the negligence of theemployee is presumed to be that of the employer, whose liability is primary and direct; and that respondent bank failed to exercise duediligence in the selection of its employees.

Respondent bank appealed to the Court of Appeals.

The Court of Appeals found the appeal meritorious. It said that before it can apply Art. 2180 on which private respondent anchored its claimof the bank‘s negligence, petitioner must first establish that Borja acted on the occasion or by reason of the func tions entrusted to him by hisemployer. The appellate court found no evidence that Borja had acted as respondent bank‘s assistant vice-president at the time of themishap. The Court of Appeals reversed the trial court‘s decision, thus:

WHEREFORE, the appealed decision is reversed only insofar as defendant-appellant bank is concerned. The complaint against itis DISMISSED. No award of damages on said appellant‘s counterclaim.

No costs.1âwphi1.nêt

SO ORDERED.4

Petitioner‘s motion for reconsideration was denied. Hence, this petition where petitioner avers that:

THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENT COMSAVINGS IS NOT LIABLE FOR DAMAGES

DESPITE THE ESTABLISHED FACT THAT RESPONDENT COMSAVINGS IS THE REGISTERED OWNER OF THE CAR THATHIT AND KILLED PETITIONER‘S SON WHICH FINDING, COUPLED WITH THE DISMISSAL OF THE COMPLAINT AGAINSTRESPONDENT COMSAVINGS, IS CONTRARY TO LAW AND EXISTING JURISPRUDENCE.

5

The sole issue is whether or not respondent bank, as the Lancer‘s registered owner, is liable for damages.

Petitioner states that the Court of Appeals erred when it disregarded the fact that respondent bank was the registered owner of the car andconcluded that the bank was not liable since there was "no iota of evidence that Borja was performing his assigned task at the time of theincident."6 He insists that the existence or absence of employer-employee relationship between the bank and Borja is immaterial in this casefor the registered owner of a motor vehicle is legally liable for the damages incurred by third persons for injuries sustained in the operation of said vehicle.

Respondent bank counters that the appellate court‘s decision is well supported by law and jurisprudence. According to respondent bank,under Article 2180 of the Civil Code, when the negligent employee commits the act outside the actual performance of his assigned tasks or duties, the employer has no vicarious liability. Further, the bank insists that it is not liable since at the time of the accident, Borja was drivingthe Lancer in his private capacity and was not performing functions in furtherance of the interest of Comsavings Bank. Additionally, according

to the bank, Borja already bought the car on installment basis. Hence, at the time of the incident, the bank concluded it was no longer theowner of the car.7

We are, however, unimpressed by respondent bank‘s disquisition. It goes against established jurisprudence.

In BA Finance Corporation vs. Court of Appeals, 215 SCRA 715, we had already held that the registered owner of any vehicle, even if not for public service, is primarily responsible to third persons for deaths, injuries and damages it caused. This is true even if the vehicle is leased tothird persons. In that case, petitioner‘s Isuzu ten-wheeler truck driven by an employee of a certain Lino Castro met an accident. Neither thedriver nor Lino Castro was connected to petitioner, for at the time of the incident, the truck was on lease to Rock Component Philippines, Inc.The Court held petitioner liable as the truck‘s registered owner, despite the absence of employer-employee relationship between petitioner and the driver. Though petitioner in said case had a right of reimbursement against Rock Component for the total amount of its liability, theCourt per Melo, J . made clear petitioner remained legally responsible to the victim of vehicular mishap on the basis of jurisprudentialdogmas.

As early as Erezo vs. Jepte, 102 Phil. 103, the Court through Labrador, J . had synthesized the rationale for holding the registered owner of avehicle directly liable. There we said:

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in landregistration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicleupon any public highway (section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle registration is to identify theowner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibilitytherefor can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on publichighways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that themotor vehicle registration is primarily ordained, in the interest of the determination of persons responsible for damages or injuriescaused on public highways.

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"‗One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available may act as a deterrent fromlax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in thesestatutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of therules of safety shall not escape because of lack of means to discover him.‘ The purpose of the statute is thwarted, andthe displayed number becomes a ‗snare and delusion,‘ if courts would entertain such defenses as that put forward byappellee in this case. No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to place a ‗middleman‘ between them and the public, and escape liability by themanner in which they recompense their servants." (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)

With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be allowed at thetrial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the sameon the person actually owning the vehicle? We hold with the trial court that the law does not allow him to do so; the law, with itsaim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to anindefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner.The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity toescape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner shouldnot be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another hasbecome the owner, so that he may thereby be relieved of the responsibility to the injured person.

The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We do not

think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in thesame action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. Theinconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to complywith the registration that the law demands and requires.

In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused tothe vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of theamount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.8

The rationale well postulated in Erezo applies in the present case. Thus far no change in jurisprudence has been brought to our attention. Inour view, respondent bank, as the registered owner of the vehicle, is primarily liable for Aguilar, Jr.‘s death. The Court of Appeals erred whenit concluded that the bank was not liable simply because (a) petitioner did not prove that Borja was acting as the bank‘s vice president at thetime of the accident; and (b) Borja had, according to respondent bank, already bought the car at the time of the mishap. For as long as therespondent bank remained the registered owner of the car involved in the vehicular accident, it could not escape primary liability for the deathof petitioner‘s son.

WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals dated October 16, 1996 in CA-G.R. CV No. 48793 isREVERSED. The judgment of the Regional Trial Court of Makati, Branch 59 in Civil Case No. 11231 is UPHELD. Costs against respondentbank.

SO ORDERED.

Bellosillo Mendoza, Buena, De Leon, Jr., JJ., concur.

Footnote1 Rollo, pp. 3-15.

2 Id . at 23-24.

3 Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only for one‘s own acts or omissions, but alsofor those of persons for whom one is responsible.

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees inthe service of the branches in which the latter are employed or on the occasion of their functions.

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

x x x

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

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Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-47745 April 15, 1988

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

Jose S. Amadora & Associates for petitioners.

Padilla Law Office for respondents.

CRUZ, J.:

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

Daffon was convicted of homicide thru reckless imprudence . 2 Additionally, the herein petitioners, as the victim's parents, filed a civil action for damages under Article 2180 of the Civil Code against the Colegio de San Jose-Recoletos, its rector the high school principal, the dean of boys, and the physics teacher, together with Daffon andtwo other students, through their respective parents. The complaint against the students was later dropped. After trial, the Court of First Instance of Cebu held the remaining defendants liable to the plaintiffs in the sum of P294,984.00, representing death compensation, loss of earning capacity, costs of litigation, funeral expenses, moraldamages, exemplary damages, and attorney's fees . 3 On appeal to the respondent court, however, the decision wasreversed and all the defendants were completely absolved . 4

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

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

The petitioners contend that their son was in the school to show his physics experiment as a prerequisite to hisgraduation; hence, he was then under the custody of the private respondents. The private respondents submit thatAlfredo Amadora had gone to the school only for the purpose of submitting his physics report and that he was nolonger in their custody because the semester had already ended.

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There is also the question of the identity of the gun used which the petitioners consider important because of anearlier incident which they claim underscores the negligence of the school and at least one of the privaterespondents. It is not denied by the respondents that on April 7, 1972, Sergio Damaso, Jr., the dean of boys,confiscated from Jose Gumban an unlicensed pistol but later returned it to him without making a report to the principal or taking any further action . 6 As Gumban was one of the companions of Daffon when the latter fired thegun that killed Alfredo, the petitioners contend that this was the same pistol that had been confiscated from Gumbanand that their son would not have been killed if it had not been returned by Damaso. The respondents say, however,that there is no proof that the gun was the same firearm that killed Alfredo.

Resolution of all these disagreements will depend on the interpretation of Article 2180 which, as it happens, isinvoked by both parties in support of their conflicting positions. The pertinent part of this article reads as follows:

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

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

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

This decision, which was penned by Justice Bautista Angelo on June 29,1957, exculpated the school in an obiter

dictum (as it was not a party to the case) on the ground that it was riot a school of arts and trades. Justice J.B.L.Reyes, with whom Justices Sabino Padilla and Alex Reyes concurred, dissented, arguing that it was the schoolauthorities who should be held liable Liability under this rule, he said, was imposed on (1) teachers in general; and(2) heads of schools of arts and trades in particular. The modifying clause "of establishments of arts and trades"should apply only to "heads" and not "teachers."

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

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

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

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This decision was concurred in by five other members, 10 including Justice J.B.L. Reyes, who stressed, in answer tothe dissenting opinion, that even students already of age were covered by the provision since they were equally inthe custody of the school and subject to its discipline. Dissenting with three others, 11 Justice Makalintal was for retaining the custody interpretation in Mercado and submitted that the rule should apply only to torts committed bystudents not yet of age as the school would be acting only in loco parentis.

In a footnote, Justice Teehankee said he agreed with Justice Reyes' dissent in the Exconde Case but added that"since the school involved at bar is a non-academic school, the question as to the applicability of the cited codal provision to academic institutions will have to await another case wherein it may properly be raised."

This is the case.

Unlike in Exconde and Mercado, the Colegio de San Jose-Recoletos has been directly impleaded and is sought to beheld liable under Article 2180; and unlike in Palisoc, it is not a school of arts and trades but an academic institutionof learning. The parties herein have also directly raised the question of whether or not Article 2180 covers evenestablishments which are technically not schools of arts and trades, and, if so, when the offending student issupposed to be "in its custody."

After an exhaustive examination of the problem, the Court has come to the conclusion that the provision in question

should apply to all schools, academic as well as non-academic. Where the school is academic rather than technicalor vocational in nature, responsibility for the tort committed by the student will attach to the teacher in charge of such student, following the first part of the provision. This is the general rule. In the case of establishments of artsand trades, it is the head thereof, and only he, who shall be held liable as an exception to the general rule. In other words, teachers in general shall be liable for the acts of their students except where the school is technical in nature,in which case it is the head thereof who shall be answerable. Following the canon of reddendo singula singulis "teachers" should apply to the words "pupils and students" and "heads of establishments of arts and trades" to theword "apprentices."

The Court thus conforms to the dissenting opinion expressed by Justice J.B.L. Reyes in Exconde where he said in part:

I can see no sound reason for limiting Art. 1903 of the Old Civil Code to teachers of arts and

trades and not to academic ones. What substantial difference is there between them insofar asconcerns the proper supervision and vice over their pupils? It cannot be seriously contended thatan academic teacher is exempt from the duty of watching that his pupils do not commit a tort tothe detriment of third Persons, so long as they are in a position to exercise authority andSupervision over the pupil. In my opinion, in the phrase "teachers or heads of establishments of arts and trades" used in Art. 1903 of the old Civil Code, the words "arts and trades" does notqualify "teachers" but only "heads of establishments." The phrase is only an updated version of theequivalent terms "preceptores y artesanos" used in the Italian and French Civil Codes.

If, as conceded by all commentators, the basis of the presumption of negligence of Art. 1903 insome culpa in vigilando that the parents, teachers, etc. are supposed to have incurred in theexercise of their authority, it would seem clear that where the parent places the child under theeffective authority of the teacher, the latter, and not the parent, should be the one answerable for

the torts committed while under his custody, for the very reason/that the parent is not supposed tointerfere with the discipline of the school nor with the authority and supervision of the teacher while the child is under instruction. And if there is no authority, there can be no responsibility.

There is really no substantial distinction between the academic and the non-academic schools insofar as tortscommitted by their students are concerned. The same vigilance is expected from the teacher over the students under his control and supervision, whatever the nature of the school where he is teaching. The suggestion in the Excondeand Mercado Cases is that the provision would make the teacher or even the head of the school of arts and tradesliable for an injury caused by any student in its custody but if that same tort were committed in an academic school,

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no liability would attach to the teacher or the school head. All other circumstances being the same, the teacher or thehead of the academic school would be absolved whereas the teacher and the head of the non-academic school would be held liable, and simply because the latter is a school of arts and trades.

The Court cannot see why different degrees of vigilance should be exercised by the school authorities on the basisonly of the nature of their respective schools. There does not seem to be any plausible reason for relaxing that

vigilance simply because the school is academic in nature and for increasing such vigilance where the school is non-academic. Notably, the injury subject of liability is caused by the student and not by the school itself nor is it a resultof the operations of the school or its equipment. The injury contemplated may be caused by any student regardlessof the school where he is registered. The teacher certainly should not be able to excuse himself by simply showingthat he is teaching in an academic school where, on the other hand, the head would be held liable if the school werenon-academic.

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

The reason for the disparity can be traced to the fact that historically the head of the school of arts and trades

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

It is conceded that the distinction no longer obtains at present in view of the expansion of the schools of arts andtrades, the consequent increase in their enrollment, and the corresponding diminution of the direct and personalcontract of their heads with the students. Article 2180, however, remains unchanged. In its present state, the

provision must be interpreted by the Court according to its clear and original mandate until the legislature, takinginto account the charges in the situation subject to be regulated, sees fit to enact the necessary amendment.

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

From a reading of the provision under examination, it is clear that while the custody requirement, to repeat Palisoc

v. Brillantes, does not mean that the student must be boarding with the school authorities, it does signify that thestudent should be within the control and under the influence of the school authorities at the time of the occurrence of the injury. This does not necessarily mean that such, custody be co-terminous with the semester, beginning with thestart of classes and ending upon the close thereof, and excluding the time before or after such period, such as the

period of registration, and in the case of graduating students, the period before the commencement exercises. In theview of the Court, the student is in the custody of the school authorities as long as he is under the control andinfluence of the school and within its premises, whether the semester has not yet begun or has already ended.

It is too tenuous to argue that the student comes under the discipline of the school only upon the start of classesnotwithstanding that before that day he has already registered and thus placed himself under its rules. Neither shouldsuch discipline be deemed ended upon the last day of classes notwithstanding that there may still be certainrequisites to be satisfied for completion of the course, such as submission of reports, term papers, clearances and the

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like. During such periods, the student is still subject to the disciplinary authority of the school and cannot consider himself released altogether from observance of its rules.

As long as it can be shown that the student is in the school premises in pursuance of a legitimate student objective,in the exercise of a legitimate student right, and even in the enjoyment of a legitimate student right, and even in theenjoyment of a legitimate student privilege, the responsibility of the school authorities over the student continues.

Indeed, even if the student should be doing nothing more than relaxing in the campus in the company of hisclassmates and friends and enjoying the ambience and atmosphere of the school, he is still within the custody andsubject to the discipline of the school authorities under the provisions of Article 2180.

During all these occasions, it is obviously the teacher-in-charge who must answer for his students' torts, in practically the same way that the parents are responsible for the child when he is in their custody. The teacher -in-charge is the one designated by the dean, principal, or other administrative superior to exercise supervision over the pupils in the specific classes or sections to which they are assigned. It is not necessary that at the time of the injury,the teacher be physically present and in a position to prevent it. Custody does not connote immediate and actual physical control but refers more to the influence exerted on the child and the discipline instilled in him as a result of such influence. Thus, for the injuries caused by the student, the teacher and not the parent shag be held responsible if the tort was committed within the premises of the school at any time when its authority could be validly exercisedover him.

In any event, it should be noted that the liability imposed by this article is supposed to fall directly on the teacher or the head of the school of arts and trades and not on the school itself. If at all, the school, whatever its nature, may beheld to answer for the acts of its teachers or even of the head thereof under the general principle of respondeat

superior , but then it may exculpate itself from liability by proof that it had exercised the diligence of a bonus

paterfamilias.

Such defense is, of course, also available to the teacher or the head of the school of arts and trades directly held toanswer for the tort committed by the student. As long as the defendant can show that he had taken the necessary precautions to prevent the injury complained of, he can exonerate himself from the liability imposed by Article2180, which also states that:

The responsibility treated of in this article shall cease when the Persons herein mentioned prove

that they observed all the diligence of a good father of a family to prevent damages.

In this connection, it should be observed that the teacher will be held liable not only when he is acting in loco

parentis for the law does not require that the offending student be of minority age. Unlike the parent, who wig beliable only if his child is still a minor, the teacher is held answerable by the law for the act of the student under himregardless of the student's age. Thus, in the Palisoc Case, liability attached to the teacher and the head of thetechnical school although the wrongdoer was already of age. In this sense, Article 2180 treats the parent morefavorably than the teacher.

The Court is not unmindful of the apprehensions expressed by Justice Makalintal in his dissenting opinion in Palisocthat the school may be unduly exposed to liability under this article in view of the increasing activism among thestudents that is likely to cause violence and resulting injuries in the school premises. That is a valid fear, to be sure. Nevertheless, it should be repeated that, under the present ruling, it is not the school that will be held directly liable.

Moreover, the defense of due diligence is available to it in case it is sought to be held answerable as principal for theacts or omission of its head or the teacher in its employ.

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

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

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

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

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

2. The rector, the high school principal and the dean of boys cannot be held liable because none of them was theteacher-in-charge as previously defined. Each of them was exercising only a general authority over the student bodyand not the direct control and influence exerted by the teacher placed in charge of particular classes or sections andthus immediately involved in its discipline. The evidence of the parties does not disclose who the teacher-in-chargeof the offending student was. The mere fact that Alfredo Amadora had gone to school that day in connection with

his physics report did not necessarily make the physics teacher, respondent Celestino Dicon, the teacher-in-charge of Alfredo's killer.

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

4. In the absence of a teacher-in-charge, it is probably the dean of boys who should be held liable especially in view

of the unrefuted evidence that he had earlier confiscated an unlicensed gun from one of the students and returned thesame later to him without taking disciplinary action or reporting the matter to higher authorities. While this wasclearly negligence on his part, for which he deserves sanctions from the school, it does not necessarily link him tothe shooting of Amador as it has not been shown that he confiscated and returned pistol was the gun that killed the petitioners' son.

5. Finally, as previously observed, the Colegio de San Jose-Recoletos cannot be held directly liable under the article because only the teacher or the head of the school of arts and trades is made responsible for the damage caused bythe student or apprentice. Neither can it be held to answer for the tort committed by any of the other private

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respondents for none of them has been found to have been charged with the custody of the offending student or has been remiss in the discharge of his duties in connection with such custody.

In sum, the Court finds under the facts as disclosed by the record and in the light of the principles herein announcedthat none of the respondents is liable for the injury inflicted by Pablito Damon on Alfredo Amadora that resulted inthe latter's death at the auditorium of the Colegio de San Jose-Recoletos on April 13, 1972. While we deeply

sympathize with the petitioners over the loss of their son under the tragic circumstances here related, wenevertheless are unable to extend them the material relief they seek, as a balm to their grief, under the law they haveinvoked.

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

Yap, Narvasa, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and Griño-Aquino, JJ., concur.

Fernan, Padilla and Teehankee, C.J., JJ, took no part.

Separate Opinions

MELENCIO-HERRERA, J., concurring and dissenting:

I concur, except with respect to the restricted meaning given the term "teacher" in Article 2180 of the Civil Code as"teacher-in-charge." This would limit liability to occasions where there are classes under the immediate charge of ateacher, which does not seem to be the intendment of the law.

As I understand it, the philosophy of the law is that whoever stands in loco parentis will have the same duties andobligations as parents whenever in such a standing. Those persons are mandatorily held liable for the tortious acts of pupils and students so long as the latter remain in their custody, meaning their protective and supervisory custody.

Thus Article 349 of the Civil Code enumerates the persons who stand in loco parentis and thereby exercisesubstitute parental authority:

Art. 349 The following persons shall exercise substitute parental authority:

2) Teachers and professors

4) Directors of trade establishments, with regard to apprentices;'

Article 352 of the Civil Code further provides:

Art. 362. The relations between teacher and pupil, professor and student, are fixed by governmentregulations and those of each school or institution....

But even such rules and regulations as may be fixed can not contravene the concept of substitute parental authority.

The rationale of liability of school heads and teachers for the tortious acts of their pupils was explained in Palisoc

vs. Brillantes (41 SCRA 548), thus:

The protective custody of the school heads and teachers is mandatorily substituted for that of the parents, and hence, it becomes their obligation as well as that of the school itself to provide proper supervision of the students' activities during the whole time that they are at attendance in theschool, including recess time, as well as to take the necessary precautions to protect the students intheir custody from dangers and hazards that would reasonably be anticipated, including injuries

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that some students themselves may inflict wilfully or through negligence on their fellow students.(Emphasis supplied)

Of course, as provided for in the same Article 2180, the responsibility treated of shall cease when the personsmentioned prove that they observed all the diligence of a good father of a family to prevent damage.

And while a school is, admittedly, not directly liable since Article 2180 speaks only of teachers and schools heads,yet, by virtue of the same provision, the school, as their employer, may be held liable for the failure of its teachers or school heads to perform their mandatory legal duties as substitute parents (Sangco, Philippine Law on Torts &Damages, 1978 ed., p. 201). Again, the school may exculpate itself from liability by proving that it had exercised thediligence of a good father of the family.

Art. 2180. x x x

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

xxx xxx xxx

Parenthetically, from the enumeration in Article 349 of the Civil Code, supra, it is apparent that the CodeCommission had already segregated the classification of "teachers and professors" vis-a-vis their pupils, from"directors of trade establishments, with regard to their apprentices."

GUTIERREZ, JR., J., concurring:

I concur in the Court's opinion so carefully analyzed and crafted by Justice Isagani A. Cruz. However, I would liketo stress the need for a major amendment to, if not a complete scrapping of, Article 2180 of the Civil Code insofar asit refers to teachers or heads of establishments of arts and trades in relation to pupils and students or apprentices. Theseventh paragraph of Art. 2180 is a relic of the past and contemplates a situation long gone and out of date. In a Palisoc v. Brillantes (41 SCRA 548) situation, it is bound to result in mischief and injustice.

First, we no longer have masters and apprentices toiling in schools of arts and trades. Students in "technological"colleges and universities are no different from students in liberal arts or professional schools. Apprentices now work in regular shops and factories and their relationship to the employer is covered by laws governing the employmentrelationship and not by laws governing the teacher — student relationship.

Second, except for kindergarten, elementary, and perhaps early high school students, teachers are often no longer objects of veneration who are given the respect due to substitute parents. Many students in their late teens or earlyadult years view some teachers as part of a bourgeois or reactionary group whose advice on behaviour, deportment,and other non-academic matters is not only resented but actively rejected. It ,seems most unfair to hold teachersliable on a presumption juris tantum of negligence for acts of students even under circumstances where strictlyspeaking there could be no in loco parentis relationship. Why do teachers have to prove the contrary of negligenceto be freed from solidary liability for the acts f bomb-throwing or pistol packing students who would just as soon

hurt them as they would other members of the so-called-establishment.

The ordinary rules on quasi-delicta should apply to teachers and schools of whatever nature insofar as grown upstudents are concerned. The provision of Art. 2180 of the Civil Code involved in this case has outlived its purpose.The Court cannot make law. It can only apply the law with its imperfections. However, the Court can suggest thatsuch a law should be amended or repealed.

Separate Opinions

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MELENCIO-HERRERA, J., concurring and dissenting:

I concur, except with respect to the restricted meaning given the term "teacher" in Article 2180 of the Civil Code as"teacher-in-charge." This would limit liability to occasions where there are classes under the immediate charge of ateacher, which does not seem to be the intendment of the law.

As I understand it, the philosophy of the law is that whoever stands in loco parentis will have the same duties andobligations as parents whenever in such a standing. Those persons are mandatorily held liable for the tortious acts of pupils and students so long as the latter remain in their custody, meaning their protective and supervisory custody.

Thus Article 349 of the Civil Code enumerates the persons who stand in loco parentis and thereby exercisesubstitute parental authority:

Art. 349 The following persons shall exercise substitute parental authority:

2) Teachers and professors

4) Directors of trade establishments, with regard to apprentices;'

Article 352 of the Civil Code further provides:

Art. 362. The relations between teacher and pupil, professor and student, are fixed by governmentregulations and those of each school or institution....

But even such rules and regulations as may be fixed can not contravene the concept of substitute parental authority.

The rationale of liability of school heads and teachers for the tortious acts of their pupils was explained in Palisoc

vs. Brillantes (41 SCRA 548), thus:

The protective custody of the school heads and teachers is mandatorily substituted for that of the parents, and hence, it becomes their obligation as well as that of the school itself to provide proper

supervision of the students' activities during the whole time that they are at attendance in theschool, including recess time, as well as to take the necessary precautions to protect the students intheir custody from dangers and hazards that would reasonably be anticipated, including injuriesthat some students themselves may inflict wilfully or through negligence on their fellow students.(Emphasis supplied)

Of course, as provided for in the same Article 2180, the responsibility treated of shall cease when the personsmentioned prove that they observed all the diligence of a good father of a family to prevent damage.

And while a school is, admittedly, not directly liable since Article 2180 speaks only of teachers and schools heads,yet, by virtue of the same provision, the school, as their employer, may be held liable for the failure of its teachers or school heads to perform their mandatory legal duties as substitute parents (Sangco, Philippine Law on Torts &Damages, 1978 ed., p. 201). Again, the school may exculpate itself from liability by proving that it had exercised thediligence of a good father of the family.

Art. 2180. x x x


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Parenthetically, from the enumeration in Article 349 of the Civil Code, supra, it is apparent that the CodeCommission had already segregated the classification of "teachers and professors" vis-a-vis their pupils, from"directors of trade establishments, with regard to their apprentices."

GUTIERREZ, JR., J., concurring:

I concur in the Court's opinion so carefully analyzed and crafted by Justice Isagani A. Cruz. However, I would liketo stress the need for a major amendment to, if not a complete scrapping of, Article 2180 of the Civil Code insofar asit refers to teachers or heads of establishments of arts and trades in relation to pupils and students or apprentices. Theseventh paragraph of Art. 2180 is a relic of the past and contemplates a situation long gone and out of date. In a Palisoc v. Brillantes (41 SCRA 548) situation, it is bound to result in mischief and injustice.

First, we no longer have masters and apprentices toiling in schools of arts and trades. Students in "technological"colleges and universities are no different from students in liberal arts or professional schools. Apprentices now work in regular shops and factories and their relationship to the employer is covered by laws governing the employmentrelationship and not by laws governing the teacher — student relationship.

Second, except for kindergarten, elementary, and perhaps early high school students, teachers are often no longer objects of veneration who are given the respect due to substitute parents. Many students in their late teens or early

adult years view some teachers as part of a bourgeois or reactionary group whose advice on behaviour, deportment,and other non-academic matters is not only resented but actively rejected. It ,seems most unfair to hold teachersliable on a presumption juris tantum of negligence for acts of students even under circumstances where strictlyspeaking there could be no in loco parentis relationship. Why do teachers have to prove the contrary of negligenceto be freed from solidary liability for the acts f bomb-throwing or pistol packing students who would just as soonhurt them as they would other members of the so-called-establishment.

The ordinary rules on quasi-delicta should apply to teachers and schools of whatever nature insofar as grown upstudents are concerned. The provision of Art. 2180 of the Civil Code involved in this case has outlived its purpose.The Court cannot make law. It can only apply the law with its imperfections. However, the Court can suggest thatsuch a law should be amended or repealed.

Footnotes: 1 Rollo, pp. 63,157.

2 lbid., p. 38.

3 Id., p. 23.

4 Id p. 31. Climaco, J., ponente, with Pascual and Agcaoili, JJ.

5 Id., pp. 30-31,

6 Id., pp. 23, 272.

7 101 Phil, 843.

8 108 Phil, 414,

9 41 SCRA 548.

10 Concepcion, C.J., Reyes, Barredo, Villamor, and Makasiar, JJ.

11 Castro, Fernando, and Zaldivar, JJ.

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Manila

THIRD DIVISION

G.R. No. 142625 December 19, 2006

ROGELIO P. NOGALES, for himself and on behalf of the minors, ROGER ANTHONY,ANGELICA, NANCY, and MICHAEL CHRISTOPHER, all surnamed NOGALES, petitioners,

vs.

CAPITOL MEDICAL CENTER, DR. OSCAR ESTRADA, DR. ELY VILLAFLOR, DR. ROSAUY, DR. JOEL ENRIQUEZ, DR. PERPETUA LACSON, DR. NOE ESPINOLA, and NURSE J.DUMLAO, respondents.

DECISION

CARPIO, J.:

The Case

This petition for review1 assails the 6 February 1998 Decision2 and 21 March 2000 Resolution3of the Court of Appeals in CA-G.R. CV No. 45641. The Court of Appeals affirmed in toto the 22 November 1993 Decision4 of the Regional Trial Court of Manila, Branch 33, finding Dr. Oscar Estrada solely liable for damages for the death of his patient, Corazon Nogales, while absolvingthe remaining respondents of any liability. The Court of Appeals denied petitioners' motion for reconsideration.

The Facts

Pregnant with her fourth child, Corazon Nogales ("Corazon"), who was then 37 years old, wasunder the exclusive prenatal care of Dr. Oscar Estrada ("Dr. Estrada") beginning on her fourthmonth of pregnancy or as early as December 1975. While Corazon was on her last trimester of pregnancy, Dr. Estrada noted an increase in her blood pressure and development of leg edema5indicating preeclampsia,6 which is a dangerous complication of pregnancy.7

Around midnight of 25 May 1976, Corazon started to experience mild labor pains promptingCorazon and Rogelio Nogales ("Spouses Nogales") to see Dr. Estrada at his home. After examining Corazon, Dr. Estrada advised her immediate admission to the Capitol Medical Center ("CMC").

On 26 May 1976, Corazon was admitted at 2:30 a.m. at the CMC after the staff nurse noted thewritten admission request8 of Dr. Estrada. Upon Corazon's admission at the CMC, Rogelio Nogales ("Rogelio") executed and signed the "Consent on Admission and Agreement"9 and"Admission Agreement."10 Corazon was then brought to the labor room of the CMC.

Dr. Rosa Uy ("Dr. Uy"), who was then a resident physician of CMC, conducted an internalexamination of Corazon. Dr. Uy then called up Dr. Estrada to notify him of her findings.

Based on the Doctor's Order Sheet,11 around 3:00 a.m., Dr. Estrada ordered for 10 mg. of valiumto be administered immediately by intramuscular injection. Dr. Estrada later ordered the start of

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intravenous administration of syntocinon admixed with dextrose, 5%, in lactated Ringers' solution,at the rate of eight to ten micro-drops per minute.

According to the Nurse's Observation Notes,12 Dr. Joel Enriquez ("Dr. Enriquez"), ananesthesiologist at CMC, was notified at 4:15 a.m. of Corazon's admission. Subsequently, whenasked if he needed the services of an anesthesiologist, Dr. Estrada refused. Despite Dr. Estrada's

refusal, Dr. Enriquez stayed to observe Corazon's condition.

At 6:00 a.m., Corazon was transferred to Delivery Room No. 1 of the CMC. At 6:10 a.m.,Corazon's bag of water ruptured spontaneously. At 6:12 a.m., Corazon's cervix was fully dilated.At 6:13 a.m., Corazon started to experience convulsions.

At 6:15 a.m., Dr. Estrada ordered the injection of ten grams of magnesium sulfate. However, Dr.Ely Villaflor ("Dr. Villaflor"), who was assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate.

At 6:22 a.m., Dr. Estrada, assisted by Dr. Villaflor, applied low forceps to extract Corazon's baby.

In the process, a 1.0 x 2.5 cm. piece of cervical tissue was allegedly torn. The baby came out in anapnic, cyanotic, weak and injured condition. Consequently, the baby had to be intubated andresuscitated by Dr. Enriquez and Dr. Payumo.

At 6:27 a.m., Corazon began to manifest moderate vaginal bleeding which rapidly became profuse. Corazon's blood pressure dropped from 130/80 to 60/40 within five minutes. There wascontinuous profuse vaginal bleeding. The assisting nurse administered hemacel through a gauge19 needle as a side drip to the ongoing intravenous injection of dextrose.

At 7:45 a.m., Dr. Estrada ordered blood typing and cross matching with bottled blood. It took approximately 30 minutes for the CMC laboratory, headed by Dr. Perpetua Lacson ("Dr.Lacson"), to comply with Dr. Estrada's order and deliver the blood.

At 8:00 a.m., Dr. Noe Espinola ("Dr. Espinola"), head of the Obstetrics-Gynecology Departmentof the CMC, was apprised of Corazon's condition by telephone. Upon being informed thatCorazon was bleeding profusely, Dr. Espinola ordered immediate hysterectomy. Rogelio wasmade to sign a "Consent to Operation."13

Due to the inclement weather then, Dr. Espinola, who was fetched from his residence by anambulance, arrived at the CMC about an hour later or at 9:00 a.m. He examined the patient andordered some resuscitative measures to be administered. Despite Dr. Espinola's efforts, Corazondied at 9:15 a.m. The cause of death was "hemorrhage, post partum."14

On 14 May 1980, petitioners filed a complaint for damages15 with the Regional Trial Court16 of Manila against CMC, Dr. Estrada, Dr. Villaflor, Dr. Uy, Dr. Enriquez, Dr. Lacson, Dr. Espinola,

and a certain Nurse J. Dumlao for the death of Corazon. Petitioners mainly contended thatdefendant physicians and CMC personnel were negligent in the treatment and management of Corazon's condition. Petitioners charged CMC with negligence in the selection and supervision of defendant physicians and hospital staff.

For failing to file their answer to the complaint despite service of summons, the trial courtdeclared Dr. Estrada, Dr. Enriquez, and Nurse Dumlao in default.17 CMC, Dr. Villaflor, Dr. Uy,Dr. Espinola, and Dr. Lacson filed their respective answers denying and opposing the allegationsin the complaint. Subsequently, trial ensued.

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After more than 11 years of trial, the trial court rendered judgment on 22 November 1993 findingDr. Estrada solely liable for damages. The trial court ruled as follows:

The victim was under his pre-natal care, apparently, his fault began from his incorrect and

inadequate management and lack of treatment of the pre-eclamptic condition of his patient. It isnot disputed that he misapplied the forceps in causing the delivery because it resulted in a largecervical tear which had caused the profuse bleeding which he also failed to control with theapplication of inadequate injection of magnesium sulfate by his assistant Dra. Ely Villaflor. Dr.Estrada even failed to notice the erroneous administration by nurse Dumlao of hemacel by way of side drip, instead of direct intravenous injection, and his failure to consult a senior obstetrician atan early stage of the problem.

On the part however of Dra. Ely Villaflor, Dra. Rosa Uy, Dr. Joel Enriquez, Dr. Lacson, Dr.Espinola, nurse J. Dumlao and CMC, the Court finds no legal justification to find them civillyliable.

On the part of Dra. Ely Villaflor, she was only taking orders from Dr. Estrada, the principal

physician of Corazon Nogales. She can only make suggestions in the manner the patient maybetreated but she cannot impose her will as to do so would be to substitute her good judgment to thatof Dr. Estrada. If she failed to correctly diagnose the true cause of the bleeding which in this caseappears to be a cervical laceration, it cannot be safely concluded by the Court that Dra. Villaflor had the correct diagnosis and she failed to inform Dr. Estrada. No evidence was introduced toshow that indeed Dra. Villaflor had discovered that there was laceration at the cervical area of the patient's internal organ.

On the part of nurse Dumlao, there is no showing that when she administered the hemacel as aside drip, she did it on her own. If the correct procedure was directly thru the veins, it could only be because this was what was probably the orders of Dr. Estrada.

While the evidence of the plaintiffs shows that Dr. Noe Espinola, who was the Chief of the

Department of Obstetrics and Gynecology who attended to the patient Mrs. Nogales, it was only at9:00 a.m. That he was able to reach the hospital because of typhoon Didang (Exhibit 2). While hewas able to give prescription in the manner Corazon Nogales may be treated, the prescription was based on the information given to him by phone and he acted on the basis of facts as presented tohim, believing in good faith that such is the correct remedy. He was not with Dr. Estrada when the patient was brought to the hospital at 2:30 o'clock a.m. So, whatever errors that Dr. Estradacommitted on the patient before 9:00 o'clock a.m. are certainly the errors of Dr. Estrada andcannot be the mistake of Dr. Noe Espinola. His failure to come to the hospital on time was due tofortuitous event.

On the part of Dr. Joel Enriquez, while he was present in the delivery room, it is not incumbentupon him to call the attention of Dr. Estrada, Dra. Villaflor and also of Nurse Dumlao on thealleged errors committed by them. Besides, as anesthesiologist, he has no authority to control the

actuations of Dr. Estrada and Dra. Villaflor. For the Court to assume that there were errors beingcommitted in the presence of Dr. Enriquez would be to dwell on conjectures and speculations.

On the civil liability of Dr. Perpetua Lacson, [s]he is a hematologist and in-charge of the blood bank of the CMC. The Court cannot accept the theory of the plaintiffs that there was delay indelivering the blood needed by the patient. It was testified, that in order that this blood will bemade available, a laboratory test has to be conducted to determine the type of blood, crossmatching and other matters consistent with medical science so, the lapse of 30 minutes maybe

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considered a reasonable time to do all of these things, and not a delay as the plaintiffs would wantthe Court to believe.

Admittedly, Dra. Rosa Uy is a resident physician of the Capitol Medical Center. She was sued because of her alleged failure to notice the incompetence and negligence of Dr. Estrada. However,there is no evidence to support such theory. No evidence was adduced to show that Dra. Rosa Uy

as a resident physician of Capitol Medical Center, had knowledge of the mismanagement of the patient Corazon Nogales, and that notwithstanding such knowledge, she tolerated the same tohappen.

In the pre-trial order, plaintiffs and CMC agreed that defendant CMC did not have any hand or participation in the selection or hiring of Dr. Estrada or his assistant Dra. Ely Villaflor as attending physician[s] of the deceased. In other words, the two (2) doctors were not employees of thehospital and therefore the hospital did not have control over their professional conduct. When Mrs. Nogales was brought to the hospital, it was an emergency case and defendant CMC had no choice but to admit her. Such being the case, there is therefore no legal ground to apply the provisions of Article 2176 and 2180 of the New Civil Code referring to the vicarious liability of an employer for the negligence of its employees. If ever in this case there is fault or negligence in the treatment of the deceased on the part of the attending physicians who were employed by the family of the

deceased, such civil liability should be borne by the attending physicians under the principle of "respondeat superior".

WHEREFORE, premises considered, judgment is hereby rendered finding defendant Dr. Estradaof Number 13 Pitimini St. San Francisco del Monte, Quezon City civilly liable to pay plaintiffs: 1)By way of actual damages in the amount of P105,000.00; 2) By way of moral damages in theamount of P700,000.00; 3) Attorney's fees in the amount of P100,000.00 and to pay the costs of suit.

For failure of the plaintiffs to adduce evidence to support its [sic] allegations against the other defendants, the complaint is hereby ordered dismissed. While the Court looks with disfavor thefiling of the present complaint against the other defendants by the herein plaintiffs, as in a way ithas caused them personal inconvenience and slight damage on their name and reputation, the

Court cannot accepts [sic] however, the theory of the remaining defendants that plaintiffs weremotivated in bad faith in the filing of this complaint. For this reason defendants' counterclaims arehereby ordered dismissed.

SO ORDERED.18

Petitioners appealed the trial court's decision. Petitioners claimed that aside from Dr. Estrada, theremaining respondents should be held equally liable for negligence. Petitioners pointed out theextent of each respondent's alleged liability.

On 6 February 1998, the Court of Appeals affirmed the decision of the trial court.19 Petitionersfiled a motion for reconsideration which the Court of Appeals denied in its Resolution of 21March 2000.20

Hence, this petition.

Meanwhile, petitioners filed a Manifestation dated 12 April 200221 stating that respondents Dr.Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao "need no longer be notified of the petition because they are absolutely not involved in the issue raised before the [Court], regarding theliability of [CMC]."22 Petitioners stressed that the subject matter of this petition is the liability of CMC for the negligence of Dr. Estrada.23

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The Court issued a Resolution dated 9 September 200224 dispensing with the requirement tosubmit the correct and present addresses of respondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor,and Nurse Dumlao. The Court stated that with the filing of petitioners' Manifestation, it should beunderstood that they are claiming only against respondents CMC, Dr. Espinola, Dr. Lacson, andDr. Uy who have filed their respective comments. Petitioners are foregoing further claims againstrespondents Dr. Estrada, Dr. Enriquez, Dr. Villaflor, and Nurse Dumlao.

The Court noted that Dr. Estrada did not appeal the decision of the Court of Appeals affirming thedecision of the Regional Trial Court. Accordingly, the decision of the Court of Appeals, affirmingthe trial court's judgment, is already final as against Dr. Oscar Estrada.

Petitioners filed a motion for reconsideration25 of the Court's 9 September 2002 Resolutionclaiming that Dr. Enriquez, Dr. Villaflor and Nurse Dumlao were notified of the petition at their counsels' last known addresses. Petitioners reiterated their imputation of negligence on theserespondents. The Court denied petitioners' Motion for Reconsideration in its 18 February 2004Resolution.26

The Court of Appeals' Ruling

In its Decision of 6 February 1998, the Court of Appeals upheld the trial court's ruling. The Courtof Appeals rejected petitioners' view that the doctrine in Darling v. Charleston CommunityMemorial Hospital27 applies to this case. According to the Court of Appeals, the present casediffers from the Darling case since Dr. Estrada is an independent contractor-physician whereas theDarling case involved a physician and a nurse who were employees of the hospital.

Citing other American cases, the Court of Appeals further held that the mere fact that a hospital permitted a physician to practice medicine and use its facilities is not sufficient to render thehospital liable for the physician's negligence.28 A hospital is not responsible for the negligence of a physician who is an independent contractor.29

The Court of Appeals found the cases of Davidson v. Conole30 and Campbell v. Emma LaingStevens Hospital31 applicable to this case. Quoting Campbell, the Court of Appeals stated that

where there is no proof that defendant physician was an employee of defendant hospital or thatdefendant hospital had reason to know that any acts of malpractice would take place, defendanthospital could not be held liable for its failure to intervene in the relationship of physician-patient between defendant physician and plaintiff.

On the liability of the other respondents, the Court of Appeals applied the "borrowed servant"doctrine considering that Dr. Estrada was an independent contractor who was merely exercisinghospital privileges. This doctrine provides that once the surgeon enters the operating room andtakes charge of the proceedings, the acts or omissions of operating room personnel, and anynegligence associated with such acts or omissions, are imputable to the surgeon.32 While theassisting physicians and nurses may be employed by the hospital, or engaged by the patient, theynormally become the temporary servants or agents of the surgeon in charge while the operation isin progress, and liability may be imposed upon the surgeon for their negligent acts under the

doctrine of respondeat superior.33

The Court of Appeals concluded that since Rogelio engaged Dr. Estrada as the attending physicianof his wife, any liability for malpractice must be Dr. Estrada's sole responsibility.

While it found the amount of damages fair and reasonable, the Court of Appeals held that nointerest could be imposed on unliquidated claims or damages.

The Issue

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Basically, the issue in this case is whether CMC is vicariously liable for the negligence of Dr.Estrada. The resolution of this issue rests, on the other hand, on the ascertainment of therelationship between Dr. Estrada and CMC. The Court also believes that a determination of theextent of liability of the other respondents is inevitable to finally and completely dispose of the present controversy.

The Ruling of the Court

The petition is partly meritorious.

On the Liability of CMC

Dr. Estrada's negligence in handling the treatment and management of Corazon's condition whichultimately resulted in Corazon's death is no longer in issue. Dr. Estrada did not appeal the decisionof the Court of Appeals which affirmed the ruling of the trial court finding Dr. Estrada solelyliable for damages. Accordingly, the finding of the trial court on Dr. Estrada's negligence isalready final.

Petitioners maintain that CMC is vicariously liable for Dr. Estrada's negligence based on Article

2180 in relation to Article 2176 of the Civil Code. These provisions pertinently state:

Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.


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

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

Similarly, in the United States, a hospital which is the employer, master, or principal of a physician employee, servant, or agent, may be held liable for the physician's negligence under thedoctrine of respondeat superior.34

In the present case, petitioners maintain that CMC, in allowing Dr. Estrada to practice and admit patients at CMC, should be liable for Dr. Estrada's malpractice. Rogelio claims that he knew Dr.Estrada as an accredited physician of CMC, though he discovered later that Dr. Estrada was not asalaried employee of the CMC.35 Rogelio further claims that he was dealing with CMC, whose

primary concern was the treatment and management of his wife's condition. Dr. Estrada justhappened to be the specific person he talked to representing CMC.36 Moreover, the fact that CMCmade Rogelio sign a Consent on Admission and Admission Agreement37 and a Consent toOperation printed on the letterhead of CMC indicates that CMC considered Dr. Estrada as amember of its medical staff.

On the other hand, CMC disclaims liability by asserting that Dr. Estrada was a mere visiting physician and that it admitted Corazon because her physical condition then was classified anemergency obstetrics case.38

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CMC alleges that Dr. Estrada is an independent contractor "for whose actuations CMC would be atotal stranger." CMC maintains that it had no control or supervision over Dr. Estrada in theexercise of his medical profession.

The Court had the occasion to determine the relationship between a hospital and a consultant or visiting physician and the liability of such hospital for that physician's negligence in Ramos v.

Court of Appeals,39 to wit:

In the first place, hospitals exercise significant control in the hiring and firing of consultants and inthe conduct of their work within the hospital premises. Doctors who apply for "consultant" slots,visiting or attending, are required to submit proof of completion of residency, their educationalqualifications; generally, evidence of accreditation by the appropriate board (diplomate), evidenceof fellowship in most cases, and references. These requirements are carefully scrutinized bymembers of the hospital administration or by a review committee set up by the hospital who either accept or reject the application. This is particularly true with respondent hospital.

After a physician is accepted, either as a visiting or attending consultant, he is normally required toattend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents,moderate grand rounds and patient audits and perform other tasks and responsibilities, for the

privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients into the hospital. In addition to these, the physician's performance as a specialist isgenerally evaluated by a peer review committee on the basis of mortality and morbidity statistics,and feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or aconsultant who regularly falls short of the minimum standards acceptable to the hospital or its peer review committee, is normally politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending andvisiting "consultant" staff. While "consultants" are not, technically employees, a point whichrespondent hospital asserts in denying all responsibility for the patient's condition, the controlexercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of anemployer-employee relationship, with the exception of the payment of wages. In assessingwhether such a relationship in fact exists, the control test is determining. Accordingly, on the basis

of the foregoing, we rule that for the purpose of allocating responsibility in medical negligencecases, an employer-employee relationship in effect exists between hospitals and their attendingand visiting physicians. This being the case, the question now arises as to whether or notrespondent hospital is solidarily liable with respondent doctors for petitioner's condition.

The basis for holding an employer solidarily responsible for the negligence of its employee isfound in Article 2180 of the Civil Code which considers a person accountable not only for his ownacts but also for those of others based on the former's responsibility under a relationship of patria potestas. x x x40 (Emphasis supplied)

While the Court in Ramos did not expound on the control test, such test essentially determineswhether an employment relationship exists between a physician and a hospital based on theexercise of control over the physician as to details. Specifically, the employer (or the hospital)

must have the right to control both the means and the details of the process by which the employee(or the physician) is to accomplish his task.41

After a thorough examination of the voluminous records of this case, the Court finds no singleevidence pointing to CMC's exercise of control over Dr. Estrada's treatment and management of Corazon's condition. It is undisputed that throughout Corazon's pregnancy, she was under theexclusive prenatal care of Dr. Estrada. At the time of Corazon's admission at CMC and during her delivery, it was Dr. Estrada, assisted by Dr. Villaflor, who attended to Corazon. There was noshowing that CMC had a part in diagnosing Corazon's condition. While Dr. Estrada enjoyed staff

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privileges at CMC, such fact alone did not make him an employee of CMC.42 CMC merelyallowed Dr. Estrada to use its facilities43 when Corazon was about to give birth, which CMCconsidered an emergency. Considering these circumstances, Dr. Estrada is not an employee of CMC, but an independent contractor.

The question now is whether CMC is automatically exempt from liability considering that Dr.

Estrada is an independent contractor-physician.

In general, a hospital is not liable for the negligence of an independent contractor-physician. Thereis, however, an exception to this principle. The hospital may be liable if the physician is the"ostensible" agent of the hospital.44 This exception is also known as the "doctrine of apparentauthority."45 In Gilbert v. Sycamore Municipal Hospital,46 the Illinois Supreme Court explainedthe doctrine of apparent authority in this wise:

[U]nder the doctrine of apparent authority a hospital can be held vicariously liable for thenegligent acts of a physician providing care at the hospital, regardless of whether the physician isan independent contractor, unless the patient knows, or should have known, that the physician isan independent contractor. The elements of the action have been set out as follows:

"For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that: (1)the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude thatthe individual who was alleged to be negligent was an employee or agent of the hospital; (2)where the acts of the agent create the appearance of authority, the plaintiff must also prove that thehospital had knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon theconduct of the hospital or its agent, consistent with ordinary care and prudence."

The element of "holding out" on the part of the hospital does not require an express representation by the hospital that the person alleged to be negligent is an employee. Rather, the element issatisfied if the hospital holds itself out as a provider of emergency room care without informingthe patient that the care is provided by independent contractors.

The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies upon

the hospital to provide complete emergency room care, rather than upon a specific physician.

The doctrine of apparent authority essentially involves two factors to determine the liability of anindependent-contractor physician.

The first factor focuses on the hospital's manifestations and is sometimes described as an inquirywhether the hospital acted in a manner which would lead a reasonable person to conclude that theindividual who was alleged to be negligent was an employee or agent of the hospital.47 In thisregard, the hospital need not make express representations to the patient that the treating physicianis an employee of the hospital; rather a representation may be general and implied.48

The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil

Code provides that "[t]hrough estoppel, an admission or representation is rendered conclusiveupon the person making it, and cannot be denied or disproved as against the person relyingthereon." Estoppel rests on this rule: "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to actupon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it."49

In the instant case, CMC impliedly held out Dr. Estrada as a member of its medical staff. ThroughCMC's acts, CMC clothed Dr. Estrada with apparent authority thereby leading the Spouses

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Nogales to believe that Dr. Estrada was an employee or agent of CMC. CMC cannot nowrepudiate such authority.

First, CMC granted staff privileges to Dr. Estrada. CMC extended its medical staff and facilities toDr. Estrada. Upon Dr. Estrada's request for Corazon's admission, CMC, through its personnel,readily accommodated Corazon and updated Dr. Estrada of her condition.

Second, CMC made Rogelio sign consent forms printed on CMC letterhead. Prior to Corazon'sadmission and supposed hysterectomy, CMC asked Rogelio to sign release forms, the contents of which reinforced Rogelio's belief that Dr. Estrada was a member of CMC's medical staff.50 TheConsent on Admission and Agreement explicitly provides:

KNOW ALL MEN BY THESE PRESENTS:

I, Rogelio Nogales, of legal age, a resident of 1974 M. H. Del Pilar St., Malate Mla., being thefather/mother/brother/sister/spouse/relative/ guardian/or person in custody of Ma. Corazon, andrepresenting his/her family, of my own volition and free will, do consent and submit said Ma.Corazon to Dr. Oscar Estrada (hereinafter referred to as Physician) for cure, treatment,retreatment, or emergency measures, that the Physician, personally or by and through the Capitol

Medical Center and/or its staff, may use, adapt, or employ such means, forms or methods of cure,treatment, retreatment, or emergency measures as he may see best and most expedient; that Ma.Corazon and I will comply with any and all rules, regulations, directions, and instructions of thePhysician, the Capitol Medical Center and/or its staff; and, that I will not hold liable or responsibleand hereby waive and forever discharge and hold free the Physician, the Capitol Medical Center and/or its staff, from any and all claims of whatever kind of nature, arising from directly or indirectly, or by reason of said cure, treatment, or retreatment, or emergency measures or intervention of said physician, the Capitol Medical Center and/or its staff.

x x x x51 (Emphasis supplied)

While the Consent to Operation pertinently reads, thus:

I, ROGELIO NOGALES, x x x, of my own volition and free will, do consent and submit saidCORAZON NOGALES to Hysterectomy, by the Surgical Staff and Anesthesiologists of CapitolMedical Center and/or whatever succeeding operations, treatment, or emergency measures as may be necessary and most expedient; and, that I will not hold liable or responsible and hereby waiveand forever discharge and hold free the Surgeon, his assistants, anesthesiologists, the CapitolMedical Center and/or its staff, from any and all claims of whatever kind of nature, arising fromdirectly or indirectly, or by reason of said operation or operations, treatment, or emergencymeasures, or intervention of the Surgeon, his assistants, anesthesiologists, the Capitol MedicalCenter and/or its staff.52 (Emphasis supplied)

Without any indication in these consent forms that Dr. Estrada was an independent contractor- physician, the Spouses Nogales could not have known that Dr. Estrada was an independentcontractor. Significantly, no one from CMC informed the Spouses Nogales that Dr. Estrada was anindependent contractor. On the contrary, Dr. Atencio, who was then a member of CMC Board of Directors, testified that Dr. Estrada was part of CMC's surgical staff.53

Third, Dr. Estrada's referral of Corazon's profuse vaginal bleeding to Dr. Espinola, who was thenthe Head of the Obstetrics and Gynecology Department of CMC, gave the impression that Dr.Estrada as a member of CMC's medical staff was collaborating with other CMC-employedspecialists in treating Corazon.

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The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry onwhether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent withordinary care and prudence.54

The records show that the Spouses Nogales relied upon a perceived employment relationship withCMC in accepting Dr. Estrada's services. Rogelio testified that he and his wife specifically chose

Dr. Estrada to handle Corazon's delivery not only because of their friend's recommendation, butmore importantly because of Dr. Estrada's "connection with a reputable hospital, the [CMC]."55 Inother words, Dr. Estrada's relationship with CMC played a significant role in the Spouses Nogales'decision in accepting Dr. Estrada's services as the obstetrician-gynecologist for Corazon's delivery.Moreover, as earlier stated, there is no showing that before and during Corazon's confinement atCMC, the Spouses Nogales knew or should have known that Dr. Estrada was not an employee of CMC.

Further, the Spouses Nogales looked to CMC to provide the best medical care and supportservices for Corazon's delivery. The Court notes that prior to Corazon's fourth pregnancy, she usedto give birth inside a clinic. Considering Corazon's age then, the Spouses Nogales decided to havetheir fourth child delivered at CMC, which Rogelio regarded one of the best hospitals at thetime.56 This is precisely because the Spouses Nogales feared that Corazon might experience

complications during her delivery which would be better addressed and treated in a modern and big hospital such as CMC. Moreover, Rogelio's consent in Corazon's hysterectomy to be performed by a different physician, namely Dr. Espinola, is a clear indication of Rogelio'sconfidence in CMC's surgical staff.

CMC's defense that all it did was "to extend to [Corazon] its facilities" is untenable. The Courtcannot close its eyes to the reality that hospitals, such as CMC, are in the business of treatment. Inthis regard, the Court agrees with the observation made by the Court of Appeals of North Carolinain Diggs v. Novant Health, Inc.,57 to wit:

"The conception that the hospital does not undertake to treat the patient, does not undertake to actthrough its doctors and nurses, but undertakes instead simply to procure them to act upon their own responsibility, no longer reflects the fact. Present day hospitals, as their manner of operation

plainly demonstrates, do far more than furnish facilities for treatment. They regularly employ on asalary basis a large staff of physicians, nurses and internes [sic], as well as administrative andmanual workers, and they charge patients for medical care and treatment, collecting for suchservices, if necessary, by legal action. Certainly, the person who avails himself of 'hospitalfacilities' expects that the hospital will attempt to cure him, not that its nurses or other employeeswill act on their own responsibility." x x x (Emphasis supplied)

Likewise unconvincing is CMC's argument that petitioners are estopped from claiming damages based on the Consent on Admission and Consent to Operation. Both release forms consist of two parts. The first part gave CMC permission to administer to Corazon any form of recognizedmedical treatment which the CMC medical staff deemed advisable. The second part of thedocuments, which may properly be described as the releasing part, releases CMC and itsemployees "from any and all claims" arising from or by reason of the treatment and operation.

The documents do not expressly release CMC from liability for injury to Corazon due tonegligence during her treatment or operation. Neither do the consent forms expressly exemptCMC from liability for Corazon's death due to negligence during such treatment or operation.Such release forms, being in the nature of contracts of adhesion, are construed strictly againsthospitals. Besides, a blanket release in favor of hospitals "from any and all claims," whichincludes claims due to bad faith or gross negligence, would be contrary to public policy and thusvoid.

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Even simple negligence is not subject to blanket release in favor of establishments like hospitals but may only mitigate liability depending on the circumstances.58 When a person needing urgentmedical attention rushes to a hospital, he cannot bargain on equal footing with the hospital on theterms of admission and operation. Such a person is literally at the mercy of the hospital. There can

be no clearer example of a contract of adhesion than one arising from such a dire situation. Thus,the release forms of CMC cannot relieve CMC from liability for the negligent medical treatmentof Corazon.

On the Liability of the Other Respondents

Despite this Court's pronouncement in its 9 September 200259 Resolution that the filing of petitioners' Manifestation confined petitioners' claim only against CMC, Dr. Espinola, Dr. Lacson,and Dr. Uy, who have filed their comments, the Court deems it proper to resolve the individualliability of the remaining respondents to put an end finally to this more than two-decade oldcontroversy.

a) Dr. Ely Villaflor

Petitioners blame Dr. Ely Villaflor for failing to diagnose the cause of Corazon's bleeding and tosuggest the correct remedy to Dr. Estrada.60 Petitioners assert that it was Dr. Villaflor's duty tocorrect the error of Nurse Dumlao in the administration of hemacel.

The Court is not persuaded. Dr. Villaflor admitted administering a lower dosage of magnesiumsulfate. However, this was after informing Dr. Estrada that Corazon was no longer in convulsionand that her blood pressure went down to a dangerous level.61 At that moment, Dr. Estradainstructed Dr. Villaflor to reduce the dosage of magnesium sulfate from 10 to 2.5 grams. Since petitioners did not dispute Dr. Villaflor's allegation, Dr. Villaflor's defense remainsuncontroverted. Dr. Villaflor's act of administering a lower dosage of magnesium sulfate was notout of her own volition or was in contravention of Dr. Estrada's order.

b) Dr. Rosa Uy

Dr. Rosa Uy's alleged negligence consisted of her failure (1) to call the attention of Dr. Estrada onthe incorrect dosage of magnesium sulfate administered by Dr. Villaflor; (2) to take correctivemeasures; and (3) to correct Nurse Dumlao's wrong method of hemacel administration.

The Court believes Dr. Uy's claim that as a second year resident physician then at CMC, she wasmerely authorized to take the clinical history and physical examination of Corazon.62 However,that routine internal examination did not ipso facto make Dr. Uy liable for the errors committed byDr. Estrada. Further, petitioners' imputation of negligence rests on their baseless assumption thatDr. Uy was present at the delivery room. Nothing shows that Dr. Uy participated in deliveringCorazon's baby. Further, it is unexpected from Dr. Uy, a mere resident physician at that time, to

call the attention of a more experienced specialist, if ever she was present at the delivery room.

c) Dr. Joel Enriquez

Petitioners fault Dr. Joel Enriquez also for not calling the attention of Dr. Estrada, Dr. Villaflor,and Nurse Dumlao about their errors.63 Petitioners insist that Dr. Enriquez should have taken, or at least suggested, corrective measures to rectify such errors.

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The Court is not convinced. Dr. Enriquez is an anesthesiologist whose field of expertise isdefinitely not obstetrics and gynecology. As such, Dr. Enriquez was not expected to correct Dr.Estrada's errors. Besides, there was no evidence of Dr. Enriquez's knowledge of any error committed by Dr. Estrada and his failure to act upon such observation.

d) Dr. Perpetua Lacson

Petitioners fault Dr. Perpetua Lacson for her purported delay in the delivery of blood Corazonneeded.64 Petitioners claim that Dr. Lacson was remiss in her duty of supervising the blood bank staff.

As found by the trial court, there was no unreasonable delay in the delivery of blood from the timeof the request until the transfusion to Corazon. Dr. Lacson competently explained the procedure before blood could be given to the patient.65 Taking into account the bleeding time, clotting timeand cross-matching, Dr. Lacson stated that it would take approximately 45-60 minutes before blood could be ready for transfusion.66 Further, no evidence exists that Dr. Lacson neglected her duties as head of the blood bank.

e) Dr. Noe Espinola

Petitioners argue that Dr. Espinola should not have ordered immediate hysterectomy withoutdetermining the underlying cause of Corazon's bleeding. Dr. Espinola should have first consideredthe possibility of cervical injury, and advised a thorough examination of the cervix, instead of believing outright Dr. Estrada's diagnosis that the cause of bleeding was uterine atony.

Dr. Espinola's order to do hysterectomy which was based on the information he received by phoneis not negligence. The Court agrees with the trial court's observation that Dr. Espinola, uponhearing such information about Corazon's condition, believed in good faith that hysterectomy wasthe correct remedy. At any rate, the hysterectomy did not push through because upon Dr.Espinola's arrival, it was already too late. At the time, Corazon was practically dead.

f) Nurse J. Dumlao

In Moore v. Guthrie Hospital Inc.,67 the US Court of Appeals, Fourth Circuit, held that to recover,a patient complaining of injuries allegedly resulting when the nurse negligently injected medicineto him intravenously instead of intramuscularly had to show that (1) an intravenous injectionconstituted a lack of reasonable and ordinary care; (2) the nurse injected medicine intravenously;and (3) such injection was the proximate cause of his injury.

In the present case, there is no evidence of Nurse Dumlao's alleged failure to follow Dr. Estrada'sspecific instructions. Even assuming Nurse Dumlao defied Dr. Estrada's order, there is no showingthat side-drip administration of hemacel proximately caused Corazon's death. No evidence linkingCorazon's death and the alleged wrongful hemacel administration was introduced. Therefore, thereis no basis to hold Nurse Dumlao liable for negligence.

On the Award of Interest on Damages

The award of interest on damages is proper and allowed under Article 2211 of the Civil Code,which states that in crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court.68

WHEREFORE, the Court PARTLY GRANTS the petition. The Court finds respondent CapitolMedical Center vicariously liable for the negligence of Dr. Oscar Estrada. The amounts of

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P105,000 as actual damages and P700,000 as moral damages should each earn legal interest at therate of six percent (6%) per annum computed from the date of the judgment of the trial court. TheCourt affirms the rest of the Decision dated 6 February 1998 and Resolution dated 21 March 2000of the Court of Appeals in CA-G.R. CV No. 45641.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio Morales, Tinga, and Velasco, Jr., JJ., concur.

Footnotes

1 Under Rule 45 of the Rules of Court.

2 Penned by Associate Justice Artemio G. Tuquero, with Associate Justices Jorge S. Imperial andEubulo G. Verzola, concurring. Rollo, pp. 42-48.

3 Penned by Associate Justice Eubulo G. Verzola, with Associate Justices Roberto A. Barrios andEriberto U. Rosario, Jr., concurring. Id. at 49.

4 Penned by Judge Rodolfo G. Palattao.

5 Edema is the accumulation of excess fluid. It is manifested by the swelling of the extremities.(http://www.preeclampsia.org/symptoms.asp)

6 A syndrome occurring in late pregnancy marked by an increase in blood pressure, swelling of the ankles by fluid, and the appearance of albumin in the urine, associated with reduced bloodflow to the placenta, therefore putting the fetus at risk of death, or stillbirth, and putting the mother at risk of complications from high blood pressure, convulsions (eclampsia), kidney failure, liver failure and death. Treated with drugs to lower the blood pressure and to prevent convulsions,

while expediting the delivery of the baby. (http://www.jansen.com.au/Dictionary_PR.html)

7 Rollo, p. 42.

8 Exh. "A-4," Folder of Exhibits.






14 Rollo, p. 43.

15 Docketed as Civil Case No. 131873.

16 Then Court of First Instance.

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17 Records, pp. 92, 93.

18 Records, pp. 639-644.

19 Rollo, pp. 42-48.

20 Id. at 49.

21 Id. at 237-240.

22 Id. at 238.

23 Id. at 207.

24 Id. at 258.

25 Id. at 283-285.

26 Id. at 312.

27 33 Ill.2d 326, 211 N.E.2d 253 (1965).

28 Citing Clary v. Hospital Authority of City of Marietta, 106 Ga.App. 134, 126 S.E.2d 470(1962).

29 Citing Cramer v. Hoffman, 390 F.2d 19, 23 (1968); Holzberg v. Flower and Fifth Ave.Hospitals, 39 A.D.2d 526, 330 N.Y.S.2d 682, 684 (1972); Snelson v. Margaretville Hospital, 49A.D.2d 991, 374 N.Y.S.2d 579, 581 (1975).

30 79 A.D.2d 43, 436 N.Y.S.2d 109 (1981).

31 118 A.D.2d 988, 499 N.Y.S.2d 993 (1986).

32 Citing Davis v. Glaze, 182 Ga.App. 18, 354 S.E.2d 845, 849 (1987).

33 Citing Ybarra v. Spangard, 25 Cal.2d 486, 154 P.2d 687 (1944).

34 40A Am.Jur.2d Hospitals and Asylums § 46, 40A Am.Jur.2d Hospitals and Asylums § 44.

35 TSN, 26 July 1984, pp. 31-32 (Rogelio Nogales).

36 Id. at 43-44.

37 TSN, 4 April 1983, pp. 48-49 (Rogelio Nogales).

38 Records, pp. 43-44.

39 378 Phil. 1198 (1999).

40 Id. at 1240-1241.

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41 See Diggs v. Novant Health, Inc., 628 S.E.2d 851 (2006) citing Hylton v. Koontz, 138 N.C.App. 629 (2000).

42 See Jones v. Tallahassee Memorial Regional Healthcare, Inc., 923 So.2d 1245 (2006).

43 See Hale v. Sheikholeslam, 724 F.2d 1205 (1984) where the US Court of Appeals, Fifth

Circuit, found the physician an independent contractor since there is no evidence or pleading thatthe doctor received compensation from the hospital or that the hospital exercised any control over his treatment of patients. The doctor was merely allowed to use the facilities of the hospital when,in the doctor's judgment, hospital care was necessary.

44 Jones v. Philpott, 702 F.Supp. 1210 (1988).

45 Sometimes referred to as the apparent, or ostensible, agency theory. (King v. Mitchell, 31A.D.3d 958, 819 N.Y.S.2d 169 [2006]).

46 156 Ill.2d 511, 622 N.E.2d 788 (1993).

47 Diggs v. Novant Health, Inc., supra note 41.

48 Id.

49 De Castro v. Ginete, 137 Phil. 453 (1969), citing Sec. 3, par. a, Rule 131 of the Rules of Court.See also King v. Mitchell, 31 A.D.3d 958, 819 N.Y.S.2d 169 (2006) where the New York Supreme Court, Appellate Division, Third Department, stated as follows:

As a general proposition, "[a] hospital may not be held for the acts of an anesthetist who was notan employee of the hospital, but one of a group of independent contractors." Vicarious liability for medical malpractice may be imposed, however, under an apparent, or ostensible,

agency theory, "or, as it is sometimes called, agency by estoppel or by holding out." "Essential to

the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to act on behalf of the principal." Also, the third party must reasonably rely upon the appearance of authoritycreated by the principal. Finally, the third party must accept the services of the agent in relianceupon the perceived relationship between the agent and the principal. (emphasis supplied andinternal citations omitted)

50 In Gilbert v. Sycamore Municipal Hospital, supra note 46, cited in York v. Rush-Presbyterian-St. Luke's Medical Center (222 Ill.2d 147, 854 N.E.2d 635 [2006]), the Illinois Supreme Courtmade a similar observation, thus

x x x the language employed in the hospital's treatment consent form could have led plaintiff toreasonably believe that he would be treated by physicians and employees of the hospital. We

concluded that, upon the record before us, the plaintiff adduced sufficient evidence to create agenuine issue of material fact with respect to the reliance element of the plaintiffs apparent agencyclaim against the hospital.



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53 TSN, 17 February 1992, p. 69 (Dr. Franklin Atencio).

54 Diggs v. Novant Health, Inc., supra note 41.

55 TSN, 26 July 1984, pp. 12-13 (Rogelio Nogales).

56 Id. at 37.

57 Supra note 41, citing Rabon v. Rowan Memorial Hospital, Inc., 269 N.C.1, 152 S.E.2d 485(1967).

58 Article 1172 of the Civil Code provides:

"Responsibility arising from negligence in the performance of every kind of obligation is alsodemandable, but such liability may be regulated by the courts, according to the circumstances."

59 Rollo, p. 258.

60 CA rollo, pp. 78-79.

61 Records, p. 76.

62 Id. at 59.

63 CA rollo, p. 89.

64 Id. at 90.

65 TSN, 11 November 1991, pp. 9-12.

66 Id. at 14

67 403 F.2d 366 (1968).

68 People v. Ocampo, G.R. No. 171731, 11 August 2006, citing People v. Torellos, 448 Phil. 287,301 (2003). See also People v. Duban, G.R. No. 141217, 26 September 2003, 412 SCRA 131 andPeople v. De Vera, 371 Phil. 563 (1999).

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FIRST DIVISION

PROFESSIONAL SERVICES, INC.,

Petitioner,

- versus -

NATIVIDAD and ENRIQUE AGANA,

Respondents.

x - - - - - - - - - - - - - - - - - - - - - - - x

NATIVIDAD (Substituted by her children

MARCELINO AGANA III, ENRIQUE AGANA,

JR., EMMA AGANA ANDAYA, JESUS AGANA,

and RAYMUND AGANA) and ENRIQUE

AGANA,

Petitioners,- versus -

JUAN FUENTES,

Respondent.

x- - - - - - - - - - - - - - - - - - - -- - - - x

MIGUEL AMPIL,

Petitioner,

- versus -

NATIVIDAD AGANA and ENRIQUE AGANA,

Respondents.

G.R. No. 126297

G.R. No. 126467

G.R. No. 127590

Present:

PUNO, C.J., Chairperson

SANDOVAL-GUTIERREZ,

CORONA,

AZCUNA, and

*GARCIA, JJ.

Promulgated:

January 31, 2007

http://sc.judiciary.gov.ph/jurisprudence/2007/jan2007/126297.htm#_ftn1

http://sc.judiciary.gov.ph/jurisprudence/2007/jan2007/126297.htm#_ftn1

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DECISION

SANDOVAL-GUTIERREZ, J.:

Hospitals, having undertaken one of mankind‘s most important and delicate endeavors, must assume the grave

responsibility of pursuing it with appropriate care. The care and service dispensed through this high trust, however

technical, complex and esoteric its character may be, must meet standards of responsibility commensurate with the

undertaking to preserve and protect the health, and indeed, the very lives of those placed in the hospital‘s keeping.

Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals‘ Decision dated

September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming with modification the Decision

dated March 17, 1993 of the Regional Trial Court (RTC), Branch 96, Quezon City in Civil Case No. Q-43322 and

nullifying its Order dated September 21, 1993.

The facts, as culled from the records, are:

On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City Hospital)

because of difficulty of bowel movement and bloody anal discharge. After a series of medical examinations, Dr.

Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering from ―cancer of the sigmoid.‖

On April 11, 1984, Dr. Ampil, assisted by the medical staff of the Medical City Hospital, performed an

anterior resection surgery on Natividad. He found that the malignancy in her sigmoid area had spread on her left

ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad‘s

husband, Enrique Agana, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy on

her.

After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and

closed the incision.

However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11,

1984, the attending nurses entered these remarks:

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“sponge count lacking 2 “announced to surgeon searched (sic) done but to no avail continue for

closure.”

On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills, including thedoctors‘ fees, amounted to P60,000.00.

After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr.

Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of the surgery. Dr.

Ampil then recommended that she consult an oncologist to examine the cancerous nodes which were not removed

during the operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further treatment.

After four months of consultations and laboratory examinations, Natividad was told she was free of cancer. Hence,

she was advised to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks thereafter,

her daughter found 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. He

then assured her that the pains would soon vanish.

Dr. Ampil‘s assurance did not come true. Instead, the pains intensified, prompting Natividad to seek

treatment at the Polymedic General Hospital. While confined there, Dr. Ramon Gutierrez detected the presence of

another foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in width which badly infected her

vaginal vault. A recto-vaginal fistula had formed in her reproductive organs which forced stool to excrete through

the vagina. Another surgical operation was needed to remedy the damage. Thus, in October 1984, Natividad

underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City a complaint

for damages against the Professional Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil,

and Dr. Fuentes, docketed as Civil Case No. Q-43322. They alleged that the latter are liable for negligence for

leaving two pieces of gauze inside Natividad‘s body and malpractice for concealing their acts of negligence.

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Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an administrative

complaint for gross negligence and malpractice against Dr. Ampil and Dr. Fuentes, docketed as Administrative Case

No. 1690. The PRC Board of Medicine heard the case only with respect to Dr. Fuentes because it failed to acquire

jurisdiction over Dr. Ampil who was then in the United States.

On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly substituted by

her above-named children (the Aganas).

On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and Dr.

Fuentes liable for negligence and malpractice, the decretal part of which reads:

WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendantsPROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL and DR. JUAN FUENTES to pay to the plaintiffs, jointly and severally, except in respect of the award for exemplary damagesand the interest thereon which are the liabilities of defendants Dr. Ampil and Dr. Fuentes only, asfollows:

1. As actual damages, the following amounts:

a. The equivalent in Philippine Currency of the total of US$19,900.00 atthe rate of P21.60-US$1.00, as reimbursement of actual expenses incurredin the United States of America;

b. The sum of P4,800.00 as travel taxes of plaintiffs and their physiciandaughter;

c. The total sum of P45,802.50, representing the cost of hospitalization atPolymedic Hospital, medical fees, and cost of the saline solution;

2. As moral damages, the sum of P2,000,000.00;

3. As exemplary damages, the sum of P300,000.00;

4. As attorney‘s fees, the sum of P250,000.00;

5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of the

complaint until full payment; and

6. Costs of suit.

SO ORDERED.

Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals, docketed as CA-

G.R. CV No. 42062.

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Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of its Decision,

which was granted in an Order dated May 11, 1993. Thereafter, the sheriff levied upon certain properties of Dr.

Ampil and sold them for P451,275.00 and delivered the amount to the Aganas.

Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr. Fuentes to

indefinitely suspend any further execution of the RTC Decision. However, not long thereafter, the Aganas again

filed a motion for an alias writ of execution against the properties of PSI and Dr. Fuentes. On September 21, 1993,

the RTC granted the motion and issued the corresponding writ, prompting Dr. Fuentes to file with the Court of

Appeals a petition for certiorari and prohibition, with prayer for preliminary injunction, docketed as CA-G.R. SP

No. 32198. During its pendency, the Court of Appeals issued a Resolution dated October 29, 1993 granting Dr.

Fuentes‘ prayer for injunctive relief .

On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.

Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision in Administrative Case

No. 1690 dismissing the case against Dr. Fuentes. The Board held that the prosecution failed to show that Dr.

Fuentes was the one who left the two pieces of gauze inside Natividad‘s body; and that he concealed such fact from

Natividad.

On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R. CV No.42062 and CA-G.R. SP No. 32198, thus:

WHEREFORE, except for the modification that the case against defendant-appellant Dr.Juan Fuentes is hereby DISMISSED , and with the pronouncement that defendant-appellant Dr.Miguel Ampil is liable to reimburse defendant-appellant Professional Services, Inc., whatever amount the latter will pay or had paid to the plaintiffs-appellees, the decision appealed from ishereby AFFIRMED and the instant appeal DISMISSED.

Concomitant with the above, the petition for certiorari and prohibition filed by hereindefendant-appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is hereby GRANTED and the

challenged order of the respondent judge dated September 21, 1993, as well as the alias writ of execution issued pursuant thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the petitioner in connection with the writ of preliminary injunction issued by this Court on November 29, 1993 is hereby cancelled.

Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.

SO ORDERED.

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Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution dated December 19,

1996.

Hence, the instant consolidated petitions.

In G.R. No. 126297 , PSI alleged in its petition that the Court of Appeals erred in holding that: (1) it is

estopped from raising the defense that Dr. Ampil is not its employee; (2) it is solidarily liable with Dr. Ampil; and

(3) it is not entitled to its counterclaim against the Aganas. PSI contends that Dr. Ampil is not its employee, but a

mere consultant or independent contractor. As such, he alone should answer for his negligence.

In G.R. No. 126467 , the Aganas 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.

Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him liable for

negligence and malpractice sans evidence that he left the two pieces of gauze in Natividad‘s vagina. He pointed to

other probable causes, such as: (1) it was Dr. Fuentes who used gauzes in performing the hysterectomy; (2) the

attending nurses‘ failure to properly count the gauzes used during surgery; and (3) the medical intervention of the

American doctors who examined Natividad in the United States of America.

For our resolution are these three vital issues: first, whether the Court of Appeals erred in holding Dr.

Ampil liable for negligence and malpractice; second, whether the Court of Appeals erred in absolving Dr. Fuentes of

any liability; and third, whether PSI may be held solidarily liable for the negligence of Dr. Ampil.

I - G.R. No. 127590

Whether the Court of Appeals Er red in Holding Dr . Ampil

L iable for Negligence and Malpractice.

Dr. Ampil, in an attempt to absolve himself, gears the Court‘s attention to other possible causes of Natividad‘s

detriment. He argues that the Court should not discount either of the following possibilities: first , Dr. Fuentes

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left the gauzes in Natividad‘s body after performing hysterectomy; second, the attending nurses erred in counting the

gauzes; and third, the American doctors were the ones who placed the gauzes in Natividad‘s body.

Dr. Ampil‘s arguments are purely conjectural and without basis. Records show that he did not present any

evidence to prove that the American doctors were the ones who put or left the gauzes in Natividad‘s body. Neither

did he submit evidence to rebut the correctness of the record of operation, particularly the number of gauzes used.

As to the alleged negligence of Dr. Fuentes, we are mindful that Dr. Ampil examined his (Dr. Fuentes‘) work and

found it in order.

The glaring truth is that all the major circumstances, taken together, as specified by the Court of Appeals,

directly point to Dr. Ampil as the negligent party, thus:

First , it is not disputed that the surgeons used gauzes as sponges to control the bleedingof the patient during the surgical operation.

Second, immediately after the operation, the nurses who assisted in the surgery noted intheir report that the ‗sponge count (was) lacking 2‘; that such anomaly was „announced to

surgeon‟ and that a „search was done but to no avail‟ prompting Dr. Ampil to „continue forclosure‟ x x x.

Third, after the operation, two (2) gauzes were extracted from the same spot of the bodyof Mrs. Agana where the surgery was performed.

An operation requiring the placing of sponges in the incision is not complete until the sponges are properly

removed, and it is settled that the leaving of sponges or other foreign substances in the wound after the incision has

been closed is at least prima facie negligence by the operating surgeon. To put it simply, such act is considered so

inconsistent with due care as to raise an inference of negligence. There are even legions of authorities to the effect

that such act is negligence per se .

Of course, the Court is not blind to the reality that there are times when danger to a patient‘s life precludes

a surgeon from further searching missing sponges or foreign objects left in the body. But this does not leave himfree from any obligation. Even if it has been shown that a surgeon was required by the urgent necessities of the

case to leave a sponge in his patient‘s abdomen, because of the dangers attendant upon delay, still, it is his legal

duty to so inform his patient within a reasonable time thereafter by advising her of what he had been

compelled to do. This is in order that she might seek relief from the effects of the foreign object left in her body as

her condition might permit. The ruling in Smith v. Zeagler is explicit, thus:

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The removal of all sponges used is part of a surgical operation, and when a physician or surgeon fails to remove a sponge he has placed in his patient‘s body that should be removed as

part of the operation, he thereby leaves his operation uncompleted and creates a new conditionwhich imposes upon him the legal duty of calling the new condition to his pat ient‟s

attention, and endeavoring with the means he has at hand to minimize and avoid untowardresults likely to ensue therefrom.

Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even misled

her that the pain she was experiencing was the ordinary consequence of her operation. Had he been more

candid, Natividad could have taken the immediate and appropriate medical remedy to remove the gauzes from her

body. To our mind, what was initially an act of negligence by Dr. Ampil has ripened into a deliberate wrongful act

of deceiving his patient.

This is a clear case of medical malpractice or more appropriately, medical negligence. To successfully

pursue this kind of case, a patient must only prove that a health care provider either failed to do something which a

reasonably prudent health care provider would have done, or that he did something that a reasonably prudent

provider would not have done; and that failure or action caused injury to the patient. Simply put, the elements are

duty, breach, injury and proximate causation. Dr, Ampil, as the lead surgeon, had the duty to remove all foreign

objects, such as gauzes, from Natividad‘s body before closure of the incision. When he failed to do so, it was his

duty to inform Natividad about it. Dr. Ampil breached both duties. Such breach caused injury to Natividad,

necessitating her further examination by American doctors and another surgery. That Dr. Ampil‘s negligence is the

proximate cause of Natividad‘s injury could be traced from his act of closing the incision despite the information

given by the attending nurses that two pieces of gauze were still missing. That they were later on extracted from

Natividad‘s vagina established the causal link between Dr. Ampil‘s negligence and the injury. And what further

aggravated such injury was his deliberate concealment of the missing gauzes from the knowledge of Natividad and

her family.

II - G.R. No. 126467

Whether the Court of Appeals Err ed in Absolving

Dr . Fuentes of any Liability

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The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the ground that it is

contrary to the doctrine of res ipsa loquitur. According to them, the fact that the two pieces of gauze were left

inside Natividad‘s body is a prima facie evidence of Dr. Fuentes‘ negligence.

We are not convinced.

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.

From the foregoing statements of the rule, 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.‖

We find the element of ―control and management of the thing which caused the injury‖ to be wanting. Hence,

the doctrine of res ipsa loquitur will not lie.

It was duly established that 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 toleave 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.

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Under the ―Captain of the Ship‖ rule, the operating surgeon is the person in complete charge of the surgery

room and all personnel connected with the operation. Their duty is to obey his orders. As stated before, Dr.

Ampil was the lead surgeon. In other words, he was the ―Captain of the Ship.‖ That he discharged such role is

evident from his following conduct: (1) calling Dr. Fuentes to perform a hysterectomy; (2) examining the work of

Dr. Fuentes and finding it in order; (3) granting Dr. Fuentes‘ permission to leave; and (4) ordering the closure of the

incision. To our mind, it was this act of ordering the closure of the incision notwithstanding that two pieces of

gauze remained unaccounted for, that caused injury to Nativ idad‟s body. Clearly, the control and management

of the thing which caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.

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.

III - G.R. No. 126297

Whether PSI I s L iable for the Negli gence of Dr . Ampil

The third issue necessitates a glimpse at the historical development of hospitals and the resulting theoriesconcerning their liability for the negligence of physicians.

Until the mid-nineteenth century, hospitals were generally charitable institutions, providing medical services

to the lowest classes of society, without regard for a patient‘s ability to pay. Those who could afford medical

treatment were usually treated at home by their doctors. However, the days of house calls and philanthropic health

care are over. The modern health care industry continues to distance itself from its charitable past and has

experienced a significant conversion from a not-for-profit health care to for-profit hospital businesses.

Consequently, significant changes in health law have accompanied the business-related changes in the hospitalindustry. One important legal change is an increase in hospital liability for medical malpractice. Many courts now

allow claims for hospital vicarious liability under the theories of respondeat superior , apparent authority, ostensible

authority, or agency by estoppel.

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In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil Code, which

reads:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or

negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

A derivative of this provision is Article 2180, the rule governing vicarious liability under the doctrine of

respondeat superior, thus:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one‘s own

acts or omissions, but also for those of persons for whom one is responsible.x x x x x x

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter areemployed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and householdhelpers acting within the scope of their assigned tasks even though the former are not engaged inany business or industry.

x x x x x x

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

A prominent civilist commented that professionals engaged by an employer, such as physicians, dentists, and

pharmacists, are not ―employees‖ under this article because the manner in which they perform their work is not

within the control of the latter (employer). In other words, professionals are considered personally liable for the

fault or negligence they commit in the discharge of their duties, and their employer cannot be held liable for

such fault or negligence. In the context of the present case, ―a hospital cannot be held liable for the fault or

negligence of a physician or surgeon in the treatment or operation of patients.‖

The foregoing view is grounded on the traditional notion that the professional status and the very nature of

the physician‘s calling preclude him from being classed as an agent or employee of a hospital, whenever he acts in a

professional capacity. It has been said that medical practice strictly involves highly developed and specialized

knowledge, such that physicians are generally free to exercise their own skill and judgment in rendering medical

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services sans interference. Hence, when a doctor practices medicine in a hospital setting, the hospital and its

employees are deemed to subserve him in his ministrations to the patient and his actions are of his own

responsibility.

The case of Schloendorff v. Society of New York Hospital was then considered an authority for this view. The

―Schloendorff doctrine‖ regards a physician, even if employed by a hospital, as an independent contractor because

of the skill he exercises and the lack of control exerted over his work. Under this doctrine, hospitals are exempt

from the application of the respondeat superior principle for fault or negligence committed by physicians in the

discharge of their profession.

However, the efficacy of the foregoing doctrine has weakened with the significant developments in medical

care. Courts came to realize that modern hospitals are increasingly taking active role in supplying and regulating

medical care to patients. No longer were a hospital‘s functions limited to furnishing room, food, facilities for

treatment and operation, and attendants for its patients. Thus, in Bing v. Thunig, the New York Court of Appeals

deviated from the Schloendorff doctrine, noting that modern hospitals actually do far more than provide facilities for

treatment. Rather, they regularly employ, on a salaried basis, a large staff of physicians, interns, nurses,

administrative and manual workers. They charge patients for medical care and treatment, even collecting for such

services through legal action, if necessary. The court then concluded that there is no reason to exempt hospitals

from the universal rule of respondeat superior .

In our shores, the nature of the relationship between the hospital and the physicians is rendered

inconsequential in view of our categorical pronouncement in Ramos v. Court of Appeals that for purposes of

apportioning responsibility in medical negligence cases, an employer-employee relationship in effect exists

between hospitals and their attending and visiting physicians. This Court held:

―We now discuss the responsibility of the hospital in this particular incident. The unique

practice (among private hospitals) of filling up specialist staff with attending and visiting―consultants,‖ who are allegedly not hospital employees, presents problems in apportioning

responsibility for negligence in medical malpractice cases. However, the difficulty is more

apparent than real.

In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work within the hospital premises. Doctors whoapply for „consultant‟ slots, visiting or attending, are required to submit proof of

completion of residency, their educational qualifications, generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in most cases,and references. These requirements are carefully scrutinized by members of the hospitaladministration or by a review committee set up by the hospital who either accept or rejectthe application. x x x.

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After a physician is accepted, either as a visiting or attending consultant, he isnormally required to attend clinico-pathological conferences, conduct bedside rounds forclerks, interns and residents, moderate grand rounds and patient audits and perform othertasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital,and/or for the privilege of admitting patients into the hospital. In addition to these, the physician‘s performance as a specialist is generally evaluated by a peer review committee on the

basis of mortality and morbidity statistics, and feedback from patients, nurses, interns andresidents. A consultant remiss in his duties, or a consultant who regularly falls short of theminimum standards acceptable to the hospital or its peer review committee, is normallypolitely terminated.

In other words, private hospitals, hire, fire and exercise real control over theirattending and visiting „consultant‟ staff. While „consultants‟ are not, technically employees, x x x, the control exercised, the hiring, and the right to terminate consultants all fulfill theimportant hallmarks of an employer-employee relationship, with the exception of thepayment of wages. In assessing whether such a relationship in fact exists, the control test isdetermining. Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship ineffect exists between hospitals and their attending and visiting physicians. ”

But the Ramos pronouncement is not our only basis in sustaining PSI‘s liability. Its liability is also

anchored upon the agency principle of apparent authority or agency by estoppel and the doctrine of corporate

negligence which have gained acceptance in the determination of a hospital‘s liability for negligent acts of health

professionals. The present case serves as a perfect platform to test the applicability of these doctrines, thus,

enriching our jurisprudence.

Apparent authority, or what is sometimes referred to as the “holding out” theory, or doctrine of ostensible

agency or agency by estoppel, has its origin from the law of agency. It imposes liability, not as the result of the

reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow

misleading the public into believing that the relationship or the authority exists. The concept is essentially one of

estoppel and has been explained in this manner:

―The principal is bound by the acts of his agent with the apparent authority which heknowingly permits the agent to assume, or which he holds the agent out to the public as

possessing. The question in every case is whether the principal has by his voluntary act placedthe agent in such a situation that a person of ordinary prudence, conversant with business usagesand the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in question.

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The applicability of apparent authority in the field of hospital liability was upheld long time ago in Irving

v. Doctor Hospital of Lake Worth, Inc. There, it was explicitly stated that “there does not appear to be any

rational basis for excluding the concept of apparent authority from the field of hospital liability.” Thus, in

cases where it can be shown that a hospital, by its actions, has held out a particular physician as its agent and/or

employee and that a patient has accepted treatment from that physician in the reasonable belief that it is being

rendered in behalf of the hospital, then the hospital will be liable for the physician‘s negligence.

Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of the Civil

Code reads:

ART. 1869. Agency may be express, or implied from the acts of the principal, from hissilence or lack of action, or his failure to repudiate the agency, knowing that another person isacting on his behalf without authority.

In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and specializations of

the physicians associated or accredited by it, including those of Dr. Ampil and Dr. Fuentes. We concur with the

Court of Appeals‘ conclusion that it ―is now estopped from passing all the blame to the physicians whose names

it proudly paraded in the public directory leading the public to believe that it vouched for their skill and

competence.‖ Indeed, PSI‘s act is tantamount to holding out to the public that Medical C ity Hospital, through its

accredited physicians, offers quality health care services. By accrediting Dr. Ampil and Dr. Fuentes and publicly

advertising their qualifications, the hospital created the impression that they were its agents, authorized to perform

medical or surgical services for its patients. As expected, these patients, Natividad being one of them, accepted the

services on the reasonable belief that such were being rendered by the hospital or its employees, agents, or servants.

The trial court correctly pointed out:

x x x regardless of the education and status in life of the patient, he ought not beburdened with the defense of absence of employer-employee relationship between the hospitaland the independent physician whose name and competence are certainly certified to the

general public by the hospital‟s act of listing him and his specialty in its lobby directory, as inthe case herein. The high costs of today‟s medical and health care should at least exact on the

hospital greater, if not broader, legal responsibility for the conduct of treatment and surgerywithin its facility by its accredited physician or surgeon, regardless of whether he isindependent or employed.”

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The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are capable of

acting only through other individuals, such as physicians. If these accredited physicians do their job well, the

hospital succeeds in its mission of offering quality medical services and thus profits financially. Logically, where

negligence mars the quality of its services, the hospital should not be allowed to escape liability for the acts of its

ostensible agents.

We now proceed to the doctrine of corporate negligence or corporate responsibility.

One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that PSI as

owner, operator and manager of Medical City Hospital, ―did not perform the necessary supervision nor exercise

diligent efforts in the supervision of Drs. Ampil and Fuentes and its nursing staff, resident doctors, and

medical interns who assisted Drs. Ampil and Fuentes in the performance of their duties as surgeons .‖

Premised on the doctrine of corporate negligence, the trial court held that PSI is directly liable for such breach of

duty.

We agree with the trial court.

Recent years have seen the doctrine of corporate negligence as the judicial answer to the problem of allocating

hospital‘s liability for the negligent acts of health practitioners, absent facts to support the application of respondeat

superior or apparent authority. Its formulation proceeds from the judiciary‘s acknowledgment that in these modern

times, the duty of providing quality medical service is no longer the sole prerogative and responsibility of the

physician. The modern hospitals have changed structure. Hospitals now tend to organize a highly professional

medical staff whose competence and performance need to be monitored by the hospitals commensurate with their

inherent responsibility to provide quality medical care.

The doctrine has its genesis in Darling v. Charleston Community Hospital . There, the Supreme Court of

Illinois held that “the jury could have found a hospital negligent, inter alia, in failing to have a sufficient

number of trained nurses attending the patient; failing to require a consultation with or examination bymembers of the hospital staff; and failing to review the treatment rendered to the patient.” On the basis of

Darling , other jurisdictions held that a hospital‟s corporate negligence extends to permitting a physician known

to be incompetent to practice at the hospital. With the passage of time, more duties were expected from

hospitals, among them: (1) the use of reasonable care in the maintenance of safe and adequate facilities and

equipment; (2) the selection and retention of competent physicians; (3) the overseeing or supervision of all

persons who practice medicine within its walls; and (4) the formulation, adoption and enforcement of adequate

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rules and policies that ensure quality care for its patients. Thus, in Tucson Medical Center, Inc. v. Misevich, it was

held that a hospital, following the doctrine of corporate responsibility, has the duty to see that it meets the standards

of responsibilities for the care of patients. Such duty includes the proper supervision of the members of its

medical staff . And in Bost v. Riley, the court concluded that a patient who enters a hospital does so with the

reasonable expectation that it will attempt to cure him. The hospital accordingly has the duty to make a

reasonable effort to monitor and oversee the treatment prescribed and administered by the physicians

practicing in its premises.

In the present case, it was duly established that PSI operates the Medical City Hospital for the purpose and

under the concept of providing comprehensive medical services to the public. Accordingly, it has the duty to

exercise reasonable care to protect from harm all patients admitted into its facility for medical treatment.

Unfortunately, PSI failed to perform such duty. The findings of the trial court are convincing, thus:

x x x PSI‟s liability is traceable to its failure to conduct an investigation of the matter

reported in the nota bene of the count nurse. Such failure established PSI‟s part in the dark

conspiracy of silence and concealment about the gauzes. Ethical considerations, if not also legal,dictated the holding of an immediate inquiry into the events, if not for the benefit of the patient towhom the duty is primarily owed, then in the interest of arriving at the truth. The Court cannotaccept that the medical and the healing professions, through their members like defendant surgeons,and their institutions like PSI‘s hos pital facility, can callously turn their backs on and disregardeven a mere probability of mistake or negligence by refusing or failing to investigate a report of such seriousness as the one in Natividad‘s case.

It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of the

Medical City Hospital‘s staff, composed of resident doctors, nurses, and interns. As such, it is reasonable to

conclude that PSI, as the operator of the hospital, has actual or constructive knowledge of the procedures carried

out, particularly the report of the attending nurses that the two pieces of gauze were missing. In Fridena v.

Evans, it was held that a corporation is bound by the knowledge acquired by or notice given to its agents or officers

within the scope of their authority and in reference to a matter to which their authority extends. This means that the

knowledge of any of the staff of Medical City Hospital constitutes knowledge of PSI. Now, the failure of PSI,

despite the attending nurses‘ report, to investigate and inform Natividad regarding the missing gauzes amounts to

callous negligence. Not only did PSI breach its duties to oversee or supervise all persons who practice

medicine within its walls, it also failed to take an active step in fixing the negligence committed. This renders

PSI, not only vicariously liable for the negligence of Dr. Ampil under Article 2180 of the Civil Code, but also

directly liable for its own negligence under Article 2176. In Fridena, the Supreme Court of Arizona held:

x x x In recent years, however, the duty of care owed to the patient by the hospital hasexpanded. The emerging trend is to hold the hospital responsible where the hospital has

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failed to monitor and review medical services being provided within its walls. See Kahn

Hospital Malpractice Prevention, 27 De Paul . Rev. 23 (1977).

Among the cases indicative of the ‗emerging trend‘ is Purcell v. Zimbelman, 18 Ariz.App. 75,500 P. 2d 335 (1972). In Purcell, the hospital argued that it could not be held liable for the malpractice of a medical practitioner because he was an independent contractor within thehospital. The Court of Appeals pointed out that the hospital had created a professional staff whose competence and performance was to be monitored and reviewed by the governingbody of the hospital, and the court held that a hospital would be negligent where it hadknowledge or reason to believe that a doctor using the facilities was employing a method of treatment or care which fell below the recognized standard of care.

Subsequent to the Purcell decision, the Arizona Court of Appeals held that ahospital has certain inherent responsibilities regarding the quality of medical carefurnished to patients within its walls and it must meet the standards of responsibilitycommensurate with this undertaking. Beeck v. Tucson General Hospital , 18 Ariz. App. 165,500 P. 2d 1153 (1972). This court has confirmed the rulings of the Court of Appeals that ahospital has the duty of supervising the competence of the doctors on its staff. x x x.

x x x x x x

In the amended complaint, the plaintiffs did plead that the operation was performed atthe hospital with its knowledge, aid, and assistance, and that the negligence of the defendants wasthe proximate cause of the patient‘s injuries. We find that such general allegations of negligence, along with the evidence produced at the trial of this case, are sufficient tosupport the hospital‟s liability based on the theory of negligent supervision.”

Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be

emphasized that PSI, apart from a general denial of its responsibility, failed to adduce evidence showing that it

exercised the diligence of a good father of a family in the accreditation and supervision of the latter. In neglecting to

offer such proof, PSI failed to discharge its burden under the last paragraph of Article 2180 cited earlier, and,

therefore, must be adjudged solidarily liable with Dr. Ampil. Moreover, as we have discussed, PSI is also directly

liable to the Aganas.

One final word. Once a physician undertakes the treatment and care of a patient, the law imposes on him

certain obligations. In order to escape liability, he must possess that reasonable degree of learning, skill and

experience required by his profession. At the same time, he must apply reasonable care and diligence in the

exercise of his skill and the application of his knowledge, and exert his best judgment.

WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of Appeals in

CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.

Costs against petitioners PSI and Dr. Miguel Ampil.

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SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ

Associate Justice

WE CONCUR:

REYNATO S. PUNO Chief Justice

Chairperson

RENATO C. CORONA

Associate Justice

ADOLFO S. AZCUNA

Associate Justice

(No Part)

CANCIO C. GARCIA

Associate Justice

CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the

above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court‘s

Division.

REYNATO S. PUNO

Chief Justice

* No part. Ponente of the assailed Decision in the Court of Appeals.

Beeck v. Tucson General Hospital, 500 P. 2d 1153 (1972), citing Darling v. Charleston Community Memorial

Hospital, 33 Ill. 2d 326, 211 N.E. 2d 253.

http://sc.judiciary.gov.ph/jurisprudence/2007/jan2007/126297.htm#_ftnref1

http://sc.judiciary.gov.ph/jurisprudence/2007/jan2007/126297.htm#_ftnref1

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Penned by Associate Justice Cancio C. Garcia (now a member of the Supreme Court) and concurred in byAssociate Justices Eugenio S. Labitoria and Artemio G. Tuquero (both retired), Rollo, G.R. Nos. 126297, pp.36-51; 126467, pp. 27-42; 127590, pp. 23-38.

Penned by Judge Lucas P. Bersamin (now Justice of the Court of Appeals), Rollo, G.R. No. 126647, pp. 69-83.

The medical staff was composed of physicians, both residents and interns, as well as nurses.

The dispositive portion reads:

―WHEREFORE, let a writ of preliminary injunction be issued upon petitioner‘s posting of bond in the

amount of P20,000.00, ENJOINING public respondents from implementing the questioned order datedSeptember 21, 1993 and from further taking any action in Civil Case No. Q-43322 entitled ‗ Natividad G.

Agana, et al., plaintiffs, versus Professional Services, Inc., et al., defendants‘ pending resolution of the instant petition.

SO ORDERED.‖ See Rollo, G.R. No. 126297, p. 42.

Rollo of G.R. No. 126467, pp. 84-89.

Rollo of G.R. No. 127590, p. 40.

Rule v. Cheeseman, 317 P. 2d 472 (1957), citing Russel v. Newman, 116 Kan. 268 P. 752; Bernsden v. Johnson, 174 Kan. 230, 255 P. 2d 1033.

Smith v. Zeagler , 157 So. 328 Fla. (1934), citing Ruth v. Johnson , (C.C.A.) 172 F. 191; Reeves v. Lutz, 179 Mo.App. 61, 162 S.W. 280; Rayburn v. Day, 126 Or. 135,268 P. 1002, 59 A.L.R. 1062; Wynne v. Harvey, 96 Wash.379, 165 P. 67; Harris v. Fall (C.C.A.) 177 F. 79, 27 L.R.A. (N.S.) 1174; Moore v. Ivey, (Tex. Civ. App.) 264S.W. 283; 21 R.C. L. 388.

157 So. 328 Fla. (1934)

Garcia-Rueda v. Pascasio, G.R. No. 118141, September 5, 1997, 278 SCRA 769.

In the leading case of Vda. de Bataclan v. Medina, (102 Phil. 181 [1957]), this Court laid down the followingdefinition of proximate cause in this jurisdiction as follows:

[T]hat cause, which, in natural and continuous sequence unbroken by any efficient intervening cause,

produces the injury and without which the result would not have occurred. And more comprehensively,the proximate cause is that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causalconnection with the immediate predecessor, the final event in the chain immediately effecting the injury asa natural and probable result of the cause which first acted, under which circumstances that the personresponsible for the first event should, as an ordinarily prudent and intelligent person, have reasonableground to expect at the moment of his act or default that an injury to some person might probably resulttherefrom.

Ramos v. Court of Appeals, G.R. No. 124354, December 29, 1999, 321 SCRA 584.

Africa v. Caltex (Phils.) Inc., 123 Phil. 280 (1966).

Ranos v. Court of Appeals, supra. In Ramos, the phrase used is ―control of the instrumentality which caused the

damage,‖ citing St. John’s Hospital and School of Nursing v. Chapman, 434 P2d 160 (1967).

Rural Educational Assn v. Bush, 42 Tenn. App. 34, 298 S.W. 2d 761 (1956).

Ramos v. Court of Appeals, supra at footnote 13.

Levin, Hospital Vicarious Liability for Negligence by Independent Contractor Physicians: A New Rule for New

Times, October 17, 2005.

Tolentino, The Civil Code of the Philippines, Volume V, 1992 Ed., p. 616.

Arkansas M.R. Co. v. Pearson, 98 Ark. 442, 153 SW 595 (1911); Runyan v. Goodrum, 147 Ark. 281, 228 SW397, 13 ALR 1403 (1921); Rosane v. Senger , 112 Colo. 363, 149 P. 2d 372 (superseded by statute on other

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grounds); Moon v. Mercy Hosp., 150 Col. 430, 373 P. 2d 944 (1962); Austin v. Litvak , 682 P. 2d 41, 50 ALR 4th 225 (1984); Western Ins. Co. v. Brochner , 682 P. 2d 1213 (1983); Rodriguez v. Denver , 702 P. 2d 1349(1984).

Arkansas M.R. Co. v. Pearson, id.; Nieto v. State, 952 P. 2d 834 (1997). But see Beeck v. Tucson General Hosp.,18 Ariz. App. 165, 500 P. 2d 1153 (1972); Paintsville Hosp. Co., 683 SW 2d 255 (1985); Kelley v. Rossi, 395Mass. 659, 481 NE 2d 1340 (1985) which held that a physician‘s professional status does not prevent him or

her from being a servant or agent of the hospital.

Fridena v. Evans, 127 Ariz. 516, 522 P. 2d 463 (1980).

Kitto v. Gilbert, 39 Colo App 374, 570 P. 2d 544 (1977).

211 N.Y. 125, 105 N.E. 92, 52 L.R.A., N.S., 505 (1914). The court in Schloendorff opined that a hospital doesnot act through physicians but merely procures them to act on their own initiative and responsibility. For subsequent application of the doctrine, see for instance, Hendrickson v. Hodkin, 250 App. Div 649, 294 NYS982, revd on other grounds, 276 NY 252, 11 NE 2d 899 (1937); Necolayff v. Genesee Hosp., 270 App. Div.648, 61 NYS 2d 832, affd 296 NY 936, 73 NE2d 117 (1946); Davie v. Lenox Hill Hosp., Inc ., 81 NYS 2d 583(1948); Roth v. Beth El Hosp., Inc., 279 App. Div 917, 110 NYS 2d 583 (1952); Rufino v. US , 126 F. Supp. 132(1954); Mrachek v. Sunshine Biscuit, Inc., 308 NY 116, 123 N.E. 2d 801 (1954).

2 NY 2d 656, 163 NYS 2d 3, 143 N.E. 2d 3 (1957).

Supra at footnote 13.

BLACK‘S LAW DICTIONAR Y (6th Ed. 1990) 1100. The terms ―ostensible agency,‖ ―agency by estoppel,‖

―apparent authority,‖ and ―holding out‖ tend to be used interchangeably by the courts to refer to this theory of

liability. See for instance, Baker v. Werner , 654 P2d 263 (1982) and Adamski v. Tacoma Gen. Hosp., 20 WashApp. 98, 579 P2d 970 (1978). Agency by estoppel is defined as ―one created by operation of law and

established by proof of such acts of the principal as reasonably lead third persons to the conclusion of itsexistence. Arises where principal by negligence in failing to supervise agent‘s affairs, allows agent to exercise

powers not granted to him, thus justifying others in believing the agent possesses requisite authority.‖ BLACK ‘s, supra, p. 62. An ostensible agency is ―an implied or presumptive agency which exists where one,

either intentionally or from want of ordinary care, induces another to believe that a third person is his agent,though he never in fact, employed him. It is, strictly speaking, no agency at all, but is in reality based entirelyupon estoppel.‖ Apparent authority refers to ―the power to affect the legal relations of another person by

transactions with third persons, professedly as agent for the other, arising from and in accordance with theother‘s manifestations to such third persons.‖ Supra, p. 96.

Irving v. Doctors Hospital of Lake Worth, Inc., 415 So. 2d 55 (1982), quoting Arthur v. St. Peters Hospital, 169 N.J. 575, 405 A. 2d 443 (1979).

Id ., citing Hudson v. C., Loan Assn., Inc. v. Horowytz , 116 N.J.L. 605, 608, 186 A 437 (Sup. Ct. 1936).

Supra.

RTC Decision, p. 9, Rollo of G.R. No. 126467, p. 127.

RTC Decision, p. 2, Rollo of G.R. No. 126467, p. 120.

Purcell v. Zimbelman, 18 Ariz. App. 75, 500 P2d 335 (1972).

Supra at footnote 1.

Corleto v. Hospital , 138 N.J. Super. 302, 350 A. 2d 534 (Super. Ct. Law Div.1975); Purcell v. Zimbelman, 18Ariz. App. 75,500 P. 2d 335 (1972); Hospital Authority v. Joiner, 229 Ga. 140,189 S.E. 2d 412 (1972).

Welsh v. Bulger , 548 Pa. 504, 698 A.2d 581 (1997).

115 Ariz. 34, 545 P2d 958 (1976).

262 S.E. 2d 391, cert denied 300 NC 194, 269 S.E. 2d 621 (1980).

127 Ariz. 516, 622 P. 2d 463 (1980).

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SUPREME COURTManila

FIRST DIVISION

G.R. No. 118889 March 23, 1998

FGU INSURANCE CORPORATION, petitioner,vs.

COURT OF APPEALS, FILCAR TRANSPORT, INC., and FORTUNE INSURANCECORPORATION, respondents.

BELLOSILLO, J .:

For damages suffered by a third party, may an action based on quasi-delict prosper against a rent-a-car company and, consequently, its insurer for fault or negligence of the

car lessee in driving the rented vehicle?

This was a two-car collision at dawn. At around 3 o'clock of 21 April 1987, two (2)vehicles, both Mitsubishi Colt Lancers, cruising northward along Epifanio de los Santos

Avenue, Mandaluyong City, figured in a traffic accident. The car bearing Plate No. PDG435 owned by Lydia F. Soriano was being driven at the outer lane of the highway byBenjamin Jacildone, while the other car, with Plate No. PCT 792, owned by respondentFILCAR Transport, Inc. (FILCAR), and driven by Peter Dahl-Jensen as lessee, was atthe center lane, left of the other vehicle. Upon approaching the corner of Pioneer Street,the car owned by FILCAR swerved to the right hitting the left side of the car of Soriano.

At that time Dahl-Jensen, a Danish tourist, did not possess a Philippine driver's license.1

As a consequence, petitioner FGU Insurance Corporation, in view of its insurancecontract with Soriano, paid the latter P25,382.20. By way of subrogation, 2 it sued Dahl-Jensen and respondent FILCAR as well as respondent Fortune Insurance Corporation(FORTUNE) as insurer of FILCAR for quasi-delict before the Regional Trial Court of Makati City.

Unfortunately, summons was not served on Dahl-Jensen since he was no longer staying at his given address; in fact, upon motion of petitioner, he was dropped from thecomplaint.

On 30 July 1991 the trial court dismissed the case for failure of petitioner to substantiateits claim of subrogation. 3

On 31 January 1995 respondent Court of Appeals affirmed the ruling of the trial courtalthough based on another ground, i .e., only the fault or negligence of Dahl-Jensen wassufficiently proved but not that of respondent FILCAR. 4 In other words, petitioner failedto establish its cause of action for sum of money based on quasi-delict .

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In this appeal, petitioner insists that respondents are liable on the strength of the rulingin MYC-Agro-Industrial Corporation v . Vda. de Caldo 5 that the registered owner of avehicle is liable for damages suffered by third persons although the vehicle is leased toanother.

We find no reversible error committed by respondent court in upholding the dismissal of petitioner's complaint. The pertinent provision is Art. 2176 of the Civil Code whichstates: "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 isno pre-existing contractual relation between the parties, is called a quasi-delict . . . . "

To sustain a claim based thereon, the following requisites must concur: (a) damagesuffered by the plaintiff; (b) fault or negligence of the defendant; and, (c) connection of cause and effect between the fault or negligence of the defendant and the damageincurred by the plaintiff. 6

We agree with respondent court that petitioner failed to prove the existence of thesecond requisite, i .e., fault or negligence of defendant FILCAR, because only the faultor negligence of Dahl-Jensen was sufficiently established, not that of FILCAR. It shouldbe noted that the damage caused on the vehicle of Soriano was brought about by thecircumstance that Dahl-Jensen swerved to the right while the vehicle that he was drivingwas at the center lane. It is plain that the negligence was solely attributable to Dahl-Jensen thus making the damage suffered by the other vehicle his personal liability.Respondent FILCAR did not have any participation therein.

Article 2180 of the same Code which deals also with quasi-delict provides:

The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.

The father and, in case of his death or incapacity, the mother, are responsible for thedamages caused by the minor children who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons who areunder their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter areemployed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and householdhelpers acting within the scope of their assigned tasks, even though the former are notengaged in any business or industry.

The State is responsible in like manner when it acts through a special agent; but notwhen the damage has been caused by the official to whom the task done properlypertains, in which case what is provided in article 2176 shall be applicable.

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

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

The liability imposed by Art. 2180 arises by virtue of a presumption juris tantum of negligence on the part of the persons made responsible thereunder, derived from their failure to exercise due care and vigilance over the acts of subordinates to prevent themfrom causing damage. 7 Yet, as correctly observed by respondent court, Art. 2180 ishardly applicable because none of the circumstances mentioned therein obtains in thecase under consideration. Respondent FILCAR being engaged in a rent-a-car businesswas only the owner of the car leased to Dahl-Jensen. As such, there was no vinculum

juris between them as employer and employee. Respondent FILCAR cannot in any waybe responsible for the negligent act of Dahl-Jensen, the former not being an employer of the latter.

We now correlate par. 5 of Art. 2180 with Art. 2184 of the same Code which provides:"In motor vehicle mishap, the owner is solidarily liable with his driver, if the former, whowas in the vehicle, could have by the use of due diligence, prevented the misfortune . . .. If the owner was not in the motor vehicle, the provisions of article 2180 are applicable."Obviously, this provision of Art. 2184 is neither applicable because of the absence of master-driver relationship between respondent FILCAR and Dahl-Jensen. Clearly,petitioner has no cause of action against respondent FILCAR on the basis of quasi-delict ; logically, its claim against respondent FORTUNE can neither prosper.

Petitioner's insistence on MYC-Agro-Industrial Corporation is rooted in a

misapprehension of our ruling therein. In that case, the negligent and reckless operationof the truck owned by petitioner corporation caused injuries to several persons anddamage to property. Intending to exculpate itself from liability, the corporation raised thedefense that at the time of the collision it had no more control over the vehicle as it wasleased to another; and, that the driver was not its employee but of the lessee. The trialcourt was not persuaded as it found that the true nature of the alleged lease contractwas nothing more than a disguise effected by the corporation to relieve itself of theburdens and responsibilities of an employer. We upheld this finding and affirmed thedeclaration of joint and several liability of the corporation with its driver.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals

dated 31 January 1995 sustaining the dismissal of petitioner's complaint by the trialcourt is AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., Vitug, Panganiban and Quisumbing, JJ., concur.

Footnotes

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1 Traffic Accident Investigation Report; Records, p. 130.

2 Subrogation is the substitution of one person in the place of another with reference to alawful claim, demand or right, so that he who is substituted succeeds to the rights of theother in relation to the debt or claim, and its rights, remedies, or securities (Gerken v.Davidson Grocery Co., 57 Idaho 670, 69 P. 2d 122, 126). Subrogation denotes the

exchange of a third person who has paid a debt in the place of the creditor to whom hehas paid it, so that he may exercise against the debtor all the rights which the creditor, if unpaid, might havedone. . . . Insurance companies, guarantors and bonding companies generally have theright to step into the shoes of the party whom they compensate and sue any party whomthe compensated party could have sued (Black's Law Dictionary, 6th Ed., St. Paul, Minn.,West Publishing Co., p. 1427).

3 Decision penned by Judge Salvador S. Abad Santos, RTC-Br. 65, Makati City,Records, pp. 204-205.

4 Decision penned by Justice Jaime M. Lantin with the concurrence of Justices Alicia Austria-Martinez and Conrado M. Vasquez Jr.; Rollo, p. 18.

5 G.R. No. 57298, 7 September 1984, 132 SCRA 10.

6 Andamo v. Intermediate Appellate Court, G.R. No. 74761, 6 November 1990, 191SCRA 195.

7 Arturo M. Tolentino, Commentaries and Jurisprudence on the Civil Code of thePhilippines, 1992, Ed., Vol. V, p. 611.

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Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 122039 May 31, 2000

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

MENDOZA, J .:

This is a petition for review on certiorari of the decision1

of the Court of Appeals, datedMarch 31, 1991, reversing the contrary decision of the Regional Trial Court, Branch 36,Dumaguete City, and awarding damages instead to private respondent Eliza JujeurcheSunga as plaintiff in an action for breach of contract of carriage.

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

At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche G.Sunga, then a college freshman majoring in Physical Education at the SilimanUniversity, took a passenger jeepney owned and operated by petitioner VicenteCalalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given

by the conductor an "extension seat," a wooden stool at the back of the door at the rear end of the vehicle.

On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let apassenger off. As she was seated at the rear of the vehicle, Sunga gave way to theoutgoing passenger. Just as she was doing so, an Isuzu truck driven by IglecerioVerena and owned by Francisco Salva bumped the left rear portion of the jeepney. As aresult, Sunga was injured. She sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the underlying skin." Closed reduction of the fracture, longleg circular casting, and case wedging were done under sedation. Her confinement inthe hospital lasted from August 23 to September 7, 1989. Her attending physician, Dr.

Danilo V. Oligario, an orthopedic surgeon, certified she would remain on a cast for aperiod of three months and would have to ambulate in crutches during saidperiod.1âwphi1.nêt

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

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

jeepney.

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

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

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

(2) P50,000.00 as moral damages;

(3) P10,000.00 as attorney's fees; and

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

(5) to pay the costs.

SO ORDERED.

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

The petition has no merit.

The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver

and the owner of the truck liable for quasi-delict ignores the fact that she was never aparty to that case and, therefore, the principle of res judicata does not apply.

Nor are the issues in Civil Case No. 3490 and in the present case the same. The issuein Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioner's jeepney. On the other hand, the issue in thiscase is whether petitioner is liable on his contract of carriage. The first , quasi-delict, alsoknown as culpa aquiliana or culpa extra contractual , has as its source the negligence of

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the tortfeasor. The second , breach of contract or culpa contractual , is premised uponthe negligence in the performance of a contractual obligation.

Consequently, in quasi-delict, the negligence or fault should be clearly establishedbecause it is the basis of the action, whereas in breach of contract, the action can be

prosecuted merely by proving the existence of the contract and the fact that the obligor,in this case the common carrier, failed to transport his passenger safely to hisdestination. 2 In case of death or injuries to passengers, Art. 1756 of the Civil Codeprovides that common carriers are presumed to have been at fault or to have actednegligently unless they prove that they observed extraordinary diligence as defined in

Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the commoncarrier the burden of proof.

There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, findingSalva and his driver Verena liable for the damage to petitioner's jeepney, should bebinding on Sunga. It is immaterial that the proximate cause of the collision between the

jeepney and the truck was the negligence of the truck driver. The doctrine of proximatecause 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 norelation between him and another party. In such a case, the obligation is created by lawitself. But, where there is a pre-existing contractual relation between the parties, it is theparties themselves who create the obligation, and the function of the law is merely toregulate the relation thus created. Insofar as contracts of carriage are concerned, someaspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers. It provides:

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

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

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

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

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

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Now, did the driver of jeepney carry Sunga "safely as far as human care and foresightcould provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We do not think so. Several factorsmilitate against petitioner's contention.

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

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

Second , it is undisputed that petitioner's driver took in more passengers than theallowed seating capacity of the jeepney, a violation of §32(a) of the same law. It

provides:

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

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

We find it hard to give serious thought to petitioner's contention that Sunga's taking an"extension seat" amounted to an implied assumption of risk. It is akin to arguing that theinjuries to the many victims of the tragedies in our seas should not be compensatedmerely because those passengers assumed a greater risk of drowning by boarding anoverloaded ferry. This is also true of petitioner's contention that the jeepney beingbumped while it was improperly parked constitutes caso fortuito. A caso fortuito is anevent which could not be foreseen, or which, though foreseen, was inevitable. 3 Thisrequires that the following requirements be present: (a) the cause of the breach isindependent of the debtor's will; (b) the event is unforeseeable or unavoidable; (c) theevent is such as to render it impossible for the debtor to fulfill his obligation in a normalmanner, and (d) the debtor did not take part in causing the injury to the

creditor.

4

Petitioner should have foreseen the danger of parking his jeepney with itsbody protruding two meters into the highway.

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

In awarding moral damages, the Court of Appeals stated:

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Plaintiff-appellant at the time of the accident was a first-year college student in thatschool year 1989-1990 at the Silliman University, majoring in Physical Education.Because of the injury, she was not able to enroll in the second semester of that schoolyear. She testified that she had no more intention of continuing with her schooling,because she could not walk and decided not to pursue her degree, major in PhysicalEducation "because of my leg which has a defect already."

Plaintiff-appellant likewise testified that even while she was under confinement, she criedin pain because of her injured left foot. As a result of her injury, the Orthopedic Surgeonalso certified that she has "residual bowing of the fracture side." She likewise decided notto further pursue Physical Education as her major subject, because "my left leg . . . has adefect already."

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

As a general rule, moral damages are not recoverable in actions for damagespredicated on a breach of contract for it is not one of the items enumerated under Art.

2219 of the Civil Code. 5 As an exception, such damages are recoverable: (1) in casesin which the mishap results in the death of a passenger, as provided in Art. 1764, inrelation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier isguilty of fraud or bad faith, as provided in Art. 2220. 6

In this case, there is no legal basis for awarding moral damages since there was nofactual finding by the appellate court that petitioner acted in bad faith in the performanceof the contract of carriage. Sunga's contention that petitioner's admission in open courtthat the driver of the jeepney failed to assist her in going to a nearby hospital cannot beconstrued as an admission of bad faith. The fact that it was the driver of the Isuzu truckwho took her to the hospital does not imply that petitioner was utterly indifferent to the

plight of his injured passenger. If at all, it is merely implied recognition by Verena that hewas the one at fault for the accident.

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

SO ORDERED.1âwphi1.nêt

Bellosillo and Buena, JJ., concur.

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

Footnotes

1 Per Justice Artemon D. Luna and concurred in by Justices Hector L. Hofilena and B.A. Adefuin-dela Cruz.

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2 See B. BALDERRAMA, THE PHILIPPINE LAW ON TROTS AND DAMAGES 20(1953).

3 CIVIL CODE, ART. 1174.

4 Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA 596 (1986); Vasquez v. Court of

Appeals, 138 SCRA 553 (1985); Republic v. Luzon Stevedoring Corp., 128 Phil. 313(1967).

5 Fores v. Miranda, 67 105 Phil. 267 (1959); Mercado v. Lira, 3 SCRA 124 (1961).

6 Philippine Rabbit Bus Lines, Inc. v. Esguerra, 117 SCRA 741 (1982); Sabena BelgianWorld Airlines v. Court of Appeals, 171 SCRA 620 (1989); China Airlines, Ltd. v.Intermediate Appellate Court, 169 SCRA 226 (1989).


SUPREME COURTManila

SECOND DIVISION

G.R. No. 108395 March 7, 1997

HEIRS OF THE LATE TEODORO GUARING, JR., petitioners,

vs.COURT OF APPEALS, PHILIPPINE RABBIT BUS LINES, INC., and ANGELESCUEVAS, respondents.

MENDOZA, J .:

This is a petition for review of the decision of the Court of Appeals, reversing thedecision of the Regional Trial Court of Manila, Branch 20, which ordered respondentPhilippine Rabbit Bus Lines, Inc. and its driver, Angeles Cuevas, to pay variousamounts in damages to petitioners, the heirs of the late Teodoro Guaring, Jr.

This case arose from an unfortunate vehicular accident which happened on November 7, 1987, along the North Expressway in San Rafael, Mexico, Pampanga. Involved in theaccident were a Mitsubishi Lancer car driven by Teodoro Guaring, Jr., who died as aresult of the mishap, Philippine Rabbit Bus No. 415, driven by Angeles Cuevas, and aToyota Cressida car, driven by Eligio Enriquez. The Mitsubishi Lancer was headingnorth, at the speed of 80 to 90 kilometers per hour. Following it was the PhilippineRabbit Bus No. 415, with Plate No. CVD-584. On the other hand, the Toyota Cressidawas cruising on the opposite lane, bound for Manila.

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Petitioners, heirs of Teodoro Guaring, Jr., brought this action for damages, based onquasi delict, in the Regional Trial Court of Manila. Their evidence tended to show thatthe Rabbit bus tried to overtake Guaring's car by passing on the right shoulder of theroad and that in so doing it hit the right rear portion of Guaring's Mitsubishi Lancer. Theimpact caused the Lancer to swerve to the south-bound lane, as a result of which it

collided with the Toyota Cressida car coming from the opposite direction.

With Teodoro Guaring, Jr. in the Lancer, seated beside him in front, was BonifacioClemente. Riding in the Toyota Cressida driven by Sgt. Eligio Enriquez was his mother,Dolores Enriquez, who was seated beside him. Seated at the back were his daughter Katherine (who was directly behind him), his wife Lilian, and his nephew FelixCandelaria.

Killed in the collision were Teodoro Guaring, Jr., who was driving the Lancer, andDolores Enriquez, who was riding in the Cressida, while injured were BonifacioClemente and the occupants of the Toyota Cressida.

Private respondents, on the other hand, presented evidence tending to show that theaccident was due to the negligence of the deceased Guaring. They claimed that it wasGuaring who tried to overtake the vehicle ahead of him on the highway and that in doingso he encroached on the south-bound lane and collided with the oncoming Cressida of U.S. Air Force Sgt. Enriquez. Private respondents claim that as a result of the collisionthe Lancer was thrown back to its lane where it crashed into the Rabbit bus.

On May 16, 1990, the Regional Trial Court rendered judgment finding Philippine RabbitBus Lines, Inc. and its driver, Angeles Cuevas, at fault, and holding them solidarily liablefor damages to petitioners. The dispositive portion of its decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against thedefendants, ordering the latter to pay the former, jointly and severally, the sum of:

1. P500,000.00 for loss of earning capacity of the deceased Teodoro Guaring, Jr.;

2. P1,000,000.00 as moral damages;

3. P50,000.00 as and for attorney's fees; and

4. Costs of suit.

From this judgment, private respondent Philippine Rabbit Bus Lines, Inc.appealed, contending:

1. The lower court erred in not finding that the proximate cause of the collision wasGuaring's negligence in attempting to overtake the car in front of him.

2. The lower court erred in not holding that PRBL exercised due diligence in thesupervision of its employees.

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3. The lower court erred in awarding the amount of P500,000.00 in favor of plaintiffs-appellees representing Guaring's loss of earning capacity.

4. The lower court erred in awarding moral damages in favor of plaintiffs-appellees.

5. The lower court erred in awarding attorney's fees in favor of plaintiffs-appellees.

On December 16, 1992, the Court of Appeals rendered a decision, setting aside thedecision of the Regional Trial Court of Manila in the civil action for damages anddismissing the complaint against private respondents Philippine Rabbit Bus Lines, Inc.and Cuevas, on the strength of a decision rendered by the Regional Trial Court at SanFernando, Pampanga, in the criminal case, acquitting the bus driver Angeles Cuevas of reckless imprudence resulting in damage to property and double homicide. Theappellate court held that since the basis of petitioners' action was the allegednegligence of the bus driver, the latter's acquittal in the criminal case rendered the civilcase based on quasi delict untenable.

Hence, this petition. Petitioners contend that

[1] EVIDENCE IN ONE CASE IS INADMISSIBLE IN ANOTHER CASE AGAINST APERSON NOT A PARTY IN THE FIRST CASE AND TO HOLD OTHERWISE ISVIOLATIVE OF PROCEDURAL DUE PROCESS.

[2] THE DECISION OF THE COURT OF APPEALS WAS WITHOUT FACTUALFINDINGS AND DID NOT RESOLVE SQUARELY THE ASSIGNED ERRORS AND ISTHEREFORE A VOID JUDGMENT.

[3] ACQUITTAL OF THE ACCUSED IN THE CRIMINAL CASE, WHETHER ONREASONABLE DOUBT OR NOT, IS NO BAR TO THE PROSECUTION FOR DAMAGESBASED ON QUASI-DELICT.

The question is whether the judgment in the criminal case extinguished the liability of private respondent Philippine Rabbit Bus Lines, Inc. and its driver, Angeles Cuevas, for damages for the death of Teodoro Guaring, Jr. In absolving private respondents fromliability, the Court of Appeals reasoned: 1

Since the appellee's civil action is predicated upon the negligence of the accused whichdoes not exist as found by the trial court in the said criminal case, it necessarily followsthat the acquittal of the accused in the criminal case carries with it the extinction of thecivil responsibility arising therefrom. Otherwise stated, the fact from which the civil actionmight arise, that is, the negligence of the accused, did not exist.

The finding in the criminal case that accused Cuevas was not negligent and theproximate cause of the accident was the act of deceased Guaring in overtaking another vehicle ahead of him likewise exonerates PRB from any civil liability.

Although it did not say so expressly, the appellate court appears to have based its rulingon Rule 111, §2(b) of the Rules of Criminal Procedure, which provides:

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(b) Extinction of the penal action does not carry with it extinction of the civil, unless theextinction proceeds from a declaration in a final judgment that the fact from which the civilmight arise did not exist.

This provision contemplates, however, a civil action arising from crime, whereas thepresent action was instituted pursuant to Art. 2176 of the Civil Code, which provides:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is nopre-existing contractual relation between the parties, is called a quasi-delict and isgoverned by the provisions of this Chapter.

It is now settled that acquittal of the accused, even if based on a finding that he is notguilty, does not carry with it the extinction of the civil liability based on quasi delict. Thus,in Tayag v . Alcantara, 2 it was held:

. . . a separate civil action lies against the offender in a criminal act, whether or not he iscriminally prosecuted and found guilty or acquitted, provided that the offended party is not

allowed, if he is actually charged also criminally, to recover damages on both scores, andwould be entitled in such eventuality only to the bigger award of the two, assuming theawards made in the two cases vary. In other words, the extinction of civil liability referredto in Par. (c), Section 3, Rule 111 [now Rule 111, §2(b)], refers exclusively to civil liabilityfounded on Article 100 of the Revised Penal Code, whereas the civil liability for the sameact considered as a quasi-delict only and not as a crime is not extinguished even by adeclaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused . . . .

It is noteworthy that the accident in that case also involved a Philippine Rabbit bus andthat, as in this case, the acquittal of the bus driver was based on reasonable doubt. Weheld that the civil case for damages was not barred since the cause of action of the

heirs was based on quasi delict.

Again, in Gula v . Dianala it was held: 3

Since the cause of action of plaintiffs-appellants is based on culpa aquiliana and notculpa criminal , thus precluding the application of the exception in Sec. 3(c) of Rule 111[now Rule 111, §2(b)], and the fact that it can be inferred from the criminal case thatdefendant-accused, Pedro Dianala, was acquitted on reasonable doubt because of dearth of evidence and lack of veracity of the two principal witnesses, the doctrine inMendoza vs. Arrieta, 91 SCRA 113, will not find application. In that case, the acquittalwas not based on reasonable doubt and the cause of action was based on culpa criminal ,for which reason we held the suit for damages barred.

Even if damages are sought on the basis of crime and not quasi delict, the acquittal of the bus driver will not bar recovery of damages because the acquittal was based not ona finding that he was not guilty but only on reasonable doubt. Thus, it has been held: 4

The judgment of acquittal extinguishes the liability of the accused for damages only whenit includes a declaration that the facts from which the civil might arise did not exist. Thus,the civil liability is not extinguished by acquittal where the acquittal is based onreasonable doubt (PNB v. Catipon, 98 Phil. 286) as only preponderance of evidence is

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required in civil cases; where the court expressly declares that the liability of the accusedis not criminal but only civil in nature (De Guzman v. Alvia, 96 Phil. 558; People v. Pantig,supra) as, for instance, in the felonies of estafa, theft, and malicious mischief committedby certain relatives who thereby incur only civil liability (See Art. 332, Revised PenalCode); and, where the civil liability does not arise from or is not based upon the criminalact of which the accused was acquitted (Castro v. Collector of Internal Revenue, 4 SCRA1093; See Regalado, Remedial Law Compendium, 1983 ed., p. 623).

In the present case, the dispositive portion of the decision of the RTC in thecriminal case reads:

WHEREFORE, the Court, entertaining reasonable doubt as to his guilt , the accused ishereby acquitted, of the offense of reckless imprudence resulting to double homicide anddamage to property as charged in the Information, without pronouncement as to costs.

SO ORDERED. 5

It was thus error for the appellate court to skip the review of the evidence in this case

and instead base its decision on the findings of the trial court in the criminal case. In sodoing, the appellate court disregarded the fact that this case had been institutedindependently of the criminal case and that petitioners herein took no part in the criminalprosecution. In fact this action was filed below before the prosecution presentedevidence in the criminal action. The attention of the Court of Appeals was called to thedecision in the criminal case, which was decided on September 7, 1990, only when thedecision of the trial court in this case was already pending review before it (the Court of

Appeals).

The appellate court did not even have before it the evidence in the criminal case. Whatit did was simply to cite findings contained in the decision of the criminal court. Worse,

what the criminal court considered was reasonable doubt concerning the liability of thebus driver the appellate court regarded as a categorical finding that the driver was notnegligent and, on that basis, declared in this case that "the proximate cause of theaccident was the act of deceased Guaring in overtaking another vehicle ahead of him."The notion that an action for quasi delict is separate and distinct from the criminal actionwas thus set aside.

This case must be decided on the basis of the evidence in the civil case. This isimportant because the criminal court appears to have based its decision, acquitting thebus driver on the ground of reasonable doubt, solely on what it perceived to be therelative capacity for observation of the prosecution and defense witnesses. 6

The

prosecution did not call Bonifacio Clemente to testify despite the fact that shortly after the accident he gave a statement to the police, pinning the blame for the accident onthe Philippine Rabbit bus driver. Indeed, the civil case involved a different set of witnesses. Petitioners presented Eligio Enriquez who was driving the Cressida, andBonifacio Clemente, who was a passenger in Guaring's car. Thus, both had full view of the accident

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It is unfair to bind petitioners to the result of the criminal action when the fact is that theydid not take part therein. That the witnesses presented on behalf of the petitioners aredifferent from those presented by the prosecution should have brought home to theappellate court the fundamental unfairness of considering the decision in the criminalcase conclusive of the civil case.

Because the Court of Appeals did not consider the evidence in the civil case, this caseshould be remanded to it so that it may render another decision in accordance with thelaw and the evidence. The issues raised by the petitioners are essentially factual andrequire the evaluation of evidence, which is the function of the Court of Appeals in theexercise of its exclusive appellate jurisdiction. They cannot be decided in this Court.

WHEREFORE, the decision of the Court of Appeals is REVERSED and this case isREMANDED to the Court of Appeals with instruction to render judgment withreasonable dispatch in accordance with law and the evidence presented in Civil CaseNo. 88-43860.

SO ORDERED.

Regalado, Romero, Puno and Torres, Jr., JJ., concur.

Footnotes

1 Rollo, p. 60.

2 98 SCRA 723, 728 (1980) (emphasis added).

3 132 SCRA 245, 248-249 (1984).

4 Padilla v. Court of Appeals, 129 SCRA 558, 565-566 (1984).

5 RTC decision, p. 31; Rollo, p. 46 (emphasis added).

6 This is apparent from the following excerpt from the decision in the criminal case whichthe Court of Appeals quoted:

While Edgardo Sobrevilla was seated in the conductor's seat in the front portion of thePhilippine Rabbit Bus, Mrs. Lilian Enriquez was at the back seat of the Cressida car. Asbetween them, it is in accord with ordinary human experience that Edgardo Sobrevillawas in a better position to see the actual occur[r]ence of the incident.

Confirmatory to the testimony of Edgardo Sobrevilla are the sketches (Exhs. "A" and "A-1") drawn by Pat. Danilo Gonzales, the investigating Policeman, which reveal no fallendebris on the North bound lane. Fallen debris could have surely occur[r]ed in the North-bound lane if there was a violent contact between the Mitsubishi Lancer car and thePhilippine Rabbit bus in the North bound lane before the Lancer car left its lane toencroach on the South bound lane. The sketches (Exh. "A"' and "A-1") reveal very clearlythat fallen debris are on the concrete pavement and asphalt shoulder of the South-boundlane, clearly indicative that the collision between the Lancer and the Cressida occur[r]edin the lane of the latter.

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Manila

FIRST DIVISION

G.R. No. 141538 March 23, 2004

HERMANA R. CEREZO, petitioner,vs.DAVID TUAZON, respondent.

D E C I S I O N

CARPIO, J .:

The Case

This is a petition for review on certiorar i1 to annul the Resolution2 dated 21 October 1999 of the

Court of Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20 January 2000denying the motion for reconsideration. The Court of Appeals denied the petition for annulmentof the Decision3 dated 30 May 1995 rendered by the Regional Trial Court of Angeles City,Branch 56 ("trial court"), in Civil Case No. 7415. The trial court ordered petitioner Hermana R.Cerezo ("Mrs. Cerezo") to pay respondent David Tuazon ("Tuazon") actual damages, loss of earnings, moral damages, and costs of suit.

Antecedent Facts

Around noontime of 26 June 1993, a Country Bus Lines passenger bus with plate number NYA241 collided with a tricycle bearing plate number TC RV 126 along Captain M. Palo Street, Sta.Ines, Mabalacat, Pampanga. On 1 October 1993, tricycle driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan Cerezo("Atty. Cerezo"), and bus driver Danilo A. Foronda ("Foronda"). The complaint alleged that:

7. At the time of the incident, plaintiff [Tuazon] was in his proper lane when the second-named defendant [Foronda], being then the driver and person in charge of the CountryBus with plate number NYA 241, did then and there willfully, unlawfully, andfeloniously operate the said motor vehicle in a negligent, careless, and imprudent manner

without due regard to traffic rules and regulations, there being a "Slow Down" sign near the scene of the incident, and without taking the necessary precaution to prevent loss of lives or injuries, his negligence, carelessness and imprudence resulted to severe damageto the tricycle and serious physical injuries to plaintiff thus making him unable to walk and becoming disabled, with his thumb and middle finger on the left hand being cut[.]4

On 1 October 1993, Tuazon filed a motion to litigate as a pauper. Subsequently, the trial courtissued summons against Atty. Cerezo and Mrs. Cerezo ("the Cerezo spouses") at the Makati

http://www.lawphil.net/judjuris/juri2004/mar2004/gr_141538_2004.html#fnt1














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address stated in the complaint. However, the summons was returned unserved on 10 November 1993 as the Cerezo spouses no longer held office nor resided in Makati. On 18 April 1994, thetrial court issued alias summons against the Cerezo spouses at their address in Barangay Sta.Maria, Camiling, Tarlac. The alias summons and a copy of the complaint were finally served on20 April 1994 at the office of Atty. Cerezo, who was then working as Tarlac Provincial

Prosecutor. Atty. Cerezo reacted angrily on learning of the service of summons upon his person.Atty. Cerezo allegedly told Sheriff William Canlas: " Punyeta, ano ang gusto mong mangyari?Gusto mong hindi ka makalabas ng buhay dito? Teritoryo ko ito. Wala ka sa teritoryo mo."5

The records show that the Cerezo spouses participated in the proceedings before the trial court.The Cerezo spouses filed a comment with motion for bill of particulars dated 29 April 1994 anda reply to opposition to comment with motion dated 13 June 1994.6 On 1 August 1994, the trialcourt issued an order directing the Cerezo spouses to file a comment to the opposition to the billof particulars. Atty. Elpidio B. Valera ("Atty. Valera") of Valera and Valera Law Officesappeared on behalf of the Cerezo spouses. On 29 August 1994, Atty. Valera filed an urgent ex- parte motion praying for the resolution of Tuazon‘s motion to litigate as a pauper and for the

issuance of new summons on the Cerezo spouses to satisfy proper service in accordance with theRules of Court.7

On 30 August 1994, the trial court issued an order resolving Tuazon‘s motion to litigate as a

pauper and the Cerezo spouses‘ urgent ex-parte motion. The order reads:

At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that he is presently jobless; that at the time of the filing of this case, his son who is working in Malaysiahelps him and sends him once in a while P300.00 a month, and that he does not have anyreal property. Attached to the Motion to Litigate as Pauper are his Affidavit that he isunemployed; a Certification by the Barangay Captain of his poblacion that his income is

not enough for his family‘s subsistence; and a Certification by the Office of theMunicipal Assessor that he has no landholding in the Municipality of Mabalacat,Province of Pampanga.

The Court is satisfied from the unrebutted testimony of the plaintiff that he is entitled to prosecute his complaint in this case as a pauper under existing rules.

On the other hand, the Court denies the prayer in the Appearance and Urgent Ex-ParteMotion requiring new summons to be served to the defendants. The Court is of theopinion that any infirmity in the service of the summons to the defendant before plaintiff was allowed to prosecute his complaint in this case as a pauper has been cured by thisOrder.

If within 15 days from receipt of this Order, the defendants do not question on appeal thisOrder of this Court, the Court shall proceed to resolve the Motion for Bill of Particulars.8

On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion for reconsideration.The trial court denied the motion for reconsideration.

















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On 14 November 1994, the trial court issued an order directing the Cerezo spouses to file their answer within fifteen days from receipt of the order. The Cerezo spouses did not file an answer.On 27 January 1995, Tuazon filed a motion to declare the Cerezo spouses in default. On 6February 1995, the trial court issued an order declaring the Cerezo spouses in default andauthorizing Tuazon to present his evidence. 9

On 30 May 1995, after considering Tuazon‘s testimonial and documentary evidence, the trial

court ruled in Tuazon‘s favor. The trial court made no pronouncement on Foronda‘s liability because there was no service of summons on him. The trial court did not hold Atty. Cerezo liableas Tuazon failed to show that Mrs. Cerezo‘s business benefited the family, pursuant to Article

121(3) of the Family Code. The trial court held Mrs. Cerezo solely liable for the damagessustained by Tuazon arising from the negligence of Mrs. Cerezo‘s employee, pursuant to Article

2180 of the Civil Code. The dispositive portion of the trial court‘s decision reads:

WHEREFORE, judgment is hereby rendered ordering the defendant Hermana Cerezo to pay the plaintiff:

a) For Actual Damages - P69,485.35

1) Expenses for operation and medicalTreatment

2) Cost of repair of the tricycle

b) For loss of earnings - 39,921.00

c) For moral damages - 43,300.00

d) And to pay the cost of the suit. - 20,000.00

The docket fees and other expenses in the filing of this suit shall be lien on whatever judgment may be rendered in favor of the plaintiff.

SO ORDERED.10

Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July 1995, Mrs. Cerezofiled before the trial court a petition for relief from judgment on the grounds of "fraud, mistakeor excusable negligence." Testifying before the trial court, both Mrs. Cerezo and Atty. Valeradenied receipt of notices of hearings and of orders of the court. Atty. Valera added that hereceived no notice before or during the 8 May 1995 elections, "when he was a senatorialcandidate for the KBL Party, and very busy, using his office and residence as Party NationalHeadquarters." Atty. Valera claimed that he was able to read the decision of the trial court onlyafter Mrs. Cerezo sent him a copy.11

Tuazon did not testify but presented documentary evidence to prove the participation of theCerezo spouses in the case. Tuazon presented the following exhibits:

Exhibit 1 - Sheriff‘s return and summons;

Exhibit 1-A - Alias summons dated April 20, 1994;













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Exhibit 2 - Comment with Motion;

Exhibit 3 - Minutes of the hearing held on August 1, 1994;

Exhibit 3-A - Signature of defendant‘s counsel;

Exhibit 4 - Minutes of the hearing held on August 30, 1994;

Exhibit 4-A - Signature of the defendant‘s counsel; Exhibit 5 - Appearance and Urgent Ex-Parte Motion;

Exhibit 6 - Order dated November 14, 1994;

Exhibit 6-A - Postal certification dated January 13, 1995;

Exhibit 7 - Order dated February [illegible];

Exhibit 7-A - Court‘s return slip addressed to Atty. Elpidio Valera;

Exhibit 7-B - Court‘s return slip addressed to Spouses Juan and Hermana Cerezo;

Exhibit 8 - Decision dated May [30], 1995

Exhibit 8-A - Court‘s return slip addressed to defendant Hermana Cerezo;

Exhibit 8-B - Court‘s return slip addressed to defendant‘s counsel, Atty. ElpidioValera;

Exhibit 9 - Order dated September 21, 1995;

Exhibit 9-A - Second Page of Exhibit 9;

Exhibit 9-B - Third page of Exhibit 9;

Exhibit 9-C - Fourth page of Exhibit 9;

Exhibit 9-D - Court‘s return slip addressed to Atty. Elpidio Valera;

and

Exhibit 9-E - Court‘s return slip addressed to plaintiff‘s counsel, Atty. Norman

Dick de Guzman.12

On 4 March 1998, the trial court issued an order 13 denying the petition for relief from judgment.The trial court stated that having received the decision on 25 June 1995, the Cerezo spousesshould have filed a notice of appeal instead of resorting to a petition for relief from judgment.The trial court refused to grant relief from judgment because the Cerezo spouses could haveavailed of the remedy of appeal. Moreover, the Cerezo spouses not only failed to prove fraud,accident, mistake or excusable negligence by conclusive evidence, they also failed to prove thatthey had a good and substantial defense. The trial court noted that the Cerezo spouses failed toappeal because they relied on an expected settlement of the case.

The Cerezo spouses subsequently filed before the Court of Appeals a petition for certiorari

under Section 1 of Rule 65. The petition was docketed as CA-G.R. SP No. 48132.14 The petitionquestioned whether the trial court acquired jurisdiction over the case considering there was noservice of summons on Foronda, whom the Cerezo spouses claimed was an indispensable party.In a resolution15 dated 21 January 1999, the Court of Appeals denied the petition for certiorari and affirmed the trial court‘s order denying the petition for relief from judgment. The Court of

Appeals declared that the Cerezo spouses‘ failure to file an answer was due to their own

negligence, considering that they continued to participate in the proceedings without filing ananswer. There was also nothing in the records to show that the Cerezo spouses actually offered a
















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reasonable settlement to Tuazon. The Court of Appeals also denied Cerezo spouses‘ motion for

reconsideration for lack of merit.

The Cerezo spouses filed before this Court a petition for review on certiorari under Rule 45.Atty. Cerezo himself signed the petition, docketed as G.R. No. 137593. On 13 April 1999, this

Court rendered a resolution denying the petition for review on certiorari for failure to attach anaffidavit of service of copies of the petition to the Court of Appeals and to the adverse parties.Even if the petition complied with this requirement, the Court would still have denied the petition as the Cerezo spouses failed to show that the Court of Appeals committed a reversibleerror. The Court‘s resolution was entered in the Book of Entries and Judgments when it becamefinal and executory on 28 June 1999.16

Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July 1999 a petition for annulment of judgment under Rule 47 with prayer for restraining order. Atty. Valera and Atty.Dionisio S. Daga ("Atty. Daga") represented Mrs. Cerezo in the petition, docketed as CA-G.R.SP No. 53572.17 The petition prayed for the annulment of the 30 May 1995 decision of the trial

court and for the issuance of a writ of preliminary injunction enjoining execution of the trialcourt‘s decision pending resolution of the petition.

The Court of Appeals denied the petition for annulment of judgment in a resolution dated 21October 1999. The resolution reads in part:

In this case, records show that the petitioner previously filed with the lower court aPetition for Relief from Judgment on the ground that they were wrongfully declared indefault while waiting for an amicable settlement of the complaint for damages. The courta quo correctly ruled that such petition is without merit. The defendant spouses admit thatduring the initial hearing they appeared before the court and even mentioned the need for

an amicable settlement. Thus, the lower court acquired jurisdiction over the defendantspouses.

Therefore, petitioner having availed of a petition for relief, the remedy of an annulmentof judgment is no longer available. The proper action for the petitioner is to appeal theorder of the lower court denying the petition for relief.

Wherefore, the instant petition could not be given due course and should accordingly bedismissed.

SO ORDERED.18

On 20 January 2000, the Court of Appeals denied the Cerezo spouses‘ motion for reconsideration.19 The Court of Appeals stated:

A distinction should be made between a court‘s jurisdiction over a person and its

jurisdiction over the subject matter of a case. The former is acquired by the proper serviceof summons or by the parties‘ voluntary appearance; while the latter is conferred by law.

















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Resolving the matter of jurisdiction over the subject matter, Section 19(1) of B[atas]P[ambansa] 129 provides that Regional Trial Courts shall exercise exclusive original jurisdiction in all civil actions in which the subject of the litigation is incapable of pecuniary estimation. Thus it was proper for the lower court to decide the instant case for damages.

Unlike jurisdiction over the subject matter of a case which is absolute and conferred bylaw; any defects [sic] in the acquisition of jurisdiction over a person (i.e., improper filingof civil complaint or improper service of summons) may be waived by the voluntaryappearance of parties.

The lower court admits the fact that no summons was served on defendant Foronda.Thus, jurisdiction over the person of defendant Foronda was not acquired, for whichreason he was not held liable in this case. However, it has been proven that jurisdictionover the other defendants was validly acquired by the court a quo.

The defendant spouses admit to having appeared in the initial hearings and in the hearingfor plaintiff‘s motion to litigate as a pauper. They even mentioned conferences where

attempts were made to reach an amicable settlement with plaintiff. However, the possibility of amicable settlement is not a good and substantial defense which willwarrant the granting of said petition.

x x x

Assuming arguendo that private respondent failed to reserve his right to institute aseparate action for damages in the criminal action, the petitioner cannot now raise suchissue and question the lower court‘s jurisdiction because petitioner and her husband have

waived such right by voluntarily appearing in the civil case for damages. Therefore, thefindings and the decision of the lower court may bind them.

Records show that the petitioner previously filed with the lower court a Petition for Relief from Judgment on the ground that they were wrongfully declared in default while waitingfor an amicable settlement of the complaint for damages. The court a quo correctly ruledthat such petition is without merit, jurisdiction having been acquired by the voluntaryappearance of defendant spouses.

Once again, it bears stressing that having availed of a petition for relief, the remedy of annulment of judgment is no longer available.

Based on the foregoing, the motion for reconsideration could not be given due course andis hereby DENIED.

SO ORDERED.20

The Issues





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On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone representing her, filed the present petition for review on certiorari before this Court. Mrs. Cerezo claims that:

1. In dismissing the Petition for Annulment of Judgment, the Court of Appeals assumesthat the issues raised in the petition for annulment is based on extrinsic fraud related to

the denied petition for relief notwithstanding that the grounds relied upon involvesquestions of lack of jurisdiction.

2. In dismissing the Petition for Annulment, the Court of Appeals disregarded theallegation that the lower court[‘s] findings of negligence against defendant-driver DaniloForonda [whom] the lower court did not summon is null and void for want of due processand consequently, such findings of negligence which is [sic] null and void cannot becomethe basis of the lower court to adjudge petitioner-employer liable for civil damages.

3. In dismissing the Petition for Annulment, the Court of Appeals ignored the allegationthat defendant-driver Danilo A. Foronda whose negligence is the main issue is an

indispensable party whose presence is compulsory but [whom] the lower court did notsummon.

4. In dismissing the Petition for Annulment, the Court of Appeals ruled that assumingarguendo that private respondent failed to reserve his right to institute a separate actionfor damages in the criminal action, the petitioner cannot now raise such issue andquestion the lower court‘s jurisdiction because petitioner [has] waived such right byvoluntarily appearing in the civil case for damages notwithstanding that lack of jurisdiction cannot be waived.21

The Court‟s Ruling

The petition has no merit. As the issues are interrelated, we shall discuss them jointly.

Remedies Avail able to a Party Declared in Defaul t

An examination of the records of the entire proceedings shows that three lawyers filed andsigned pleadings on behalf of Mrs. Cerezo, namely, Atty. Daga, Atty. Valera, and Atty. Cerezo.Despite their number, Mrs. Cerezo‘s counsels failed to avail of the proper remedies. It is either

by sheer ignorance or by malicious manipulation of legal technicalities that they have managedto delay the disposition of the present case, to the detriment of pauper litigant Tuazon.

Mrs. Cerezo claims she did not receive any copy of the order declaring the Cerezo spouses indefault. Mrs. Cerezo asserts that she only came to know of the default order on 25 June 1995,when she received a copy of the decision. On 10 July 1995, Mrs. Cerezo filed before the trialcourt a petition for relief from judgment under Rule 38, alleging "fraud, mistake, or excusablenegligence" as grounds. On 4 March 1998, the trial court denied Mrs. Cerezo‘s petition for relief

from judgment. The trial court stated that Mrs. Cerezo could have availed of appeal as a remedyand that she failed to prove that the judgment was entered through fraud, accident, mistake, or excusable negligence. Mrs. Cerezo then filed before the Court of Appeals a petition for certiorari





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under Section 1 of Rule 65 assailing the denial of the petition for relief from judgment. On 21January 1999, the Court of Appeals dismissed Mrs. Cerezo‘s petition. On 24 February 1999, the

appellate court denied Mrs. Cerezo‘s motion for reconsideration. On 11 March 1999, Mrs.Cerezo filed before this Court a petition for review on certiorari under Rule 45, questioning thedenial of the petition for relief from judgment. We denied the petition and our resolution became

final and executory on 28 June 1999.

On 6 July 1999, a mere eight days after our resolution became final and executory, Mrs. Cerezofiled before the Court of Appeals a petition for annulment of the judgment of the trial court under Rule 47. Meanwhile, on 25 August 1999, the trial court issued over the objection of Mrs. Cerezoan order of execution of the judgment in Civil Case No. 7415. On 21 October 1999, the Court of Appeals dismissed the petition for annulment of judgment. On 20 January 2000, the Court of Appeals denied Mrs. Cerezo‘s motion for reconsideration. On 7 February 2000, Mrs. Cerezofiled the present petition for review on certiorari under Rule 45 challenging the dismissal of her petition for annulment of judgment.

Lina v. Court of Appeal s

22

enumerates the remedies available to a party declared in default:

a) The defendant in default may, at any time after discovery thereof and before judgment,file a motion under oath to set aside the order of default on the ground that his failureto answer was due to fraud, accident, mistake or excusable negligence, and that he has ameritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);

b) If the judgment has already been rendered when the defendant discovered the default, but before the same has become final and executory, he may file a motion for new trial under Section 1 (a) of Rule 37;

c) If the defendant discovered the default after the judgment has become final andexecutory, he may file a petition for relief under Section 2 [now Section 1] of Rule 38;and

d) He may also appeal from the judgment rendered against him as contrary to theevidence or to the law, even if no petition to set aside the order of default has been presented by him (Sec. 2, Rule 41). (Emphasis added)

Moreover, a petition for certiorari to declare the nullity of a judgment by default is also availableif the trial court improperly declared a party in default, or even if the trial court properly declareda party in default, if grave abuse of discretion attended such declaration.23

Mrs. Cerezo admitted that she received a copy of the trial court‘s decision on 25 June 1995.Based on this admission, Mrs. Cerezo had at least three remedies at her disposal: an appeal, amotion for new trial, or a petition for certiorari.

Mrs. Cerezo could have appealed under Rule 4124 from the default judgment within 15 days fromnotice of the judgment. She could have availed of the power of the Court of Appeals to try cases












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and conduct hearings, receive evidence, and perform all acts necessary to resolve factual issuesraised in cases falling within its appellate jurisdiction.25

Mrs. Cerezo also had the option to file under Rule 3726 a motion for new trial within the periodfor taking an appeal. If the trial court grants a new trial, the original judgment is vacated, and the

action will stand for trial de novo. The recorded evidence taken in the former trial, as far as thesame is material and competent to establish the issues, shall be used at the new trial withoutretaking the same.27

Mrs. Cerezo also had the alternative of filing under Rule 6528 a petition for certiorari assailingthe order of default within 60 days from notice of the judgment. An order of default isinterlocutory, and an aggrieved party may file an appropriate special civil action under Rule 65.29 In a petition for certiorari, the appellate court may declare void both the order of default and the judgment of default.

Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within the reglementary

periods provided under the Rules of Court. However, Mrs. Cerezo opted to file a petition for relief from judgment, which is available only in exceptional cases. A petition for relief from judgment should be filed within the reglementary period of 60 days from knowledge of judgmentand six months from entry of judgment, pursuant to

Rule 38 of the Rules of Civil Procedure.30 Tuason v. Court of Appeal s 31 explained the nature of a petition for relief from judgment:

When a party has another remedy available to him, which may either be a motion for newtrial or appeal from an adverse decision of the trial court, and he was not prevented byfraud, accident, mistake or excusable negligence from filing such motion or taking such

appeal, he cannot avail himself of this petition. Indeed, relief will not be granted to a party who seeks avoidance from the effects of the judgment when the loss of the remedyat law was due to his own negligence; otherwise the petition for relief can be used torevive the right to appeal which has been lost thru inexcusable negligence.

Evidently, there was no fraud, accident, mistake, or excusable negligence that prevented Mrs.Cerezo from filing an appeal, a motion for new trial or a petition for certiorari. It was error for her to avail of a petition for relief from judgment.

After our resolution denying Mrs. Cerezo‘s petition for relief became final and executory, Mrs.Cerezo, in her last ditch attempt to evade liability, filed before the Court of Appeals a petition for annulment of the judgment of the trial court. Annulment is available only on the grounds of extrinsic fraud and lack of jurisdiction. If based on extrinsic fraud, a party must file the petitionwithin four years from its discovery, and if based on lack of jurisdiction, before laches or estoppel bars the petition. Extrinsic fraud is not a valid ground if such fraud was used as aground, or could have been used as a ground, in a motion for new trial or petition for relief from judgment.32































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Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her ground for filing the petition for annulment of judgment. However, a party may avail of the remedy of annulment of judgment under Rule 47 only if the ordinary remedies of new trial, appeal, petition for relief from judgment, or other appropriate remedies are no longer available through no fault of the party.33 Mrs. Cerezo could have availed of a new trial or appeal but through her own fault she

erroneously availed of the remedy of a petition for relief, which was denied with finality. Thus,Mrs. Cerezo may no longer avail of the remedy of annulment.

In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezo‘s person. Mrs. Cerezoactively participated in the proceedings before the trial court, submitting herself to the jurisdiction of the trial court. The defense of lack of jurisdiction fails in light of her active participation in the trial court proceedings. Estoppel or laches may also bar lack of jurisdiction asa ground for nullity especially if raised for the first time on appeal by a party who participated inthe proceedings before the trial court, as what happened in this case .34

For these reasons, the present petition should be dismissed for utter lack of merit. The

extraordinary action to annul a final judgment is restricted to the grounds specified in the rules.The reason for the restriction is to prevent this extraordinary action from being used by a losing party to make a complete farce of a duly promulgated decision that has long become final andexecutory. There would be no end to litigation if parties who have unsuccessfully availed of anyof the appropriate remedies or lost them through their fault could still bring an action for annulment of judgment.35 Nevertheless, we shall discuss the issues raised in the present petitionto clear any doubt about the correctness of the decision of the trial court.

Mrs. C erezo’s Liability and the Trial Court’s Acquisition of Jurisdiction

Mrs. Cerezo contends that the basis of the present petition for annulment is lack of jurisdiction.

Mrs. Cerezo asserts that the trial court could not validly render judgment since it failed to acquire jurisdiction over Foronda. Mrs. Cerezo points out that there was no service of summons onForonda. Moreover, Tuazon failed to reserve his right to institute a separate civil action for damages in the criminal action. Such contention betrays a faulty foundation. Mrs. Cerezo‘s

contention proceeds from the point of view of criminal law and not of civil law, while the basisof the present action of Tuazon is quasi-delict under the Civil Code, not delict under the RevisedPenal Code.

The same negligent act may produce civil liability arising from a delict under Article 103 of theRevised Penal Code, or may give rise to an action for a quasi-delict under Article 2180 of theCivil Code. An aggrieved party may choose between the two remedies. An action based on aquasi-delict may proceed independently from the criminal action.36 There is, however, adistinction between civil liability arising from a delict and civil liability arising from a quasi-delict. The choice of remedy, whether to sue for a delict or a quasi-delict, affects the proceduraland jurisdictional issues of the action.37

Tuazon chose to file an action for damages based on a quasi-delict. In his complaint, Tuazonalleged that Mrs. Cerezo, "without exercising due care and diligence in the supervision andmanagement of her employees and buses," hired Foronda as her driver. Tuazon became disabled





















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because of Foronda‘s "recklessness, gross negligence and imprudence," aggravated by Mrs.

Cerezo‘s "lack of due care and diligence in the selection and supervision of her employees,

particularly Foronda."38

The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil Code. Article 2180

states in part:

Employers shall be liable for the damages caused by their employees and householdhelpers acting within the scope of their assigned tasks, even though the former are notengaged in any business or industry.

Contrary to Mrs. Cerezo‘s assertion, Foronda is not an indispensable party to the case. An

indispensable party is one whose interest is affected by the court‘s action in the litigation, and

without whom no final resolution of the case is possible.39 However, Mrs. Cerezo‘s liability as an

employer in an action for a quasi-delict is not only solidary, it is also primary and direct. Forondais not an indispensable party to the final resolution of Tuazon‘s action for damages against Mrs.

Cerezo.

The responsibility of two or more persons who are liable for a quasi-delict is solidary.40 Wherethere is a solidary obligation on the part of debtors, as in this case, each debtor is liable for theentire obligation. Hence, each debtor is liable to pay for the entire obligation in full. There is nomerger or renunciation of rights, but only mutual representation.41 Where the obligation of the parties is solidary, either of the parties is indispensable, and the other is not even a necessary party because complete relief is available from either .42 Therefore, jurisdiction over Foronda isnot even necessary as Tuazon may collect damages from Mrs. Cerezo alone.

Moreover, an employer‘s liability based on a quasi-delict is primary and direct, while the

employer‘s liability based on a delict is merely subsidiary.

43

The words "primary and direct," ascontrasted with "subsidiary," refer to the remedy provided by law for enforcing the obligationrather than to the character and limits of the obligation.44 Although liability under Article 2180originates from the negligent act of the employee, the aggrieved party may sue the employer directly. When an employee causes damage, the law presumes that the employer has himself committed an act of negligence in not preventing or avoiding the damage. This is the fault thatthe law condemns. While the employer is civilly liable in a subsidiary capacity for theemployee‘s criminal negligence, the employer is also civilly liable directly and separately for his

own civil negligence in failing to exercise due diligence in selecting and supervising hisemployee. The idea that the employer‘s liability is solely subsidiary is wrong.

45

The action can be brought directly against the person responsible (for another), withoutincluding the author of the act. The action against the principal is accessory in the sensethat it implies the existence of a prejudicial act committed by the employee, but it is notsubsidiary in the sense that it can not be instituted till after the judgment against theauthor of the act or at least, that it is subsidiary to the principal action; the action for responsibility (of the employer) is in itself a principal action.46





































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Thus, there is no need in this case for the trial court to acquire jurisdiction over Foronda. Thetrial court‘s acquisition of jurisdiction over Mrs. Cerezo is sufficient to dispose of the present

case on the merits.

In contrast, an action based on a delict seeks to enforce the subsidiary liability of the employer

for the criminal negligence of the employee as provided in Article 103 of the Revised PenalCode. To hold the employer liable in a subsidiary capacity under a delict, the aggrieved partymust initiate a criminal action where the employee‘s delict and corresponding primary liability

are established.47 If the pr esent action proceeds from a delict, then the trial court‘s jurisdictionover Foronda is necessary. However, the present action is clearly for the quasi-delict of Mrs.Cerezo and not for the delict of Foronda.

The Cerezo spouses‘ contention that summons be served anew on them is untenable in light of their participation in the trial court proceedings. To uphold the Cerezo spouses‘ contention would

make a fetish of a technicality.48 Moreover, any irregularity in the service of summons that mighthave vitiated the trial court‘s jurisdiction over the persons of the Cerezo spouses was deemed

waived when the Cerezo spouses filed a petition for relief from judgment.

49

We hold that the trial court had jurisdiction and was competent to decide the case in favor of Tuazon and against Mrs. Cerezo even in the absence of Foronda. Contrary to Mrs. Cerezo‘s

contention, Foronda is not an indispensable party to the present case. It is not even necessary for Tuazon to reserve the filing of a separate civil action because he opted to file a civil action for damages against Mrs. Cerezo who is primarily and directly liable for her own civil negligence.The words of Justice Jorge Bocobo in Bar redo v. Garcia still hold true today as much as it did in1942:

x x x [T]o hold that there is only one way to make defendant‘s liability effective, and that

is, to sue the driver and exhaust his (the latter‘s) property first, would be tantamount tocompelling the plaintiff to follow a devious and cumbersome method of obtaining relief.True, there is such a remedy under our laws, but there is also a more expeditious way,which is based on the primary and direct responsibility of the defendant under article[2180] of the Civil Code. Our view of the law is more likely to facilitate remedy for civilwrongs, because the procedure indicated by the defendant is wasteful and productive of delay, it being a matter of common knowledge that professional drivers of taxis and other similar public conveyances do not have sufficient means with which to pay damages.Why, then, should the plaintiff be required in all cases to go through this roundabout,unnecessary, and probably useless procedure? In construing the laws, courts haveendeavored to shorten and facilitate the pathways of right and justice.50

Interest at the rate of 6% per annum is due on the amount of damages adjudged by the trialcourt.51 The 6% per annum interest shall commence from 30 May 1995, the date of the decisionof the trial court. Upon finality of this decision, interest at 12% per annum, in lieu of 6% per annum, is due on the amount of damages adjudged by the trial court until full payment.

WHEREFORE, we DENY the instant petition for review. The Resolution dated 21 October 1999 of the Court of Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20





















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January 2000 denying the motion for reconsideration, is AFFIRMED with theMODIFICATION that the amount due shall earn legal interest at 6% per annum computed from30 May 1995, the date of the trial court‘s decision. Upon finality of this decision, the amount dueshall earn interest at 12% per annum, in lieu of 6% per annum, until full payment.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, and Azcuna, JJ., concur. Panganiban, J., on official leave.

Footnotes

1 Under Rule 45 of the Rules of Court.

2

Penned by Associate Justice Elvi John S. Asuncion, with Associate Justices Eubulo G.Verzola and Artemio G. Tuquero, concurring.

3 Penned by Judge Carlos D. Rustia.

4 CA Rollo, p. 8.

5 Ibid., pp. 13-17.

6 Rollo, p. 66.

7

CA Rollo, pp. 18-20.8 Ibid., p. 21.

9 Rollo, p. 4.

10 CA Rollo, p. 23.

11 Ibid., pp. 24-33.

12 Ibid., pp. 35-36.

13 Penned by Judge Lourdes F. Gatbalite.

14 Captioned "Hermana R. Cerezo and Juan D. Cerezo, as husband, petitioners, v. Hon.Lourdes Gatbalite and David Tuazon, respondents."

15 Penned by Associate Justice Romeo A. Brawner, with Associate Justices AngelinaSandoval-Gutierrez and Martin S. Villarama, Jr., concurring.

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16 Rollo, pp. 60-61.

17 Captioned "Hermana R. Cerezo and Juan D. Cerezo, as husband, petitioners, v.Lourdes Gatbalite, Presiding Judge (incumbent), RTC Branch 56, Angeles City, andDavid Tuazon, respondents."

18 Rollo, pp. 36-37.

19 Ibid., pp. 33-34.

20 Ibid., pp. 18-19.

21 Ibid., pp. 6-7.

22 No. L-63397, 9 April 1985, 135 SCRA 637.

23

Pacete v. Cariaga, Jr., G.R. No. 53880, 17 March 1994, 231 SCRA 321. See alsoMatute v. Court of Appeals, 136 Phil. 162 (1969); Omico Mining and IndustrialCorporation v. Vallejos, No. L-38974, 25 March 1975, 63 SCRA 285.

24 Section 3, Rule 41.

25 Section 9(3), Batas Pambansa Blg. 129, as amended.

26 Section 1. Grounds of and period for filing motion for new trial or reconsideration. — Within the period for taking an appeal, the aggrieved party may move the trial court to setaside the judgment or final order and grant a new trial for one or more of the following

causes materially affecting the substantial rights of said party:

(a) Fraud, accident, mistake or excusable negligence which ordinary prudencecould not have guarded against and by reason of which such aggrieved party has probably been impaired in his rights; or

(b) Newly discovered evidence, which he could not, with reasonable diligence,have discovered and produced at the trial, and which if presented would probablyalter the result.

x x x

27 Sections 1 and 6, Rule 37.

28 Section 1. Petition for certiorari. – When any tribunal, board, or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there isno appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the














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facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as lawand justice may require.

x x x

Section 4. Where petition filed. – The petition may be filed not later than sixty (60) daysfrom notice of judgment, order or resolution sought to be assailed in the Supreme Court;or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area asdefined by the Supreme Court. It may also be filed in the Court of Appeals whether or notthe same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves acts or omissions of a quasi-judicial agency, and unlessotherwise provided by law or these Rules, the petition shall be filed in and cognizableonly by the Court of Appeals.

29

Section 1, Rule 41.30 Section 1. Petition for relief from judgment, order, or other proceedings. – When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any court through fraud, accident, mistake, or excusable negligence, he may filea petition in such court and in the same case praying that the judgment, order or proceeding be set aside.

Section 3. Time for filing petition; contents and verification. – A petition provided for ineither of the preceding sections of this Rule must be verified, filed within sixty (60) daysafter the petitioner learns of the judgment, final order, or other proceeding to be set aside,

and not more than six (6) months after such judgment or final order was entered, or such proceeding was taken; x x x.

See Turqueza v. Hernando, No. L-51626, 30 April 1980, 97 SCRA 483.

31 326 Phil. 169 (1996).

32 Sections 2 and 3, Rule 47.

33 Cipriano M. Lazaro v. Rural Bank of Francisco Balagtas (Bulacan), Inc. and TheRegister of Deeds of Valenzuela City, G.R. No. 139895, 15 August 2003; Teresita

Villasor Manipol, et al., v. Spouses Pablo and Antonia Ricafort, G.R. No. 150159, 25July 2003.

34 Tijam, et al. v. Sibonghanoy, et al., 181 Phil. 556 (1968).

35 See Ibabao v. Intermediate Appellate Court, No. L-74848, 20 May 1987, 150 SCRA76.





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36 See Article 2177, Civil Code of the Philippines. Compare Sections 1 and 3, Rule 111,1988 Rules of Criminal Procedure with Sections 1 and 3, Rule 111, 2000 Rules of Criminal Procedure.

37 See Barredo v. Garcia, 73 Phil. 607 (1942).

38 CA Rollo, pp. 8-9.

39 Imson v. Court of Appeals, G.R. No. 106436, 8 December 1994, 239 SCRA 59.

40 Article 2194, Civil Code of the Philippines.

41 Quiombing v. CA, G.R. No. 93219, 30 August 1990, 189 SCRA 331 (citing Tolentino,IV Civil Code of the Philippines 218 (1985 ed.)).

42 Ibid., (citing Feria, Civil Procedure 153 (1969 ed.).

43 Poblete v. Fabros, No. L-29803, 14 September 1979, 93 SCRA 200.

44 33A Words and Phrases 215 (1971 ed.)

45 See Barredo v. Garcia, supra note 37 (1942) (citing Amandi, 4 Cuestionario del CódigoCivil Reformado 429, 430).

46 Ibid., (citing Laurent, 20 Principles of French Civil Law 734-735 (Spanishtranslation)).

47

Poblete v. Fabros, supra note 43; Franco v. Intermediate Appellate Court, G.R. No.71137, 5 October 1989, 178 SCRA 331.

48 Gumabay v. Baralin, No. L-30683, 77 SCRA 258, 31 May 1977; Rule 14, Section 20.

49 See J.M. Tuason & Co., Inc., v. Estabillo, No. L-20610, 9 January 1975, 62 SCRA 1.

50 Barredo v. Garcia, supra note 36, pp. 620-621.

51 Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234SCRA 78; Reformina v. Tomol, Jr., No. L-59096, 11 October 1985, 139 SCRA 260.








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Manila

SECOND DIVISION

G.R. No. 125356 November 21, 2001

SUPREME TRANSLINER INC., FELIPE SIA and NOVENCIO FLORES, petitioners,vs.HON. COURT OF APPEALS, GLORIA BRAZAL and minor LOTIS BRAZAL,represented by her father, NOEL BRAZAL, respondents.

QUISUMBING, J.:

This petition seeks to annul the decision1 dated September 21, 1995, of the Court of Appeals in

CA G.R. No. 39784, and its resolution

2

dated June 18, 1996 denying petitioners' motion for reconsideration.

Petitioners Supreme Transliner Inc. and Felipe Sia are the registered owners of a bus driven byco-petitioner Novencio Flores. On September 24, 1990, the bus collided with a passenger jeepney carrying private respondents Gloria and Lotis Brazal. At the time of the incident, the jeepney was owned and registered in the name of Marcelino Villones and driven by ReynaldoDecena.

As a result of the collision, private respondents suffered injuries. They instituted Civil Case No.SP-3312 for damages against petitioners based on quasi-delict and against Villones and Decena

for breach of contract. Petitioners, in turn, filed a third-party complaint against Country BankersInsurance Company, insurer of the Supreme Transliner bus.

During the trial, Gloria Brazal testified that on September 24, 1990, she and her daughter Lotiswere on board the passenger jeepney when the Supreme Transliner bus hit it, causing theminjuries that required medical treatment.

Decena and Villones testified on their own behalf and presented Luzviminda Malabanan and Sgt. Nicolas M. Roxas as witnesses. Decena recounted that on September 24, 1990, at about 2:00P.M., he was driving a passenger jeepney bound for Candelaria, Quezon. On board, the jeepneywas about fifteen passengers, including private respondents Gloria and Lotis Brazal. Upon

reaching Sampaloc, Sariaya, Quezon, a Supreme Transliner bus coming from the oppositedirection, suddenly appeared on a curved portion of the road and overtook another jeepney,which it was then following. Thereafter, the bus collided with Decena's jeepney.1âwphi1.nêt

Petitioners presented Novencio Flores and Moises Alvarez, the Manager of Supreme Transliner.Both testified that the passenger jeepney was running very fast when the accident occurred. Onthe third-party complaint, petitioners showed that they already submitted the required documents

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for insurance claim and that Country Bankers Insurance Company promised to settle the claim, but did not.

On October 28, 1992, the trial court rendered its judgment, the dispositive portion of whichreads:

WHEREFORE, finding that the plaintiffs [have] established by preponderance of evidence the allegations of the complaint, judgment is hereby rendered:

ON THE COMPLAINT:

1. Ordering the defendants Felipe Sia, as registered owner of the Supreme Bus, and Novencio Flores primarily liable for the damages of the plaintiffs and directing them to jointly and severally pay plaintiffs the following:

a. The amount of TWENTY FIVE THOUSAND PESOS (P25,000.00) by way of actual

damages;

b. The amount of P10,000.00 by way of moral damages;

c. The amount of P5,000.00 as attorney's fees.

On the third-party complaint, judgment is hereby rendered ordering the third-partydefendant to pay the third-party plaintiffs any and all amounts that they have paid to the plaintiffs by reason of this decision provided it does not exceed P50,000.00.

Third-party defendant is also ordered to pay the costs.

SO ORDERED.3

The trial court declared that Flores was negligent in operating the bus, while Sia failed toexercise the diligence of a good father of a family in the choice, supervision and direction of hisemployees.

On the third-party complaint, the trial court found that Supreme Transliner had insured the buswith Country Bankers, paid the premiums for the period covering the accident, and made aninsurance claim by notifying the insurer and submitting the required documents. However, untilthe filing of the complaint, Country Bankers had not acted upon Supreme Transliner's claim. The

trial court ordered Country Bankers to pay third-party plaintiffs an amount not exceedingP50,000.

Petitioners appealed to the Court of Appeals where they maintained that the trial court erred in:(a) pronouncing them liable to private respondents; (b) awarding the amount of P25,000 as actualdamages; and (c) finding Sia solidarily liable with driver Flores. Country Bankers InsuranceCompany filed on July 5, 1994, a manifestation and motion wherein it stated that it had already

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settled its maximum liability under the policy, and therefore prayed for its exclusion from thecase.

On September 21, 1995, the Court of Appeals promulgated its decision, decreeing as follows:

WHEREFORE, the appealed judgment is AFFIRMED subject to the Manifestation andMotion filed by third-party defendant as discussed in the text of herein decision.

Costs against defendant-third party appellant Felipe Sia and defendant-appellant Novencio C. Flores.

SO ORDERED.4

The Court of Appeals found that there was competent and preponderant evidence which showedthat driver Novencio Flores' negligence was the proximate cause of the mishap and that FelipeSia failed to perform the required degree of care in the selection and supervision of the bus

driver. It also found that the actual damages representing the medical expenses incurred by private respondents were properly supported by receipts.

Petitioners filed a motion for reconsideration but this was denied. Hence, this petition, where petitioners raise the following issues:

I

ARE EVIDENCES (SIC) IN THE RECORDS OF THE CASE BUT NOT OFFEREDBY A P ARTY LITIGANT BE CONSIDERED IN THE LATTER'S FAVOR?

II

ARE EVIDENCES (SIC) ADDUCED BY A CO-DEFENDANT BE CONSIDERED ASEVIDENCES (SIC) OF THE PLAINTIFF AS AGAINST THE OTHER DEFENDANT?5

Petitioners aver that the Court of Appeals erred in affirming the trial court's decision which wasmainly based on the evidence proffered by their co-defendants Decena and Villones. Petitionerscontend that this evidence, which proved their liability for quasi-delict, could not be appreciatedagainst them because the same was not adopted, much less offered in evidence by privaterespondents. Neither did Decena and Villones file a cross-claim against them. Consequently, inaccordance with Section 1,6 Rule 131 and Sections 347 and 358, Rule 132 of the Rules of Court,

said evidence was placed beyond the court's consideration, hence they could not be held liable onthe basis thereof.

Private respondents contend that Philippine courts are not only courts of law but of equity and justice as well. The Court of Appeals, being a court of record, has to appreciate all the facts andevidence before it in determining the parties' rights and liabilities regardless of who among thelitigants actually presented the same. Further, they point out that the issue is being raised for the

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first time, thus it is highly improper to nullify or reverse the Court of Appeals' decision basedsolely on a completely new and foreign ground.

For our resolution are the following issues: (a) Who has the burden of proving herein petitioners'liability? (b) May the evidence presented by Decena and Villones be considered in determining

preponderance of evidence against herein petitioners?

Burden of proof is the duty of a party to present evidence to establish his claim or defense by theamount of evidence required by law, which is preponderance of evidence in civil cases.9 The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment. For the defendant, an affirmative defense is one which isnot a denial of an essential ingredient in the plaintiffs cause of action, but one which, if established, will be a good defense - i.e. an "avoidance" of the claim.10

In this case, both private respondents as well as the jeepney driver Reynaldo Decena and itsowner Marcelino Villones claim that the bus driver, Novencio Flores, was liable for negligently

operating the bus. For private respondents, the claim constitutes their cause of action against petitioners which said private respondents must prove by preponderance of evidence. At thesame time, the same claim is a matter of affirmative defense on the part of Decena and Villoneswho are impleaded as co-defendants of petitioners. Therefore, both private respondents as wellas the said co-defendants had the burden of proving petitioners' negligence by the quantum of proof required to establish the latter's liability, i.e. by preponderance of evidence.

On the second issue, we rule in the affirmative. The evidence presented by the jeepney owner and its driver, Villones and Decena, forms part of the totality of the evidence concerning thenegligence committed by petitioners as defendants in quasi-delict case. Preponderance of evidence is determined by considering all the facts and circumstances of the case, culled from the

evidence, regardless of who actually presented it.

11

Petitioners' liability were proved by theevidence presented by Decena and Villones at the trial, taken together with the evidence presented by the victims of the collision, namely herein private respondents Gloria and LotisBrazal.

We find petitioners' reliance on Sections 34 and 35 of Rule 132 of the Rules of Court misplaced.Petitioners cited these rules to support their allegation that evidence by Decena and Villonesshould not be considered in private respondents' favor since the latter did not adopt much lessoffer them in evidence. Nothing in Section 34 requires that the evidence be offered or adopted bya specific party before it could be considered in his favor. It is enough that the evidence isoffered for the court's consideration. We find, moreover, no pertinence in petitioners' invocationof Rule 35, on when to make an offer, except to indicate to us petitioners' reliance oninapplicable technicalities that betray the lack of merit of their petition.

WHEREFORE, the instant petition is DENIED. The decision and resolution dated September 21, 1995 and June 18, 1996, respectively, of the Court of Appeals are hereby AFFIRMED.

Costs against petitioners.1âwphi1.nêt

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SO ORDERED.

Bellosillo, Mendoza, Buena, De Leon, Jr., JJ., concur.

Footnotes

1 Rollo, pp. 24-39.

2 Id. at 41.

3 Records, pp. 128-129.

4 Rollo, p. 38.

5

Id. at 13.6 Section 1. Burden of proof. - Burden of proof is the duty of a party to present evidenceon the facts in issue necessary to establish his claim or defense by the amount of evidencerequired by law.

7 Section 34. Offer to evidence. - the court shall consider no evidence which has not beenformally offered. The purpose for which the evidence is offered must be specified.

8 Section 35. When to make offer. - As regards the testimony of a witness, the offer must be made at the time the witness is alled to testify. Documentary and object evidence shall

be offered after the presentation of a party's testimonial evidence. Such offer shall bedone orally unless allowed by the court to be done in writing.

9 See note 6.

10 Paras, Rules of Court 448 (3rd ed. 1996).

11 Sec. 1, Rule 133, Revised Rules on Evidence. Preponderance of evidence, howdetermined. - In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all the facts and

circumstances of the case, the witnesses' manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of thefacts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same maylegitimately appear upon the trial. The court may also consider the number of witnesses,though the preponderance is not necessarily with the greater number.

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Manila

SECOND DIVISION

G.R. No. 101439 June 21, 1999

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), petitioner,vs.COURT OF APPEALS (former Tenth Division),VICTORIA JAIME VDA. DE KHO, for herself and minor ROY ROLAND, GLORIAKHO VDA. DE CALABIA for herself and minors MARY GRACE, WILLIE, JR.,VOLTAIRE, GLENN, and MAY, all surnamed CALABIA, DANIEL KHO, JOSEFINAKHO,EMERITA KHO APEGO, ANTONIO KHO and TERESITA KHO, respondents.

QUISUMBING, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Government Service Insurance System (GSIS) assails the January 15, 1991 Decision1 of theCourt of Appeals in CA-G.R. No. 19849, which affirmed in toto the judgment of the RegionalTrial Court of Butuan City, Branch II, dated April 30, 1985, stating in part:

WHEREFORE, judgment is hereby rendered, as follows:

x x x x x x x x x

In Civil Case No. 2256:

a) Dismissing the complaint against defendant Victor Uy;

b) Ordering defendants Mabuhay Insurance and Guaranty Company, Inc.,Guillermo Corbeta, NFA and GSIS to pay jointly and severally the followingsums of money:

i. to pay plaintiff Gloria Kho Vda. de Calabia, the sum of P8,935.06 for doctor's fees, medicines, hospitalizations and medical expenses; P2,319.00

for transportation expenses; and P53.30 for telegrams; P10,000.00 for theinjuries she sustained; P12,000.00 loss of income for six months.

ii. to plaintiff Victoria Kho, the sum P832.00 for hospitalization andmedicines; P10,000.00 for the injuries she sustained;

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iii. to the heirs of Wellie [Willie] Calabia, Roland Kho and MaximaUhmad [Ugmad] Vda. de Kho, the sum of P7,500.00 as funeral expensesless P5,000.00 advanced by defendant Victor Uy.

iv. to the heirs of Wellie [Willie] Calabia, Sr., heirs of Roland Kho and

heirs of Maxima Ugmad Vda. de Kho; P30,000.00 each as compensatorydamages.

c) To pay plaintiff the sum of P10,000.00 as attorney's fees and expenses of litigation;

d) Dismissing defendants counterclaim, and cross-claim; and

e) To pay the costs.

That this decision is without prejudice as to the right Mabuhay Insurance & Guaranty

Co., Inc., and NFA to recover from Guillermo Corbeta and GSIS the amounts they mayhave paid by virtue hereof.2

For purposes of this review, we deem as also assailed the disposition by the trial court in itsOrder issued on July 12, 1985, modifying its original decision, by awarding moral damages tothe heirs of the deceased victims, as follows:

Considering that the dispositive portion of the decision in this case, an award of P10,000.00 each made to plaintiffs Gloria Kho Vda. de Calabia . . ., for injuries theysustained, this award, through [sic] not clearly stated in the decision, is the moraldamages the instant motion seeks to obtain. However, the prayer for moral damages for

the death of the three (3) persons above-mentioned is proper. (citation omitted)

In view of the foregoing, the prayer of plaintiffs Gloria Kho Vda. de Calabia and VictoriaKho for an award of moral damages in their favor is hereby denied. However, as for thedeath of Wellie [Willie] Calabia, Sr., Rolando Kho and Maxima Ugmad Vda. de Kho, anaward of moral damages is hereby made, and ordering and directing defendants MabuhayInsurance and Guaranty Company Inc., Guillermo Corbeta, National Food Authority andGovernment Service Insurance System to pay jointly and severally the following sums towit :

P10,000.00 to the heirs of Wellie [Willie]Calabia, Sr.

P10,000.00 to the heirs of Rolando Kho and

P10,000.00 to the heirs of Maxima Ugmad Vda. de Kho.

x x x x x x x x x

IT IS SO ORDERED.3

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

National Food Authority (NFA, formerly National Grains Authority) was the owner of aChevrolet truck which was insured against liabilities for death of and injuries to third personswith the GSIS.

On May 9, 1979, at about 7:00 in the evening at Tabon-Tabon, Butuan City, the said truck driven by Guillermo Corbeta collided with a public utility vehicle, a Toyota Tamaraw. The ToyotaTamaraw was owned and operated by Victor Uy, under the name and style of "Victory Line."The Tamaraw was a total wreck.

All the collision victims were passengers of the Toyota Tamaraw. Five (5) passengers died4 while ten (10) others sustained bodily injuries. Among those injured were private respondents,Victoria Jaime Vda. de Kho and Gloria Kho Vda. de Calabia. Among the dead were MaximaUgmad Vda. de Kho, Roland Kho and Willie Calabia, Sr.

Three (3) cases were filed with the Court of First Instance of Agusan del Norte and Butuan City.The first , Civil Case No. 2196 for quasi-delict , damages and attorney's fees, was commenced byUy on June 5, 1979 against NFA and Corbeta. On August 27, 1979, the second , Civil Case No.2225 for damages, was filed by an injured passenger, Librado Taer, against Uy, the operator of the public utility vehicle, and insurer, Mabuhay Insurance and Guaranty Co. (MIGC). In turn, Uyfiled a cross-claim against MIGC and a third-party complaint against Corbeta and NFA. Thethird , Civil Case No. 2256, was instituted by herein private respondents on November 26, 1979against the following: NFA and Corbeta for damages due to quasi-delict ; GSIS as insurer of thetruck; Uy for breach of contract of carriage; and MIGC as insurer of the Toyota Tamaraw. Thesecases were consolidated and partially tried by Judge Fortunate A. Vailoces, of the then Court of First Instance of Agusan del Norte and Butuan City.

These cases were later on transferred to Branch II of the Regional Trial Court of Butuan City.Trial ensued and on April 30, 1985, the court rendered its decision5 holding that Corbeta'snegligence was the proximate cause of the collision. The findings of the trial court stated that thetruck which crossed over to the other lane was speeding because after the collision, its left frontwheel was detached and the truck traveled for about fifty (50) meters and fell into a ravine.6 Likewise, the court concluded that if both vehicles had traveled in their respective lanes, theincident would not have occurred.7 However, the Chevy cargo truck had crossed over to theother lane which, under traffic rules, was the lane of the Toyota Tamaraw.8

In Civil Case No. 2196, the trial court awarded Uy the total amount of one hundred ninethousand one hundred (P109,100.00) pesos for damages. In Civil Case No. 2225, said courtdismissed the case against Uy and ordered MIGC, Corbeta and NFA to pay plaintiff Taer, jointlyand severally, the total amount of forty thousand five hundred fifty-nine pesos and ninety four centavos (P40,559.94) for actual, compensatory, and moral damages plus attorney's fees.Damages were likewise awarded to the herein private respondents in Civil Case No. 2256, asearlier mentioned.1âwphi1.nêt

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Corbeta and NFA appealed the decision of the trial court in Civil Case Nos. 2196, 2225, and2256 to the Court of Appeals. GSIS also elevated the decision in Civil Case No. 2256 to thesame appellate court. The appeals were docketed as C.A.-G.R. Nos. 19847, 19848, and 19849.

The Court of Appeals agreed with the conclusions of the trial court and ruled as follows:

WHEREFORE, in view of the foregoing considerations, and finding no reversible error,the decisions of the Court a quo in Civil Cases Nos. 2196, 2225 and 2256 are herebyAFFIRMED in toto, with costs against the appellants.

SO ORDERED.9

On February 5 and 6, 1991, GSIS and NFA filed their motions for reconsideration respectively,which were denied by the respondent court in its Resolution10 dated August 13, 1991.

On October 4, 1991, only GSIS filed this petition for review on certiorari based on the following

assigned errors:

1. The respondent court erred in holding GSIS solidarily liable with NFA.

2. The respondent court erred in holding GSIS liable beyond the terms and conditions of the contract of insurance and the limitations under Insurance Memorandum Circular (IMC) No. 5-78.

3. The respondent court erred in holding GSIS liable without proof that a notice of claimhad been filed within six (6) months from the date of the accident.

We find pertinent the following issues:

1) Whether the respondent court erred in holding GSIS solidarily liable with the negligentinsured/owner-operator of the Chevrolet truck for damages awarded to privaterespondents which are beyond the limitations of the insurance policy and the InsuranceMemorandum Circular No. 5-78.

2) Whether the respondent court failed to consider that the private respondents have nocause of action against the petitioner, allegedly for failure of the victims to file aninsurance claim within six (6) months from the date of the accident.

Petitioner denies solidary liability with the NFA or the negligent operator of the cargo truck because it claims that they are liable under different obligations. It asserts that the NFA's liabilityis based on quasi-delict , while petitioner's liability is based on the contract of insurance. Citingarticles 120711 and 120812 of the Civil Code of the Philippines, petitioner states that when thereare two or more debtors or two or more creditors, the obligation as a general rule is joint. Itclaims that the only exceptions are: (1) when there is a stipulation for solidary obligation; (2)when the nature of the obligation requires solidary liability; and (3) when the law declares theobligation to be solidary. However, since neither the provision of the contract nor the insurance

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law provides for solidary liability, petitioner asserts that the presumption is that its obligationarising from a contract of insurance is joint.

Petitioner's position insofar as joint liability is concerned is not tenable. It is now established thatthe injured or the heirs of a deceased victim of a vehicular accident may sue directly the insurer

of the vehicle. Note that common carriers are required to secure Compulsory Motor VehicleLiability Insurance [CMVLI] coverage as provided under Sec. 37413 of the Insurance Code, precisely for the benefit of victims of vehicular accidents and to extend them immediate relief.14 As this Court held in Shafter vs. Judge, RTC of Olongapo City, Br . 75:15

Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarilyintended to provide compensation for the death or bodily injuries suffered by innocentthird parties or passengers as a result of a negligent operation and use of motor vehicles.The victims and/or their defendants [dependents] are assured of immediate financialassistance, regardless of the financial capacity of motor vehicle owners.

x x x x x x x x x

The injured for whom the contract of insurance is intended can sue directly the insurer.The general purpose of statutes enabling an injured person to proceed directly against theinsurer is to protect injured persons against the insolvency of the insured who causes suchinjury, and to give such injured person a certain beneficial interest in the proceeds of the policy, and statutes are to be liberally construed so that their intended purpose may beaccomplished. It has even been held that such a provision creates a contractual relationwhich injures to the benefit of any and every person who may be negligently injured bythe named insured as if such injured person were specifically named in the policy. (S 4497 Am. Jur., 2d, pp. 118-119)16

However, although the victim may proceed directly against the insurer for indemnity, the third party liability is only up to the extent of the insurance policy and those required by law. While itis true that where the insurance contract provides for indemnity against liability to third persons,and such third persons can directly17 sue the insurer, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held liablein solidum with the insured and/or the other parties found at fault.18 For the liability of the insurer is based on contract; that of the insured carrier or vehicle owner is based on tort.19 The liabilityof GSIS based on the insurance contract is direct, but not solidary with that of the NFA. Thelatter's liability is based separately on Article 218020 of the Civil Code.21

Obviously, the insurer could be held liable only up to the extent of what was provided for by thecontract of insurance, in accordance with CMVLI law. At the time of the incident, the scheduleof indemnities for death and/or bodily injuries, professional fees, hospital and other charges payable under a CMVLI coverage was provided under the Insurance Memorandum Circular (IMC) No. 5-78 which was approved on November 10, 1978. As therein provided, the maximumindemnity for death was twelve thousand (P12,000.00) pesos per victim.22 The schedules for medical expenses were also provided by said IMC, specifically in paragraphs (C) to (G).

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Consequently, heirs of the victims who died in the May 9, 1979 vehicular incident, could proceed (1) against GSIS for the indemnity of P12,000 for each dead victim, and against NFAand Guillermo Corbeta for any other damages or expenses claimed; or (2) against NFA andCorbeta to pay them all their claims in full.

It follows also that injured victims, Gloria Kho Vda. de Calabia and Victoria Kho, could claimtheir medical expenses for eight thousand nine hundred thirty-five pesos and six centavos(P8,935.06) and eight hundred thirty-two (P832.00) pesos, from any of the following: GSIS, NFA, or Corbeta. As to the other damages, only NFA or Corbeta may be held liable therefor.

Computation of hospital charges and fees for the services rendered to the injured victims wasconclusively established by the trial court. The petitioner failed to object to the evidence thereon,when presented by the private respondents during the trial. Thus, these factual bases for theaward of damages may no longer be attacked. For generally, findings of the judge who tried thecase and heard the witnesses could not be disturbed on appeal, unless there are substantial factsand particular circumstances which have been overlooked but which, if properly considered,

might affect the result of the case.

23

Thus, considering the evidence on record including theschedule of indemnities provided under IMC No. 5-78, we find no cogent reason to disturb thecomputation of medical charges and expenses that justify the award of damages by the trialcourt.

As to the second issue, the petitioner contends that it cannot be held liable without proof nor allegation that the private respondents filed before its office a notice of claim within six (6)months from the date of the accident. This requirement, according to the petitioner, gives theinsurer the opportunity to investigate the veracity of the claim, and non-compliance therewithconstitutes waiver. Since the claim was not reported to the insurer, the petitioner avers that the presumption is that the victim opted to pursue his claim against the motor vehicle owner or

against the tortfeasor.

However, in this case the records reveal that on September 7, 1979, the private respondents senta notice of loss to the petitioner informing the latter of the accident. Included as "Exihibit J''24 inthe records, this notice constitutes evidence of the loss they suffered by reason of the vehicular collision. They stressed further that the petitioner did not deny receipt of notice of claim duringthe trial, and it would be too late now to state otherwise.

Although merely factual, we need to emphasize that the alleged delay in reporting the loss by theinsured and/or by the beneficiaries must be promptly raised by the insurer 25 in objecting to theclaims. When the insured presented proof of loss before the trial court, the insurer failed to objectto said presentation. The petitioner should have promptly interposed the defense of delay, or belated compliance, concerning the notice of claim. Moreover, the petitioner merely waited for the victims or beneficiaries to file their complaint. As matters stand now, the defense of laches or prescription is deemed waived because of petitioner's failure to raise it not only before but alsoduring the hearing.26

To recapitulate, petitioner seeks a definitive ruling only on the extent of its liability, as insurer of NFA, to those injured or killed in the May 9, 1979 vehicular collision.

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As found by the trial court, the driver (Guillermo Corbeta), the operator (NFA), and MIGC, aresolidarily liable for damages as computed below:

SCHEDULE A

I. For the Injured Victims.

1) Gloria Kho Vda. de Calabia.

a) Medical expenses P8,935.06

b) Transportation and TelegraphExpenses

2,372.30

c) Other Compensatory/MoralDamages

10,000.00

d) Loss of Income 12,000.00

Total P33,307.36=========

2) Victoria Kho.

a) Medical expenses P832.00

b) Other Compensatory/Moral

Damages10,000.00

Total P10,832.00=========

II. For the Heirs of the Deceased Victims:

Compensatory/

FuneralExpenses

DeathIndemnity

MoralDamages Total

1) Heirs of Willie Calabia, Sr. P2,500.00 P30,000.00 P10,000.00 42,500.00

2) Heirs of Roland Kho 2,500.00 30,000.00 10,000.00 42,500.00

3) Heirs of Maxima Ugmad Vda.de Kho

2,500.00 30,000.00 10,000.00 42,500.00

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Sub-Total P7,500.00 P90,000.00 P30,000.00 P127,500.00

Less: Advances by Victor Uy (5,000.00) NIL (5,000.00)

Balance P2,500.00

========

P90,000.00

========

P30,000.00

========

122,500.00

========

III. Total Amount of Attorney's Fees P10,000.00

Note that, the petitioner (GSIS) was impleaded as insurer of NFA. But under the CMVLI law,the petitioner could only be held liable under its contract of insurance. And pursuant to theCMVLI law, its liability is primary, and not dependent on the recovery of judgment from theinsured. Hence, GSIS is directly liable to the private respondents, in the following amounts.

SCHEDULE B

I. Injured Victims MedicalExpenses

1) Victoria Jaime Vda. de Kho P832.00

2) Gloria Kho Vda. de Calabia P8,935.00

II. Heirs of Deceased Victims Death Indemnity

1) Heirs of Willie Calabia, Sr. P12,000.00

2) Heirs of Roland Kho P12,000.00

3) Heirs of Maxima Ugmad Vda. deKho P12,000.00

The balance of the private respondents' claims as shown on Schedule A above, must be paid byCorbeta or NFA, or MIGC, the parties found solidarily liable.27

WHEREFORE, the instant petition is hereby GRANTED, but the decision of the trial court asaffirmed by the Court of Appeals is hereby. MODIFIED, as follows:

1. Petitioner Government Service Insurance System is ordered to pay (a) twelve thousand pesos (P12,000.00) as death indemnity to each group of heirs of the deceased, Willie

Calabia Sr., Roland Kho and Maxima Ugmad Vda. de Kho; (b) eight hundred thirty-two(P832.00) pesos for medical expenses of Victoria Jaime Vda. de Kho; and (c) eightthousand, nine hundred thirty-five pesos and six centavos (P8,935.06) for medicalexpenses of Gloria Kho Vda. de Calabia.

2. Guillermo Corbeta, National Foods Authority, and Mabuhay Insurance & GuarantyCo., Inc., jointly and severally, are ordered to pay private respondents' claims28 as

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adjudged by the Regional Trial Court of Butuan City, minus the amounts that GSIS must pay to the injured victims and the heirs of the deceased victims as above stated.

This decision is immediately executory. No pronouncement as to cost.1âwphi1.nêt

SO ORDERED.

Bellosillo, Mendoza and Buena, JJ., concur. Puno, J., took no part.

Footnotes

1 Penned by Associate Justice Jainal D. Rasul, concurred by Associate Justices Fidel P.Purisima and Jorge S. Imperial; Rollo, pp. 23-30.

2 Court of Appeals Rollo, pp. 75-76. Emphasis supplied.

3 Id . at 85-86. Emphasis supplied.

4 Annex A, RTC records, Civil Case No. 2256, p. 13. The police report states that onlythree (3) passengers died on the spot and another one (1) died a few hours later at SantosHospital.

5 Penned by Judge Rosarito F. Abalos.

6

Court of Appeals Rollo, p. 70.7 Id . at 70-71.

8 Ibid .

9 Rollo, p. 30.

10 Court of Appeals, Rollo, p. 152 B-C.

11 Civil Code of the Philippines, art. 1207 states — The concurrence of two or more

creditors or of two or more debtors in one and the same obligation does not imply thateach one of the former has a right to demand or that each one of the latter is bound torender, entire compliance with the prestations. There is a solidary liability only when theobligation expressly so states, or when the law or the nature of the obligation requiressolidarity.

12 Civil Code of the Philippines, art. 1208 states — If from the law, or the nature or thewording of the obligations to which the preceding article refers the contrary does not

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appear, the credit or debt shall be presumed to be divided into as many equal shares asthere are creditors or debtors, the credits or debts being considered distinct from oneanother, subject to the Rules of Court governing the multiplicity of suits.

13 Insurance Code, sec. 374 states — It shall be unlawful for any land transportation

operator or owner of a motor vehicle to operate the same in the public highways unlessthere is in force in relation thereto a policy of insurance or guaranty in cash or surety bond issued in accordance with the provisions of this chapter to indemnify the death or bodily injury of a third party or passenger, as the case may be, arising from the usethereof.

14 Insurance Memorandum Circular No. 5-78, paragraph I.

15 167 SCRA 386 (1988).

16 Id . at 390-391.

17 Malayan Insurance Co., Inc v. Court of Appeals, 165 SCRA 536, 554 (1988); citing Coquia v. Fieldman 's Insurance Co., Inc., 26 SCRA 178 (1969).

18 Ibid .

19 Ibid .

20 Employers shall be liable for the damages caused by their employees.

21 See Vda. de Maglana vs. Consolacion, 212 SCRA 268 (1992).

22 Insurance Memorandum Circular No. 5-78. Subject: Schedule of Indemnities for Deathand/or Bodily Injuries, Professional Fees, Hospital and Other Charges Payable under aCompulsory Motor Vehicle Liability Insurance Coverage.

x x x x x x x x x

II. SCHEDULE OF INDEMNITIES — . . .

A. DEATH INDEMNITY — Maximum of P 12,000.00

23

People v. Pareja, 30 SCRA 693, 703 (1969).24 Regional Trial Court, folder of exhibits, p. 58.

25 See Pacific Timber Export Corp. v. CA , 112 SCRA 199, 206 (1982).

26 MD Transit & Taxi Co., Inc. v. Estrella, 113 SCRA 378, 387 (1982); citing Blanco v.WCC, 29 SCRA 7 (1969).

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27 The decision of the trial court as affirmed by the Court of Appeals not having beenappealed by the insurer (MICG) of the Toyota Tamaraw, the same is now final as far asthat entity is concerned, and may not be modified by this Court. Failure of any parties toappeal the judgment as against him makes such judgment final and executory. (FirestoneTire and Rubber Company of the Philippines vs. Tempongko, 27 SCRA 418. 424 (1969);

Singapore Airlines Limited vs. Court of Appeals, 243 SCRA 143, 148 (1995). By thesame token, an appeal by one party from such judgment does not inure to the benefit of the other party who had not appealed nor can it be deemed to be an appeal of such other party from the judgment against him.

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SECOND DIVISION

Norma Mangaliag and G.R. No. 143951

Narciso Solano,

Petitioners, Present:

- versus - PUNO, Chairman,

AUSTRIA-MARTINEZ, Hon. Edelwina Catubig-Pastoral, CALLEJO, SR.,Judge of the Regional Trial Court, TINGA, and

1st Judicial Region, San Carlos CHICO-NAZARIO, JJ . City, (Pangasinan), Branch 56

and Apolinario Serquina, Jr., Promulgated: Respondents.

October 25, 2005

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before us is a petition for certiorari, with a prayer for the issuance of a

temporary restraining order, to set aside the Order dated April 17, 2000 of theRegional Trial Court (RTC), Branch 56, San Carlos City in Civil Case No. SCC-

2240, which denied petitioners‘ motion to dismiss; and the Or der dated June 13,

2000, which denied petitioners‘ motion for reconsideration.

The factual background of the case is as follows:

On May 10, 1999, private respondent Apolinario Serquina, Jr. filed before

the RTC a complaint for damages against petitioners Norma Mangaliag and

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Narciso Solano. The complaint alleges that: on January 21, 1999, from 9:00 to

10:00 a.m., private respondent, together with Marco de Leon, Abner Mandapat and

Manuel de Guzman, was on board a tricycle driven by Jayson Laforte; while in

Pagal, San Carlos City, a dump truck owned by petitioner Mangaliag and driven by

her employee, petitioner Solano, coming from the opposite direction, tried to

overtake and bypass a tricycle in front of it and thereby encroached the left lane

and sideswiped the tricycle ridden by private respondent; due to the gross

negligence, carelessness and imprudence of petitioner Solano in driving the truck,

private respondent and his co-passengers sustained serious injuries and permanent

deformities; petitioner Mangaliag failed to exercise due diligence required by law

in the selection and supervision of her employee; private respondent was

hospitalized and spent P71,392.00 as medical expenses; private respondent

sustained a permanent facial deformity due to a fractured nose and suffers from

severe depression as a result thereof, for which he should be compensated in the

amount of P500,000.00 by way of moral damages; as a further result of his

hospitalization, private respondent lost income of P25,000.00; private respondent

engaged the services of counsel on a contingent basis equal to 25% of the total

award.[1]

On July 21, 1999, petitioners filed their answer with counterclaim denying

that private respondent has a cause of action against them. They attributed fault or

negligence in the vehicular accident on the tricycle driver, Jayson Laforte, who

was allegedly driving without license.[2]

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Following pre-trial conference, trial on the merits ensued. When private

respondent rested his case, petitioner Solano testified in his defense.

Subsequently, on March 8, 2000, petitioners, assisted by a new counsel, filed

a motion to dismiss on the ground of lack of jurisdiction over the subject matter of

the claim, alleging that the Municipal Trial Court (MTC) has jurisdiction over the

case since the principal amount prayed for, in the amount of P71,392.00, falls

within its jurisdiction.[3] Private respondent opposed petitioners‘ motion to

dismiss.[4] On March 24, 2000, petitioners filed a supplement in support of their

motion to dismiss.[5]

On April 17, 2000, the respondent RTC Judge, Edelwina Catubig-Pastoral,

issued the first assailed Order denying petitioners‘ motion to dismiss,[6] relying

upon the mandate of Administrative Circular No. 09-94, paragraph 2 of which

reads:

2. The exclusion of the term ―damages of whatever kind in determining

the jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg.129, as amended by R.A. No. 7691, applied to cases where the damages aremerely incidental to or a consequence of the main cause of action. However, incases where the claim for damages is the main cause of action, or one of thecauses of action, the amount of such claim shall be considered in determining the jurisdiction of the court.

The respondent RTC Judge also cited the 1999 case of Ong vs. Court of

Appeals,[7] where an action for damages due to a vehicular accident, with prayer





















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for actual damages of P10,000.00 and moral damages of P1,000,000.00, was tried

in a RTC.

On May 19, 2000, petitioners filed a motion for reconsideration[8] but it was

denied by the respondent RTC Judge in her second assailed Order, dated June 13,

2000.[9]

Hence, the present petition for certiorari, with prayer for the issuance of a

temporary restraining order .[10]

On August 9, 2000, the Court resolved to issue the temporary restraining

order prayed for by petitioners. Consequently, the respondent RTC Judge desisted

from hearing further Civil Case No. SCC-2240.[11]

Petitioners propound this issue for consideration: In an action for recovery of

damages, does the amount of actual damages prayed for in the complaint provide

the sole test for determining the court‘s jurisdiction, or is the total amount of all the

damages claimed, regardless of kind and nature, such as moral, exemplary,

nominal damages, and attorney‘s fees, etc., to be computed collectively with the

actual damages to determine what court – whether the MTC or the RTC – has

jurisdiction over the action?
















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Petitioners maintain that the court‘s jurisdiction should be based exclusively

on the amount of actual damages, excluding therefrom the amounts claimed as

moral, exemplary, nominal damages and attorney‘s fee, etc. They submit that the

specification in Administrative Circular No. 09-94 that “in cases where the claim

for damages is the main cause of action. . . the amount of such claim shall be

considered in determining the jurisdiction of the court” signifies that the court‘s

jurisdiction must be tested solely by the amount of that damage which is

principally and primarily demanded, and not the totality of all the damages sought

to be recovered.

Petitioners insist that private respondent‘s claim for actual damages in the

amount of P71,392.00 is the principal and primary demand, the same being the

direct result of the alleged negligence of petitioners, while the moral damages for

P500,000.00 and attorney‘s fee, being the consequent effects thereof, may prosper

only upon a prior finding by the court of the existence of petitioners‘ negligence

that caused the actual damages. Considering that the amount of actual damages

claimed by private respondent in Civil Case No. SCC-2240 does not exceed

P200,000.00, which was then the jurisdictional amount of the MTC, the

jurisdiction over the case clearly pertains to the MTC, and not to the RTC.

Therefore, the RTC should have dismissed the case for lack of jurisdiction.

Petitioners cite as relevant the case of Movers-Baseco Integrated Port Services,

Inc. vs. Cyborg Leasing Corporation[12] wherein the Court, in disposing of the

jurisdictional issue, limited its consideration only to the actual or compensatory

damages.




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Furthermore, while admitting that the defense of lack of jurisdiction was

only raised during the trial, petitioners nevertheless contend that jurisdiction may

be raised anytime, even after judgment, but before it is barred by laches or

estoppel. They submit that they seasonably presented the objection to the RTC‘s

lack of jurisdiction, i.e., during the trial stage where no decision had as yet been

rendered, must less one unfavorable to them.

At any rate, they argue that when the jurisdictional flaw is evident from the

record of the case, the court may, even without the urgings of the parties, take judicial notice of such fact, and thereupon dismiss the case motu proprio. Thus,

even if lack of jurisdiction was not initially raised in a motion to dismiss or in the

answer, no waiver may be imputed to them.

Private respondent, on the other hand, submits that in an action for recovery

of damages arising from a tortious act, the claim of moral damages is not merely

an incidental or consequential claim but must be considered in the amount of

demand which will determine the court‘s jurisdiction. He argues that the position

taken by petitioners is a misreading of paragraph 2 of Administrative Circular No.

09-94. The clear and explicit language of said circular leaves no room for doubt;

hence, needs no interpretation.

He further submits that petitioners‘ reliance on Movers-Baseco Integrated

Port Services, Inc. is misplaced since that case is for recovery of the value of

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vehicle and unpaid rentals on the lease of the same. He contends that Section 18,

paragraph 8 of Batas Pambansa Blg . 129, as amended by Republic Act No. 7691,

upon which petitioners anchor their stand, refers to all the demands involving

collection of sums of money based on obligations arising from contract, express or

implied, where the claim for damages is just incidental thereto and it does not

apply to actions for damages based on obligations arising from quasi-delict where

the claim for damages of whatever kind is the main action.

Private respondent also contends that, being incapable of pecuniarycomputation, the amount of moral damages that he may be awarded depends on the

sound discretion of the trial court, not restrained by the limitation of the

jurisdictional amount. Should the Court follow petitioners‘ line of reasoning,

private respondent argues that it will result in an absurd situation where he can

only be awarded moral damages of not more than P200,000.00 although he

deserves more than this amount, taking into consideration his physical suffering, as

well as social and financial standing, simply because his claim for actual damages

does not exceed P200,000.00 which amount falls under the jurisdiction of the

MTC.

Lastly, he asserts that it is too late in the day for petitioners to question the

jurisdiction of the RTC since they are estopped from invoking this ground. He

contends that after actively taking part in the trial proceedings and presenting a

witness to seek exoneration, it would be unfair and legally improper for petitioners

to seek the dismissal of the case.

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At the outset, it is necessary to stress that generally a direct recourse to this

Court is highly improper, for it violates the established policy of strict observance

of the judicial hierarchy of courts. Although this Court, the RTCs and the Court of

Appeals (CA) have concurrent jurisdiction to issue writs of certiorari, prohibition,

mandamus, quo warranto, habeas corpus and injunction, such concurrence does

not give the petitioner unrestricted freedom of choice of court forum. This Court is

a court of last resort, and must so remain if it is to satisfactorily perform the

functions assigned to it by the Constitution and immemorial tradition.[13]

Thus, this Court, as a rule, will not entertain direct resort to it unless the

redress desired cannot be obtained in the appropriate courts, and exceptional and

compelling circumstances, such as cases of national interest and of serious

implications, justify the availment of the extraordinary remedy of writ of

certiorari, calling for the exercise of its primary jurisdiction.[14] Such exceptional

and compelling circumstances were present in the following cases: (a) Chavez vs.

Romulo[15] on the citizens‘ right to bear arms; (b) Government of the United

States of America vs. Purganan[16] on bail in extradition proceedings; (c)

Commission on Elections vs. Quijano-Padilla[17] on a government contract on the

modernization and computerization of the voters‘ registration list; (d) Buklod ng

Kawaning EIIB vs. Zamora[18] on the status and existence of a public office; and(e) Fortich vs. Corona[19] on the so-called ―Win-Win Resolution‖ of the Office of

the President which modified the approval of the conversion to agro-industrial area

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Be that as it may, the judicial hierarchy of courts is not an iron-clad rule. It

generally applies to cases involving warring factual allegations. For this reason,

litigants are required to repair to the trial courts at the first instance to determine

the truth or falsity of these contending allegations on the basis of the evidence of

the parties. Cases which depend on disputed facts for decision cannot be brought

immediately before appellate courts as they are not triers of facts.[20] Therefore, a

strict application of the rule of hierarchy of courts is not necessary when the cases

brought before the appellate courts do not involve factual but legal questions.

In the present case, petitioners submit a pure question of law involving the

interpretation and application of paragraph 2 of Administrative Circular No. 09-

94. This legal question and in order to avoid further delay are compelling enough

reasons to allow petitioners‘ invocation of this Court‘s jurisdiction in the first

instance.

Before resolving this issue, the Court shall deal first on the question of

estoppel posed by private respondent. Private respondent argues that the defense

of lack of jurisdiction may be waived by estoppel through active participation in

the trial. Such, however, is not the general rule but an exception, bestcharacterized by the peculiar circumstances in Tijam vs. Sibonghanoy.[21] In

Sibonghanoy, the party invoking lack of jurisdiction did so only after fifteen years

and at a stage when the proceedings had already been elevated to the CA.

Sibonghanoy is an exceptional case because of the presence of laches, which was









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defined therein as failure or neglect for an unreasonable and unexplained length of

time to do that which, by exercising due diligence, could or should have been done

earlier; it is the negligence or omission to assert a right within a reasonable time,

warranting a presumption that the party entitled to assert has abandoned it or

declined to assert it.[22]

As enunciated in Calimlim vs. Ramirez ,[23] this Court held:

A rule that had been settled by unquestioned acceptance and upheld indecisions so numerous to cite is that the jurisdiction of a court over the subjectmatter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at anystage of the proceedings, even on appeal. This doctrine has been qualified byrecent pronouncements which stemmed principally from the ruling in the citedcase of Sibonghanoy. It is to be regretted, however, that the holding in said casehad been applied to situations which were obviously not contemplated therein.The exceptional circumstances involved in Sibonghanoy which justified thedeparture from the accepted concept of non-waivability of objection to

jurisdiction has been ignored and, instead a blanket doctrine had been repeatedlyupheld that rendered the supposed ruling in Sibonghanoy not as the exception, butrather the general rule, virtually overthrowing altogether the time honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

. . .

It is neither fair nor legal to bind a party by the result of a suit or proceeding which was taken cognizance of in a court which lacks jurisdictionover the same irrespective of the attendant circumstances. The equitable defenseof estoppel requires knowledge or consciousness of the facts upon which it is

based. The same thing is true with estoppel by conduct which may be assertedonly when it is shown, among others, that the representation must have been madewith knowledge of the facts and that the party to whom it was made is ignorant of the truth of the matter ( De Castro vs. Gineta, 27 SCRA 623). The filing of anaction or suit in a court that does not possess jurisdiction to entertain the samemay not be presumed to be deliberate and intended to secure a ruling which couldlater be annulled if not favorable to the party who filed such suit or proceeding.Instituting such an action is not a one-sided affair. It can just as well be









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prejudicial to the one who file the action or suit in the event that he obtains afavorable judgment therein which could also be attacked for having been renderedwithout jurisdiction. The determination of the correct jurisdiction of a court is nota simple matter. It can raise highly debatable issues of such importance that thehighest tribunal of the land is given the exclusive appellate jurisdiction to

entertain the same. The point simply is that when a party commits error in filinghis suit or proceeding in a court that lacks jurisdiction to take cognizance of thesame, such act may not at once be deemed sufficient basis of estoppel. It couldhave been the result of an honest mistake or of divergent interpretations of doubtful legal provisions. If any fault is to be imputed to a party taking suchcourse of action, part of the blame should be placed on the court which shallentertain the suit, thereby lulling the parties into believing that they pursued their remedies in the correct forum. Under the rules, it is the duty of the court todismiss an action ―whenever it appears that court has no jurisdiction over thesubject matter.‖ (Section 2, Rule 9, Rules of Court) Should the Court render a

judgment without jurisdiction, such judgment may be impeached or annulled for

lack of jurisdiction (Sec. 30, Rule 132, Ibid ), within ten (10) years from thefinality of the same (Art. 1144, par. 3, Civil Code).[24]

In the present case, no judgment has yet been rendered by the RTC.[25] As

a matter of fact, as soon as the petitioners discovered the alleged jurisdictional

defect, they did not fail or neglect to file the appropriate motion to dismiss. Hence,finding the pivotal element of laches to be absent, the Sibonghanoy doctrine does

not control the present controversy. Instead, the general rule that the question of

jurisdiction of a court may be raised at any stage of the proceedings must apply.

Therefore, petitioners are not estopped from questioning the jurisdiction of the

RTC.

In any event, the petition for certiorari is bereft of merit.









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Section 1 of Republic Act (R.A.) No. 7691, which took effect on April 15,

1994, provides inter alia that where the amount of the demand in civil cases

exceeds P100,000.00,[26] exclusive of interest, damages of whatever kind,

attorney‘s fees, litigation expenses, and costs, the exclusive jurisdiction thereof is

lodged with in the RTC. Under Section 3 of the same law, where the amount of

the demand in the complaint does not exceed P100,000.00, exclusive of interest,

damages of whatever kind, attorney‘s fees, litigation expenses, and costs, the

exclusive jurisdiction over the same is vested in the Metropolitan Trial Court,

MTC and Municipal Circuit Trial Court. The jurisdictional amount was increased

to P200,000.00,[27] effective March 20, 1999, pursuant to Section 5[28] of R.A.

No. 7691 and Administrative Circular No. 21-99.

In Administrative Circular No. 09-94 dated March 14, 1994, the Court

specified the guidelines in the implementation of R.A. No. 7691. Paragraph 2 of

the Circular provides:

2. The exclusion of the term ―damages of whatever kind in determining

the jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg.129, as amended by R.A. No. 7691, applied to cases where the damages aremerely incidental to or a consequence of the main cause of action. However, incases where the claim for damages is the main cause of action, or one of thecauses of action, the amount of such claim shall be considered in determiningthe jurisdiction of the court. (Emphasis supplied)

The well-entrenched principle is that the jurisdiction of the court over the

subject matter of the action is determined by the material allegations of the












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complaint and the law, irrespective of whether or not the plaintiff is entitled to

recover all or some of the claims or reliefs sought therein.[29] In the present case,

the allegations in the complaint plainly show that private respondent seeks to

recover not only his medical expenses, lost income but also damages for physical

suffering and mental anguish due to permanent facial deformity from injuries

sustained in the vehicular accident. Viewed as an action for quasi-delict, the

present case falls squarely within the purview of Article 2219 (2),[30] which

provides for the payment of moral damages in cases of quasi-delict causing

physical injuries.

Private respondent‘s claim for moral damages of P500,000.00 cannot be

considered as merely incidental to or a consequence of the claim for actual

damages. It is a separate and distinct cause of action or an independent actionable

tort. It springs from the right of a person to the physical integrity of his or her

body, and if that integrity is violated, damages are due and assessable.[31] Hence,

the demand for moral damages must be considered as a separate cause of action,

independent of the claim for actual damages and must be included in determining

the jurisdictional amount, in clear consonance with paragraph 2 of Administrative

Circular No. 09-94.

If the rule were otherwise, i.e., the court‘s jurisdiction in a case of quasi-

delict causing physical injuries would only be based on the claim for actual

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In view of the foregoing, the Court is convinced that the respondent RTC

Judge committed no grave abuse of discretion in issuing the assailed Orders dated

April 17, 2000 and June 13, 2000.

WHEREFORE, the instant petition for certiorari is DISMISSED for lack of

merit. The temporary restraining order issued by this Court on August 9, 2000 is

LIFTED.

The Regional Trial Court, Branch 56, San Carlos City is DIRECTED to

continue with the trial proceedings in Civil Case No. SCC-2240 and resolve the

case with dispatch.

Costs against petitioners.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

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WE CONCUR:

REYNATO S. PUNO

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

DANTE O. TINGA

Associate Justice

(On Leave)

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MINITA V. CHICO-NAZARIO

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached inconsultation before the case was assigned to the writer of the opinion of the

Court‘s Division.

REYNATO S. PUNO

Associate Justice

Chairman, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the DivisionChairman‘s Attestation, it is hereby certified that the conclusions in the above

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Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court‘s Division.

HILARIO G. DAVIDE, JR.

Chief Justice

[1] Records, pp. 3-4.

[2] Id ., p. 25.

[3] Id ., p. 219.

[4] Id ., p. 232.

[5] Id ., p. 237.

[6] Id ., p. 251.

[7] G.R. No. 117103, January 21, 1999, 301 SCRA 387.

[8] Id ., p. 199.

[9] Id ., p. 214.

[10] Rollo, p. 3.

[11] Id ., p. 63.

[12] G.R. No. 131755, October 25, 1999, 317 SCRA 327.

[13] Ouano vs. PGTT International Investment Corporation, G.R. No. 134230, July 17,2002, 384 SCRA 589, 593; Vergara, Sr. vs. Suelto, G.R. No. L-74766, December 21,1987, 156 SCRA 753, 766.

[14] Zamboanga Barter Goods Retailers Association, Inc. vs. Lobregat, G.R. No. 145466, July 7, 2004, 433SCRA 624, 629; Yared vs. Ilarde, G.R. No. 114732, August 1, 2000, 337 SCRA 53, 61; People vs. Court of Appeals, G.R. No. 128297, January 21, 1999, 301 SCRA 566, 569-570; Aleria, Jr. vs. Velez, G.R. No.

127400, November 16, 1998, 298 SCRA 611, 618-619; Tano vs. Socrates, G.R. No. 110249, August 21,1997, 278 SCRA 154, 172-174.

[15] G.R. No. 157036, June 9, 2004, 431 SCRA 534.

[16] G.R. No. 148571, September 24, 2002, 389 SCRA 623.

[17] G.R. No. 151992, September 18, 2002, 389 SCRA 353.

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[18] G.R. Nos. 142801-802, July 10, 2001, 360 SCRA 718.

[19] G.R. No. 131457, April 24, 1998, 289 SCRA 624.

[20] Agan, Jr. vs. Philippine International Air Terminals Co., Inc., G.R. Nos. 155001,155547 and 155661, January 21, 2004, 420 SCRA 575, 584. Cf. Liga ng mga Barangay National vs. Atienza, Jr., G.R. No. 154599, January 21, 2004, 420 SCRA 562, 573;Santiago vs. Vasquez, G.R. Nos. 99289-90, January 27, 1993, 217 SCRA 633, 652.

[21] G.R. No. L-21450, April 15, 1968, 23 SCRA 29. See Metromedia TimesCorporation, et al . vs. Pastorin, G.R. No. 154295, July 29, 2005.

[22] Id . , p. 35.

[23] G.R. No. L-34362, November 19, 1982, 118 SCRA 399.

[24] Id ., pp. 406-408.

[25] See Binay vs. Sandiganbayan, G.R. Nos. 120681-83 and G.R. No. 128136, October 1, 1999, 316 SCRA 65, 100; Uy vs. Court of Appeals, G.R. No. 119000, July 28, 1997,276 SCRA 367, 379.

[26] P200,000.00 in Metro Manila.

[27] P400,000.00 in Metro Manila.

[28] SEC. 5. After five (5) years from the effectivity of this Act, the jurisdictionalamounts mentioned in Sec. 19 (3), (4), and (8); and Sec. 33 (1) of Batas Pambansa Blg.

129 as amended by this Act, shall be adjusted to Two hundred thousand pesos(P200,000.00). Five (5) years thereafter, such jurisdictional amounts shall be adjustedfurther to Three hundred thousand pesos (P300,000.00): Provided, however, that in caseof Metro Manila, the abovementioned jurisdictional amounts shall be adjusted after five(5) years from the effectivity of this Act to Four hundred thousand pesos (P400,000.00).

[29] Laresma vs. Abellana, G.R. No. 140973, November 11, 2004, 442 SCRA 156, 169;Hilado vs. Chavez, G.R. No. 134742, September 22, 2004, 438 SCRA 623, 641; Cruz vs.Torres, G.R. No. 121939, October 4, 1999, 316 SCRA 193.

[30] Art. 2219. Moral damages may be recovered in the following and analogous cases:

…

(2) Quasi-delicts causing physical injuries; …

[31] Ong vs. Court of Appeals, supra, Note No. 7, p. 402.

[32] Article 2217 of the Civil Code.





























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[33] Pleyto vs. Lomboy, G.R. No. 148737, June 16, 2004, 432 SCRA 329, 342; Samson,Jr. vs. Bank of the Philippine Islands, G.R. No. 150487, July 10, 2003, 405 SCRA 607,612; Kierulf vs. Court of Appeals, G.R. Nos. 99301 & 99343, March 13, 1997, 269SCRA 433, 448-449.

[34] G.R. No. 131755, October 25, 1999, 317 SCRA 327.

[35] Art. 2220. Willful injury to property may be a legal ground for awarding moraldamages if the court should find that, under the circumstances, such damages are justlydue. The same rule applies to breaches of contract where the defendant acted fraudulentlyor in bad faith.

FIRST DIVISION

[G.R. No. 138569. September 11, 2003]

THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs. COURT OFAPPEALS and L.C. DIAZ and COMPANY, CPA‘s, respondents.

D E C I S I O N

CARPIO, J .:

The Case

Before us is a petition for review of the Decision of the Court of Appeals dated 27 October 1998and its Resolution dated 11 May 1999. The assailed decision reversed the Decision of theRegional Trial Court of Manila, Branch 8, absolving petitioner Consolidated Bank and TrustCorporation, now known as Solidbank Corporation (―Solidbank‖), of any liability. Thequestioned resolution of the appellate court denied the motion for reconsideration of Solidbank but modified the decision by deleting the award of exemplary damages, attorney‘s fees, expenses

of litigation and cost of suit.

The Facts

Solidbank is a domestic banking corporation organized and existing under Philippine laws.Private respondent L.C. Diaz and Company, CPA‘s (―L.C. Diaz‖), is a professional partnership

engaged in the practice of accounting.

Sometime in March 1976, L.C. Diaz opened a savings account with Solidbank, designated asSavings Account No. S/A 200-16872-6.



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On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya (―Macaraya‖), filled up a

savings (cash) deposit slip for P990 and a savings (checks) deposit slip for P50. Macarayainstructed the messenger of L.C. Diaz, Ismael Calapre (―Calapre‖), to deposit the money withSolidbank. Macaraya also gave Calapre the Solidbank passbook.

Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook.The teller acknowledged receipt of the deposit by returning to Calapre the duplicate copies of thetwo deposit slips. Teller No. 6 stamped the deposit slips with the words ―DUPLICATE‖ and

―SAVING TELLER 6 SOLIDBANK HEAD OFFICE.‖ Since the transaction took time andCalapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook withSolidbank. Calapre then went to Allied Bank. When Calapre returned to Solidbank to retrievethe passbook, Teller No. 6 informed him that ―somebody got the passbook.‖ Calapre went back to L.C. Diaz and reported the incident to Macaraya.

Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000.Macaraya, together with Calapre, went to Solidbank and presented to Teller No. 6 the deposit

slip and check. The teller stamped the words ―DUPLICATE‖ and ―SAVING TELLER 6SOLIDBANK HEAD OFFICE‖ on the duplicate copy of the deposit slip. When Macaraya asked

for the passbook, Teller No. 6 told Macaraya that someone got the passbook but she could notremember to whom she gave the passbook. When Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone shorter than Calapre got the passbook. Calaprewas then standing beside Macaraya.

Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the deposit of a check for P90,000 drawn on Philippine Banking Corporation (―PBC‖). This PBC check of L.C. Diaz

was a check that it had ―long closed.‖ PBC subsequently dishonored the check because of insufficient funds and because the signature in the check differed from PBC‘s specimen

signature. Failing to get back the passbook, Macaraya went back to her office and reported thematter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.

The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz(―Diaz‖), called up Solidbank to stop any transaction using the same passbook until L.C. Diazcould open a new account. On the same day, Diaz formally wrote Solidbank to make the samerequest. It was also on the same day that L.C. Diaz learned of the unauthorized withdrawal theday before, 14 August 1991, of P300,000 from its savings account. The withdrawal slip for theP300,000 bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz andRustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain NoelTamayo received the P300,000.

In an Information dated 5 September 1991, L.C. Diaz charged its messenger, Emerano Ilagan(―Ilagan‖) and one Roscon Verdazola with Estafa through Falsification of CommercialDocument. The Regional Trial Court of Manila dismissed the criminal case after the CityProsecutor filed a Motion to Dismiss on 4 August 1992.

On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank the return of itsmoney. Solidbank refused.

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On 25 August 1992, L.C. Diaz filed a Complaint for Recovery of a Sum of Money againstSolidbank with the Regional Trial Court of Manila, Branch 8. After trial, the trial courtrendered on 28 December 1994 a decision absolving Solidbank and dismissing the complaint.

L.C. Diaz then appealed to the Court of Appeals. On 27 October 1998, the Court of Appeals

issued its Decision reversing the decision of the trial court.

On 11 May 1999, the Court of Appeals issued its Resolution denying the motion for reconsideration of Solidbank. The appellate court, however, modified its decision by deletingthe award of exemplary damages and attorney‘s fees.

The Ruling of the Trial Court

In absolving Solidbank, the trial court applied the rules on savings account written on the passbook. The rules state that ―possession of this book shall raise the presumption of ownershipand any payment or payments made by the bank upon the production of the said book and entry

therein of the withdrawal shall have the same effect as if made to the depositor personally.‖

At the time of the withdrawal, a certain Noel Tamayo was not only in possession of the passbook, he also presented a withdrawal slip with the signatures of the authorized signatories of L.C. Diaz. The specimen signatures of these persons were in the signature cards. The teller stamped the withdrawal slip with the words ―Saving Teller No. 5.‖ The teller then passed on the

withdrawal slip to Genere Manuel (―Manuel‖) for authentication. Manuel verified the signatureson the withdrawal slip. The withdrawal slip was then given to another officer who compared thesignatures on the withdrawal slip with the specimen on the signature cards. The trial courtconcluded that Solidbank acted with care and observed the rules on savings account when itallowed the withdrawal of P300,000 from the savings account of L.C. Diaz.

The trial court pointed out that the burden of proof now shifted to L.C. Diaz to prove that thesignatures on the withdrawal slip were forged. The trial court admonished L.C. Diaz for notoffering in evidence the National Bureau of Investigation (―NBI‖) report on the authenticity of

the signatures on the withdrawal slip for P300,000. The trial court believed that L.C. Diaz didnot offer this evidence because it is derogatory to its action.

Another provision of the rules on savings account states that the depositor must keep the passbook ―under lock and key.‖ When another person presents the passbook for withdrawal prior

to Solidbank‘s receipt of the notice of loss of the passbook, that person is considered as theowner of the passbook. The trial court ruled that the passbook presented during the questionedtransaction was ―now out of the lock and key and presumptively ready for a businesstransaction.‖

Solidbank did not have any participation in the custody and care of the passbook. The trial court believed that Solidbank‘s act of allowing the withdrawal of P300,000 was not the direct and proximate cause of the loss. The tr ial court held that L.C. Diaz‘s negligence caused the

unauthorized withdrawal. Three facts establish L.C. Diaz‘s negligence: (1) the possession of the

passbook by a person other than the depositor L.C. Diaz; (2) the presentation of a signed

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withdrawal receipt by an unauthorized person; and (3) the possession by an unauthorized personof a PBC check ―long closed‖ by L.C. Diaz, which check was deposited on the day of the

fraudulent withdrawal.

The trial court debunked L.C. Diaz‘s contention that Solidbank did not follow the precautionary

procedures observed by the two parties whenever L.C. Diaz withdrew significant amounts fromits account. L.C. Diaz claimed that a letter must accompany withdrawals of more than P20,000.The letter must request Solidbank to allow the withdrawal and convert the amount to amanager‘s check. The bearer must also have a letter authorizing him to withdraw the sameamount. Another person driving a car must accompany the bearer so that he would not walk from Solidbank to the office in making the withdrawal. The trial court pointed out that L.C. Diazdisregarded these precautions in its past withdrawal. On 16 July 1991, L.C. Diaz withdrewP82,554 without any separate letter of authorization or any communication with Solidbank thatthe money be converted into a manager‘s check.

The trial court further justified the dismissal of the complaint by holding that the case was a last

ditch effort of L.C. Diaz to recover P300,000 after the dismissal of the criminal case againstIlagan.

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

IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the complaint.

The Court further renders judgment in favor of defendant bank pursuant to its counterclaim theamount of Thirty Thousand Pesos (P30,000.00) as attorney‘s fees.

With costs against plaintiff.

SO ORDERED.

The Ruling of the Court of Appeals

The Court of Appeals ruled that Solidbank‘s negligence was the proximate cause of the

unauthorized withdrawal of P300,000 from the savings account of L.C. Diaz. The appellatecourt reached this conclusion after applying the provision of the Civil Code on quasi-delict, towit:

Article 2176. Whoever by act or omission causes damage to another, there being fault or

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

The appellate court held that the three elements of a quasi-delict are present in this case, namely:(a) damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person for whose acts he must respond; and (c) the connection of cause and effect between thefault or negligence of the defendant and the damage incurred by the plaintiff.

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The Court of Appeals pointed out that the teller of Solidbank who received the withdrawal slipfor P300,000 allowed the withdrawal without making the necessary inquiry. The appellate courtstated that the teller, who was not presented by Solidbank during trial, should have called up thedepositor because the money to be withdrawn was a significant amount. Had the teller called upL.C. Diaz, Solidbank would have known that the withdrawal was unauthorized. The teller did not

even verify the identity of the impostor who made the withdrawal. Thus, the appellate courtfound Solidbank liable for its negligence in the selection and supervision of its employees.

The appellate court ruled that while L.C. Diaz was also negligent in entrusting its deposits to itsmessenger and its messenger in leaving the passbook with the teller, Solidbank could not escapeliability because of the doctrine of ―last clear chance.‖ Solidbank could have averted the injury

suffered by L.C. Diaz had it called up L.C. Diaz to verify the withdrawal.

The appellate court ruled that the degree of diligence required from Solidbank is more than thatof a good father of a family. The business and functions of banks are affected with publicinterest. Banks are obligated to treat the accounts of their depositors with meticulous care,

always having in mind the fiduciary nature of their relationship with their clients. The Court of Appeals found Solidbank remiss in its duty, violating its fiduciary relationship with L.C. Diaz.

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

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and anew one entered.

1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to pay plaintiff-appellant the sum of Three Hundred Thousand Pesos (P300,000.00), withinterest thereon at the rate of 12% per annum from the date of filing of the

complaint until paid, the sum of P20,000.00 as exemplary damages, andP20,000.00 as attorney‘s fees and expenses of litigation as well as the cost of suit;

and

2. Ordering the dismissal of defendant-appellee‘s counterclaim in the amount of

P30,000.00 as attorney‘s fees.

SO ORDERED.

Acting on the motion for reconsideration of Solidbank, the appellate court affirmed its decision but modified the award of damages. The appellate court deleted the award of exemplary

damages and attorney‘s fees. Invoking Article 2231 of the Civil Code, the appellate court ruledthat exemplary damages could be granted if the defendant acted with gross negligence. SinceSolidbank was guilty of simple negligence only, the award of exemplary damages was not justified. Consequently, the award of attorney‘s fees was also disallowed pursuant to Article2208 of the Civil Code. The expenses of litigation and cost of suit were also not imposed onSolidbank.

The dispositive portion of the Resolution reads as follows:

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WHEREFORE, foregoing considered, our decision dated October 27, 1998 is affirmed withmodification by deleting the award of exemplary damages and attorney‘s fees, expenses of

litigation and cost of suit.

SO ORDERED.

Hence, this petition.

The Issues

Solidbank seeks the review of the decision and resolution of the Court of Appeals on thesegrounds:

I. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER BANK SHOULD SUFFER THE LOSS BECAUSE ITS TELLER SHOULDHAVE FIRST CALLED PRIVATE RESPONDENT BY TELEPHONE BEFORE

IT ALLOWED THE WITHDRAWAL OF P300,000.00 TO RESPONDENT‘SMESSENGER EMERANO ILAGAN, SINCE THERE IS NO AGREEMENTBETWEEN THE PARTIES IN THE OPERATION OF THE SAVINGSACCOUNT, NOR IS THERE ANY BANKING LAW, WHICH MANDATESTHAT A BANK TELLER SHOULD FIRST CALL UP THE DEPOSITOR BEFORE ALLOWING A WITHDRAWAL OF A BIG AMOUNT IN ASAVINGS ACCOUNT.

II. THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OFLAST CLEAR CHANCE AND IN HOLDING THAT PETITIONER BANK‘S

TELLER HAD THE LAST OPPORTUNITY TO WITHHOLD THE

WITHDRAWAL WHEN IT IS UNDISPUTED THAT THE TWOSIGNATURES OF RESPONDENT ON THE WITHDRAWAL SLIP AREGENUINE AND PRIVATE RESPONDENT‘S PASSBOOK WAS DULYPRESENTED, AND CONTRARIWISE RESPONDENT WAS NEGLIGENT INTHE SELECTION AND SUPERVISION OF ITS MESSENGER EMERANOILAGAN, AND IN THE SAFEKEEPING OF ITS CHECKS AND OTHER FINANCIAL DOCUMENTS.

III. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THEINSTANT CASE IS A LAST DITCH EFFORT OF PRIVATE RESPONDENTTO RECOVER ITS P300,000.00 AFTER FAILING IN ITS EFFORTS TORECOVER THE SAME FROM ITS EMPLOYEE EMERANO ILAGAN.

IV. THE COURT OF APPEALS ERRED IN NOT MITIGATING THE DAMAGESAWARDED AGAINST PETITIONER UNDER ARTICLE 2197 OF THE CIVILCODE, NOTWITHSTANDING ITS FINDING THAT PETITIONER BANK‘S NEGLIGENCE WAS ONLY CONTRIBUTORY.

The Ruling of the Court

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The petition is partly meritorious.

Solidbank’s Fiduciary Duty under the Law

The rulings of the trial court and the Court of Appeals conflict on the application of the law. The

trial court pinned the liability on L.C. Diaz based on the provisions of the rules on savingsaccount, a recognition of the contractual relationship between Solidbank and L.C. Diaz, the latter being a depositor of the former. On the other hand, the Court of Appeals applied the law onquasi-delict to determine who between the two parties was ultimately negligent. The law onquasi-delict or culpa aquiliana is generally applicable when there is no pre-existing contractualrelationship between the parties.

We hold that Solidbank is liable for breach of contract due to negligence, or culpa contractual.

The contract between the bank and its depositor is governed by the provisions of the Civil Codeon simple loan. Article 1980 of the Civil Code expressly provides that ―x x x savings x x x

deposits of money in banks and similar institutions shall be governed by the provisionsconcerning simple loan.‖ There is a debtor-creditor relationship between the bank and itsdepositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2of Republic Act No. 8791 (―RA 8791‖), which took effect on 13 June 2000, declares that the

State recognizes the ―fiduciary nature of banking that requires high standards of integrity and

performance.‖ This new provision in the general banking law, introduced in 2000, is a statutory

affirmation of Supreme Court decisions, starting with the 1990 case of Simex I nternational v.Court of Appeals , holding that ―the bank is under obligation to treat the accounts of its

depositors with meticulous care, always having in mind the fiduciary nature of their relationship.‖

This fiduciary relationship means that the bank‘s obligation to observe ―high standards of

integrity and performance‖ is deemed written into every deposit agreement between a bank andits depositor. The fiduciary nature of banking requires banks to assume a degree of diligencehigher than that of a good father of a family. Article 1172 of the Civil Code states that thedegree of diligence required of an obligor is that prescribed by law or contract, and absent suchstipulation then the diligence of a good father of a family. Section 2 of RA 8791 prescribes thestatutory diligence required from banks – that banks must observe ―high standards of integrity

and performance‖ in servicing their depositors. Although RA 8791 took effect almost nine yearsafter the unauthorized withdrawal of the P300,000 from L.C. Diaz‘s savings account, jurisprudence at the time of the withdrawal already imposed on banks the same high standard of diligence required under RA No. 8791.

However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement, whether express or

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implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breachof trust. The law simply imposes on the bank a higher standard of integrity and performance incomplying with its obligations under the contract of simple loan, beyond those required of non- bank debtors under a similar contract of simple loan.

The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do not accept deposits to enrich depositors but to earn money for themselves. The lawallows banks to offer the lowest possible interest rate to depositors while charging the highest possible interest rate on their own borrowers. The interest spread or differential belongs to the bank and not to the depositors who are not cestui que trust of banks. If depositors are cestui que

trust of banks, then the interest spread or income belongs to the depositors, a situation thatCongress certainly did not intend in enacting Section 2 of RA 8791.

Solidbank’s Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that ―responsibility arising from negligence in the

performance of every kind of obligation is demandable.‖ For breach of the savings depositagreement due to negligence, or culpa contractual , the bank is liable to its depositor.

Calapre left the passbook with Solidbank because the ―transaction took time‖ and he had to go to

Allied Bank for another transaction. The passbook was still in the hands of the employees of Solidbank for the processing of the deposit when Calapre left Solidbank. Solidbank‘s rules onsavings account require that the ―deposit book should be carefully guarded by the depositor and

kept under lock and key, if possible.‖ When the passbook is in the possession of Solidbank‘s

tellers during withdrawals, the law imposes on Solidbank and its tellers an even higher degree of diligence in safeguarding the passbook.

Likewise, Solidbank‘s tellers must exercise a high degree of diligence in insuring that they returnthe passbook only to the depositor or his authorized representative. The tellers know, or shouldknow, that the rules on savings account provide that any person in possession of the passbook is presumptively its owner. If the tellers give the passbook to the wrong person, they would beclothing that person presumptive ownership of the passbook, facilitating unauthorizedwithdrawals by that person. For failing to return the passbook to Calapre, the authorizedrepresentative of L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe suchhigh degree of diligence in safeguarding the passbook, and in insuring its return to the partyauthorized to receive the same.

In culpa contractual , once the plaintiff proves a breach of contract, there is a presumption thatthe defendant was at fault or negligent. The burden is on the defendant to prove that he was notat fault or negligent. In contrast, in culpa aquiliana the plaintiff has the burden of proving thatthe defendant was negligent. In the present case, L.C. Diaz has established that Solidbank breached its contractual obligation to return the passbook only to the authorized representative of L.C. Diaz. There is thus a presumption that Solidbank was at fault and its teller was negligent innot returning the passbook to Calapre. The burden was on Solidbank to prove that there was nonegligence on its part or its employees.

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Solidbank failed to discharge its burden. Solidbank did not present to the trial court Teller No. 6,the teller with whom Calapre left the passbook and who was supposed to return the passbook tohim. The record does not indicate that Teller No. 6 verified the identity of the person whoretrieved the passbook. Solidbank also failed to adduce in evidence its standard procedure inverifying the identity of the person retrieving the passbook, if there is such a procedure, and that

Teller No. 6 implemented this procedure in the present case.

Solidbank is bound by the negligence of its employees under the principle of respondeat

superior or command responsibility. The defense of exercising the required diligence in theselection and supervision of employees is not a complete defense in culpa contractual , unlike inculpa aquiliana.

The bank must not only exercise ―high standards of integrity and performance,‖ it must also

insure that its employees do likewise because this is the only way to insure that the bank willcomply with its fiduciary duty. Solidbank failed to present the teller who had the duty to returnto Calapre the passbook, and thus failed to prove that this teller exercised the ―high standards of

integrity and performance‖ required of Solidbank‘s employees.

Proximate Cause of the Unauthorized Withdrawal

Another point of disagreement between the trial and appellate courts is the proximate cause of the unauthorized withdrawal. The trial court believed that L.C. Diaz‘s negligence in not securingits passbook under lock and key was the proximate cause that allowed the impostor to withdrawthe P300,000. For the appellate court, the proximate cause was the teller‘s negligence in

processing the withdrawal without first verifying with L.C. Diaz. We do not agree with either court.

Proximate cause is that cause which, in natural and continuous sequence, unbroken by anyefficient intervening cause, produces the injury and without which the result would not haveoccurred. Proximate cause is determined by the facts of each case upon mixed considerations of logic, common sense, policy and precedent.

L.C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank wasin possession of the passbook while it was processing the deposit. After completion of thetransaction, Solidbank had the contractual obligation to return the passbook only to Calapre, theauthorized 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

P300,000 by the impostor who took possession of the passbook. Under Solidbank‘s rules on

savings account, mere possession of the passbook raises the presumption of ownership. It wasthe negligent act of Solidbank‘s Teller No. 6 that gave the impostor presumptive ownership of

the passbook. Had the passbook not fallen into the hands of the impostor, the loss of P300,000would not have happened. Thus, the proximate cause of the unauthorized withdrawal wasSolidbank‘s negligence in not returning the passbook to Calapre.

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We do not subscribe to the appellate court‘s theory that the proximate cause of the unauthorized

withdrawal was the teller‘s failure to call up L.C. Diaz to verify the withdrawal. Solidbank didnot 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 andL.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 withdrawsignificant amounts from their accounts. L.C. Diaz therefore had the burden to prove that it isthe 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.

Teller No. 5 who processed the withdrawal could not have been put on guard to verify thewithdrawal. Prior to the withdrawal of P300,000, the impostor deposited with Teller No. 6 theP90,000 PBC check, which later bounced. The impostor apparently deposited a large amount of money to deflect suspicion from the withdrawal of a much bigger amount of money. The

appellate court thus erred when it imposed on Solidbank the duty to call up L.C. Diaz to confirmthe withdrawal when no law requires this from banks and when the teller had no reason to besuspicious of the transaction.

Solidbank continues to foist the defense that Ilagan made the withdrawal. Solidbank claims thatsince Ilagan was also a messenger of L.C. Diaz, he was familiar with its teller so that there wasno more need for the teller to verify the withdrawal. Solidbank relies on the following statementsin the Booking and Information Sheet of Emerano Ilagan:

xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and indicated theamount of P90,000 which he deposited in favor of L.C. Diaz and Company. After successfully

withdrawing this large sum of money, accused Ilagan gave alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the amount of P1,000 to transport him (Ilagan) to hishome province at Bauan, Batangas. Ilagan extravagantly and lavishly spent his money but a big part of his loot was wasted in cockfight and horse racing. Ilagan was apprehended and meeklyadmitted his guilt. (Emphasis supplied.)

L.C. Diaz refutes Solidbank‘s contention by pointing out that the person who withdrew theP300,000 was a certain Noel Tamayo. Both the trial and appellate courts stated that this NoelTamayo presented the passbook with the withdrawal slip.

We uphold the finding of the trial and appellate courts that a certain Noel Tamayo withdrew theP300,000. The Court is not a trier of facts. We find no justifiable reason to reverse the factualfinding of the trial court and the Court of Appeals. The tellers who processed the deposit of theP90,000 check and the withdrawal of the P300,000 were not presented during trial to substantiateSolidbank‘s claim that Ilagan deposited the check and made the questioned withdrawal. Moreover, the entry quoted by Solidbank does not categorically state that Ilagan presented thewithdrawal slip and the passbook.

Doctrine of Last Clear Chance

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The doctrine of last clear chance states that where both parties are negligent but the negligent actof one is appreciably later than that of the other, or where it is impossible to determine whosefault 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 the plaintiff does not preclude him from recovering damages caused by the supervening

negligence of the defendant, who had the last fair chance to prevent the impending harm by theexercise of due diligence.

We do not apply the doctrine of last clear chance to the present case. Solidbank is liable for breach of contract due to negligence in the performance of its contractual obligation to L.C.Diaz. This is a case of culpa contractual , where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from liability.Such contributory negligence or last clear chance by the plaintiff merely serves to reduce therecovery of damages by the plaintiff but does not exculpate the defendant from his breach of contract.

Mitigated Damages

Under Article 1172, ―liability (for culpa contractual ) may be regulated by the courts, accordingto the circumstances.‖ This means that if the defendant exercised the proper diligence in the

selection and supervision of its employee, or if the plaintiff was guilty of contributorynegligence, then the courts may reduce the award of damages. In this case, L.C. Diaz was guiltyof contributory negligence in allowing a withdrawal slip signed by its authorized signatories tofall into the hands of an impostor. Thus, the liability of Solidbank should be reduced.

In Phi li ppine Bank of Commerce v. Cour t of Appeals , where the Court held the depositor guiltyof contributory negligence, we allocated the damages between the depositor and the bank on a

40-60 ratio. Applying the same ruling to this case, we hold that L.C. Diaz must shoulder 40% of the actual damages awarded by the appellate court. Solidbank must pay the other 60% of theactual damages.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION.Petitioner Solidbank Corporation shall pay private respondent L.C. Diaz and Company, CPA‘s

only 60% of the actual damages awarded by the Court of Appeals. The remaining 40% of theactual damages shall be borne by private respondent L.C. Diaz and Company, CPA‘s. Proportionate costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, and Ynares-Santiago, JJ., concur.

Azcuna, J., on official leave.

Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias,Marina L. Buzon, Godardo A. Jacinto and Candido V. Rivera, concurring, Fourth Division(Special Division of Five Justices).

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Penned by Judge Felixberto T. Olalia, Jr.

Rollo, p. 119.

Ibid ., p. 229. The account must have been long dormant.

Records, p. 9.

Ibid ., p. 34.

Docketed as Civil Case No. 92-62384.

Docketed as CA-G.R. CV No. 49243.

Rollo, p. 231.

Ibid ., p. 233.

Ibid ., p. 60.

Ibid ., p. 66.

Rollo, pp. 49-50.

Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with grossnegligence.

Rollo, p. 43.

Ibid ., pp. 33-34.

Article 1953 of the Civil Code provides: ―A person who receives a loan of money or any other

fungible thing acquires the ownership thereof, and is bound to pay the creditor an equal amountof the same kind and quality.‖

The General Banking Law of 2000.

In the United States, the prevailing rule, as enunciated by the U.S. Supreme Court in Bank of

Marin v. England, 385 U.S. 99 (1966), is that the bank-depositor relationship is governed bycontract, and the bankruptcy of the depositor does not alter the relationship unless the bank receives notice of the bankruptcy. However, the Supreme Court of some states, like Arizona,have held that banks have more than a contractual duty to depositors, and that a specialrelationship may create a fiduciary obligation on banks outside of their contract with depositors.See Stewart v. Phoenix National Bank, 49 Ariz. 34, 64 P. 2d 101 (1937); Klein v. First Edina National Bank, 293 Minn. 418, 196 N.W. 2d 619 (1972).

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G.R. No. 88013, 19 March 1990, 183 SCRA 360.

The ruling in Simex I nternational was followed in the following cases: Bank of the PhilippineIslands v. Intermediate Appellate Court, G.R. No. 69162, 21 February 1992, 206 SCRA 408;Citytrust Banking Corporation v. Intermediate Appellate Court, G.R. No. 84281, 27 May 1994,

232 SCRA 559; Tan v. Court of Appeals, G.R. No. 108555, 20 December 1994, 239 SCRA 310;Metropolitan Bank & Trust Co. v. Court of Appeals, G.R. No. 112576, 26 October 1994, 237SCRA 761; Philippine Bank of Commerce v. Court of Appeals, 336 Phil. 667 (1997); Firestonev. Court of Appeals, G.R. No. 113236, 5 March 2001, 353 SCRA 601.

The second paragraph of Article 1172 of the Civil Code provides: ―If the law or contract does

not state the diligence which is to be observed in the performance, that which is expected of agood father of a family shall be required.‖

See notes 20 and 21.

Serrano v. Central Bank, G.R. L-30511, 14 February 1980, 96 SCRA 96.

Cangco v. Manila Railroad Co., 38 Phil. 769 (1918); De Guia v. Meralco, 40 Phil. 706 (1920).

Philippine Bank of Commerce v. Court of Appeals, supra note 21, citing Vda. de Bataclan v.Medina, 102 Phil. 181 (1957).

Ibid .

Rollo, p. 35.

Philippine Bank of Commerce v. Court of Appeals, supra note 21.

Ibid .

See note 23.

Del Prado v. Manila Electric Co., 52 Phil. 900 (1928-1929).

See note 21.

http://sc.judiciary.gov.ph/jurisprudence/2003/sep2003/..%5C..%5C2001%5Cmar2001%5C113236.htm






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FIRST DIVISION

[G.R. No. 126640. November 23, 2000]

SPOUSES MARCELO B. ARENAS and ANITA T. ARENAS, petitioners, vs. THE HON.

COURT OF APPEALS, SPOUSES CONRADO S. ROJAS AND ROSALINA BAUZONROJAS, respondents.

D E C I S I O N

PARDO, J .:

The Case

The case is a petition for review assailing the decision of the Court of Appeals,reversing and setting aside the decision of the Regional Trial Court, Pangasinan,

Branch 39, Lingayen, dismissing petitioners‘ complaint for ―Damages, Certiorari with aWrit of Preliminary Injunction and/or Restraining Order.‖

The Facts

Respondent Rosalina B. Rojas was the co-owner of a two-story building located inCalasiao, Pangasinan.

Sometime in 1970, respondent Rojas entered into a verbal contract of lease withpetitioner Marcelo B. Arenas over one stall located at the ground floor of the building, ona month to month basis. Petitioner Arenas used the leased premises as an optical

clinic.

In 1990, respondent Rojas wanted to demolish and reconstruct the building andterminated her lease contract with petitioner Arenas.

On November 19, 1990, respondents sent petitioners a notice of termination and ademand to vacate the premises on or before January 2, 1991.

However, petitioners refused to vacate the premises.

Civil Case No. 658

On June 18, 1991, respondent Rojas filed with the Municipal Trial Court, Calasiao,Pangasinan, a complaint for ―Unlawful Detainer and Damages‖ against petitioner

Arenas. Respondent prayed first, that the petitioner be ordered to vacate the premisesin question; second, that respondent be allowed to cause the demolition, reconstructionand renovation of the premises; and third, that petitioner be ordered to indemnifyrespondent damages in the form of litigation expenses and attorney‘s fees.

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On June 28, 1991, petitioner Arenas filed his answer to the complaint and counterclaimfor moral damages amounting to P50,000.00, exemplary damages totaling P30,000.00and attorney‘s fees, stating that the case was maliciously filed.

After trial, on August 29, 1991, the Municipal Trial Court, Calasiao, Pangasinan decided

against petitioners, to wit:

―Premises considered, the Court hereby renders judgment in favor of the plaintiff andagainst the defendant by ordering the defendant:

―(a) to vacate the premises leased and occupied by him subject of this case;

―(b) to pay the plaintiff litigation expenses in the amount of P2,000.00 andattorney‘s fees in the amount of P10,000.00; and

―(c) to pay the costs of suit.

―Counterclaim of defendant is dismissed for lack of evidence.‖

In due time, petitioner Arenas appealed the above-quoted decision to the Regional TrialCourt, Dagupan City, Branch 44.

The Regional Trial Court denied the appeal and affirmed the decision of the MunicipalTrial Court in toto.

Civil Case No. 16890

On September 2, 1991, before petitioners Arenas received a copy of the decision inCivil Case No. 658, they filed with the Regional Trial Court, Pangasinan, Lingayen anaction for ―Damages, Certiorari with a Writ of Preliminary Injunction and/or RestrainingOrder‖ against respondents Rojas. We quote pertinent parts of the complaint:

―3. That notwithstanding the existence of a contract between plaintiff Marcelo R. Arenasand defendant Rosanna Bauzon-Rojas (sic ), for the use of said one door commercialstall, defendant Rosanna Bauzon Rojas (sic ) filed a complaint for ejectment againstplaintiff Marcelo R. Arenas, a copy of which is hereto attached as Annex ―A‖ hereof;

xxx xxx xxx

―5. That after the filling of said complaint, defendants-spouses conspiring together ashusband and wife caused the removal of the sign board infront (sic ) of the clinic of plaintiffs and dumped gravel and sand infront (sic ) of their stall and fenced off the samepreventing the patients and customers of plaintiffs from coming in;

―6. That in order to force the ejectment of plaintiffs from their stall defendants cut off their electric connection;

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―15. That due to the unlawful and malicious concerted acts of defendant spouses,plaintiffs suffered moral damages amounting to P200,000.00;

―16. That likewise plaintiffs suffered a net income loss of P50,000.00 at the rate of P5,000.00 per month;

―17. That similarly plaintiffs were constrained to engage the services of undersignedcounsel for a fee of P25,000.00.‖

On September 4, 1991, the Regional Trial Court issued a temporary restraining order enjoining the Municipal Trial Court, Calasiao, Pangasinan from hearing Civil Case No.658. The temporary restraining order also directed respondents to cease and desistfrom ―committing acts of disturbances‖ against the stall of petitioners.

On September 13, 1991, invoking the rule against ―multiplicity of suits,‖ respondentsmoved the trial court to dismiss the case.

On September 26, 1991, the trial court denied the motion to dismiss for lack of merit.

On October 16, 1991, respondents filed with the trial court their answer to the complaintwith counterclaim, reiterating their motion to dismiss with an alternative motion tosuspend the proceedings for the reason that the pending appeal raises a prejudicialquestion.

On December 23, 1991, the trial court issued a resolution stating that it had jurisdictionto hear, try and decide Civil Case No. 16890.

On August 10, 1992, the trial court decided the case in favor of petitioners. The trialcourt reasoned: First, there was a tacit renewal of the lease and that the defendants(respondents) maliciously filed the ejectment case (Civil Case No. 658). Second,respondents‘ acts of ―dumping gravel‖ and of placing a ―no trespassing sign‖ in front of the stall rented by plaintiffs (petitioners) were done merely to harass petitioners andcause damage to their business. The trial court thus ordered:

―(1) Defendants to pay the plaintiffs actual damages in the amount of P50,000.00representing unrealized earnings;

―(2) Defendants to pay the plaintiffs, moral and exemplary damages in the amount of

P15,000.00;

―(3) Defendants to pay the plaintiffs, attorney‘s fees of P6,500.00 plus expenses of litigation of P3,000.00 and to pay the costs.

―SO ORDERED.‖

On August 20, 1992, respondents appealed to the Court of Appeals.

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On June 10, 1996, the Court of Appeals rendered its decision reversing that of the trialcourt and dismissing petitioner‘s complaint. The Court of Appeals reasoned that sincepetitioners interposed a counterclaim for moral and exemplary damages in Civil CaseNo. 658, they were barred from instituting Civil Case No. 16890. The Court of Appealsdismissed Civil Case No. 16890, as follows:

―WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE andthe complaint filed by plaintiffs-appellees against defendants-appellants is herebyDISMISSED. With costs against plaintiffs-appellees.

―SO ORDERED.‖

On June 27, 1996, petitioners filed with the Court of Appeals a motion for reconsideration.

On September 12, 1996, the Court of Appeals denied petitioners‘ motion for

reconsideration for lack of merit.

Hence, this appeal.

The Issue

The sole issue raised is whether the causes of action complained of in the RegionalTrial Court were in the nature of compulsory counterclaims that must be pleaded in CivilCase No. 658 of the Municipal Trial Court.

Petitioners argue that the acts complained of in Civil Case No. 16890 arose after the

filing of the complaint and the answer in Civil Case No. 658. Thus, damages arisingfrom such acts could not be raised therein as compulsory counterclaims.

The Court‘s Ruling

We find the appeal meritorious.

We agree with petitioners that the causes of action pleaded in Civil Case No. 16890 aredifferent from those in Civil Case No. 658, and that such causes could not have beenraised as compulsory counterclaims therein.

Nonetheless, we find that the trial court erred in Civil Case No. 16890 for touching onthe propriety of the ejectment case which was settled in Civil Case No. 658 and affirmedon appeal in Civil Case No. D-9996.

We discuss these points seriatim.

Not Compulsory Counterclaims

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Rule 11 of the 1997 Rules of Civil Procedure provides:

―Sec. 8. Existing counterclaim or cross-claim - A compulsory counterclaim or a cross-claim that a defending party has at the time he files his answer shall be containedtherein.‖ (underscoring ours)

A counterclaim is compulsory where: (1) it arises out of, or is necessary connected with,the transaction or occurrence that is the subject matter of the opposing party‘s claim; (2)it does not require the presence of third parties of whom the court cannot acquire

jurisdiction; and (3) the trial court has jurisdiction to entertain the claim.

The following are the tests by which the compulsory nature of a counterclaim can bedetermined: (1) Are the issues of fact and law raised by the claim and counterclaimlargely the same? (2) Would res judicata bar a subsequent suit on defendant‘s claimabsent the compulsory counterclaim rule? (3) Will substantially the same evidencesupport or refute plaintiff‘s claim as well as defendant‘s counterclaim? (4) Is there any

logical relation between the claim and counterclaim?

We do not agree with the Court of Appeals that the claims in Civil Case No. 16890 maybe pleaded as compulsory counterclaims in Civil Case No. 658.

First. In Civil Case No. 16890, the damages prayed for arose not from contract butfrom quasi-delict . They constitute separate and distinct causes of action.

A cause of action has the following elements: (1) the legal right of plaintiff, (2) thecorrelative obligation of the defendant, and (3) the act or omission of the defendant inviolation of said legal right.

Cause of Action in Civil Case No. 658

Civil Case No. 658 involves a complaint for unlawful detainer and damages. In anunlawful detainer case, the issue is the right to physical possession of the premises or possession de facto. The basis is a contract of lease.

Causes of Action in Civil Case No. 16890

The acts complained of in Civil Case No. 16890 were:

―1. Removal of the signboard in front of the stall of Marcelo Arenas, which is being usedas an eye clinic and the refusal of Conrado Rojas or his failure to return it;

―2. Dumping of gravel and sand in front of the stall as well as the fencing of the front of the stall in question thus effectively preventing patients and customers from coming in;

―3. Cutting off the electric connection to the eye clinic.‖

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We agree with petitioners that the acts complained of were not founded on the contractof lease but could constitute violations of the Civil Code provisions on Human Relations,specifically:

―Art. 19. Every person must, in the exercise of his rights and in the performance of his

duties, act with justice, give everyone his due, and observe honesty and good faith.

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

―Art. 21. Any person who willfully causes loss or injury to another in a manner that iscontrary to morals, good customs or public policy shall compensate the latter for thedamage.‖

Here, respondents‘ duty to respect petitioners‘ rights is an obligation sourced not fromcontract but from quasi-delict.

Second. In de Leon v. Court of Appeals, we held that ―[W]here the issues of the caseextend beyond those commonly involved in unlawful detainer suits, the case isconverted from a mere detainer suit to one ‗incapable of pecuniary estimation‘ therebyplacing it under the exclusive jurisdiction of the regional trial courts.‖ Verily, since themunicipal trial court could not have taken cognizance of the claims in Civil Case No.16890, then such claims could not be considered as compulsory counterclaims in CivilCase No. 658.

The fact that the rule on summary procedure governs ejectment cases emphasizes thepoint that an action for damages incapable of pecuniary estimation can not be pleaded

as counterclaims therein. It cannot be overemphasized that the reason for the rule onsummary procedure is to prevent undue delays in the disposition of cases. To achievethis, the filing of certain pleadings is prohibited and the periods for acting on motions aswell as on the case itself are relatively reduced.

Third. The acts complained of were committed after the complaint and the answer were filed.

Trial Court Ruling in Civil Case No. 16890 Erroneous

However, as the Court of Appeals erred, so did the trial court.

In Civil Case No. 16890, the trial court ruled that the lease was still subsisting and thatthe ejectment case was maliciously brought. It should not have done so. These issueswere already decided in Civil Case No. 658 and affirmed on appeal in Civil Case No. D-9996. These issues, stemming from the lease contract are barred by res judicata.

Res judicata exists when the following elements are present:

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―(a) the former judgment must be final;

"(b) the court which rendered judgment had jurisdiction over the parties and thesubject matter;

"(c) it must be a judgment on the merits;

"(d) and there must be between the first and second actions identity of parties,subject matter, and cause of action."

The doctrine of res judicata is a rule which pervades every well regulated system of jurisprudence and is founded upon two grounds embodied in various maxims of thecommon law, namely: (1) public policy and necessity which makes it to the interest of the State that there should be an end to litigation, interest reipublicae ut sit finis litum,and (2) the hardship on the individual that he should be vexed twice for the same cause,memo debet bis vexari et eadem causa.

The decision of the Regional Trial Court, Branch 39, Lingayen, Pangasinan in CivilCase No. 16890 touched on matters already decided. There must be an end tolitigation. The issue of whether ejectment was proper was fully and fairly adjudicated inCivil Case No. 658.

Remand Case

Whether or not the acts of respondents complained of in Civil Case No. 16890prejudiced petitioners may be objectively determined by the trial court, independent of the issues of the propriety of the ejectment and malicious prosecution.

To settle this, it must be determined whether respondents committed quasi-delict andacted in bad faith. Malice or bad faith implies a conscious and intentional design to do awrongful act for a dishonest purpose or moral obliquity.

The determination of whether one acted in bad faith and whether damages may beawarded is evidentiary in nature. As a matter of defense, it can be best passed uponafter a full-blown trial on the merits. Thus, there is a need to remand the case to thecourt of origin.

The Fallo

WHEREFORE, the Court GRANTS the petition, and SETS ASIDE the decision of theCourt of Appeals in CA-G. R. CV No. 40470, dismissing the petition in Civil Case No.16890.

In lieu thereof, the Court renders judgment setting aside the decision of the RegionalTrial Court, Pangasinan, Branch 39, Lingayen, in Civil Case No. 16890, andREMANDING the case to the court of origin with instructions that the court shall hear

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the case with all deliberate dispatch, limiting itself to the determination of whether theacts committed by respondents constitute quasi-delict , entitling petitioners to thedamages prayed for. The trial court shall report to the Court the progress of the case ona month to month basis.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

Filed under Rule 45 of the 1964 Revised Rules of Court.

In CA-G. R. CV No. 40470, promulgated June 10, 1996, Luna, J ., ponente, Barcelonaand Alino-Hormachuelos, JJ ., concurring.

In Civil Case No. 16890.

No. 15, Rizal Avenue, Poblacion East, Calasiao, Pangasinan.

―Tandoc-Arenas Optical Clinic.‖

Docketed as Civil Case No. 658, Complaint, Annex ―B‖, RTC Record, pp. 7 -8.

Complaint, Annex ―C‖, RTC Record, pp. 12-16.

RTC Record, pp. 30-33.

Docketed as Civil Case No. D-9996.

Petition, Annex A, Rollo, pp. 28-39, at pp. 31-33.

RTC Record, p. 23.

Ibid ., p. 27.

Ibid ., pp. 35-36.


Civil Case No. D-9996.


RTC Decision, Ibid ., pp. 127-133.

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Docketed as CA-G. R. CV No. 40470.

Petition, Annex ―A‖, Rollo, pp. 28-39.

Rollo, p. 39.

CA Rollo, pp. 68-72.

Petition, Annex ―B‖, Rollo, p. 40.

Petition, filed on November 8, 1996, Rollo, pp. 8-20. On January 31, 2000, we gavedue course to the petition, Rollo, pp. 62-63.

Civil Case No. 16890.

Petition, Rollo, p. 18.

Cabaero v . Cantos, 338 Phil. 105 (1997).

Intestate Estate of Amado B. Dalisay v . Marasigan, 327 Phil. 298 (1996); Ponciano v.Parentella, G. R. No. 133284, May 9, 2000.

Valencia v . Court of Appeals, 331 Phil. 590 (1996).

The Civil Code of the Philippines, Article 1157, provides ―Obligations arise fr om: (1)Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5)Quasi-delicts.‖ Article 2176 provides, ―Whoever by act or omission causes damage to

another, there being fault or negligence, is obliged to pay for the damage done. Suchfault or negligence, if there is no pre-existing contractual relation between the parties, iscalled a quasi-delict and is governed by the provisions of this Chapter.‖

Dabuco v. Court of Appeals, G. R. No. 133775, January 20, 2000.

Del Rosario v . Court of Appeals, 311 Phil. 589 (1995), citing University PhysiciansServices, Inc. v . Court of Appeals, 233 SCRA 86 [1994]; Gachon v . Davera, Jr., 274SCRA 540 (1997); Arcal v . Court of Appeals, 348 Phil. 813 (1998); Carreon v . Court of

Appeals, 353 Phil. 271, 281 (1998).

Supra, Note 10.

Banco Filipino Savings and Mortgage Bank v . Court of Appeals, 225 SCRA 199 (1993).

315 Phil. 140 (1995).

Cuevas v. Balerian, A. M. No. MTJ-00-1276, June 23, 2000.

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The complaint was filed by respondents on June 18, 1991; petitioners filed their answer on June 28, 1991. On July 20, 1991, respondents removed the signboard of petitionersstall; respondents also subsequently dumped gravel and sand in front of the stall,placed a ―no trespassing sign‖ and cut off the electr icity to the stall (Rollo, pp. 99-100).

Mangoma v . Court of Appeals, 241 SCRA 21 (1995); Militante v . National Labor Relations Commission, 246 SCRA 365 (1995); Saura v . Saura, 313 SCRA 465 (1999).

Madarieta v. Regional Trial Court, G. R. No. 126443, February 28, 2000.

Calusin v. Court of Appeals, G. R. No. 128405, June 21, 2000.

Far East Bank and Trust Company v . Court of Appeals, 311 Phil. 783 (1995).

Deloso v. Desierto, G. R. No. 129939, September 9, 1999.

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Baguio

SECOND DIVISION

G.R. No. 119771 April 24, 1998

SAN ILDEFONSO LINES, INC., and EDUARDO JAVIER, petitioners,vs.COURT OF APPEALS (Thirteenth Division) and PIONEER INSURANCE and SURETYCORPORATION, respondents.

MARTINEZ, J .:

At around 3:30 in the afternoon of June 24, 1991, a Toyota Lite Ace Van being driven by its owner AnnieU. Jao and a passenger bus of herein petitioner San Ildefonso Lines, Inc. (hereafter, SILI) figured in a

vehicular mishap at the intersection of Julia Vargas Avenue and Rodriguez Lanuza Avenue in Pasig,Metro Manila, totally wrecking the Toyota van and injuring Ms. Jao and her two (2) passengers in theprocess.

A criminal case was thereafter filed with the Regional Trial Court of Pasig on September 18, 1991charging the driver of the bus, herein petitioner Eduardo Javier, with reckless imprudence resulting indamage to property with multiple physical injuries.

About four (4) months later, or on January 13, 1992, herein private respondent Pioneer Insurance andSurety Corporation (PISC), as insurer of the van and subrogee, filed a case for damages againstpetitioner SILI with the Regional Trial Court of Manila, seeking to recover the sums it paid the assuredunder a motor vehicle insurance policy as well as other damages, totaling P564,500.00 (P454,000.00 asactual/compensatory damages; P50,000.00 as exemplary damages; P50,000.00 as attorney's fees;P10,000.00 as litigation expenses; and P500.00 as appearance fees.) 1

With the issues having been joined upon the filing of the petitioners' answer to the complaint for damagesand after submission by the parties of their respective pre-trial briefs, petitioners filed on September 18,1992 a Manifestation and Motion to Suspend Civil Proceedings grounded on the pendency of the criminalcase against petitioner Javier in the Pasig RTC and the failure of respondent PISC to make a reservationto file a separate damage suit in said criminal action. This was denied by the Manila Regional Trial Courtin its Order dated July 21, 1993,

2 ruling thus:

Answering the first question thus posed, the court holds that plaintiff may legally institute the present civil action even inthe absence of a reservation in the criminal action. This is so because it falls among the very exceptions to the rulecited by the movant.

It is true that the general rule is that once a criminal action has been instituted, then civil action based thereon isdeemed instituted together with the criminal action, such that if the offended party did not reserve the filing of the civilaction when the criminal action was filed, then such filing of the civil action is therefore barred; on the other hand, if there was such reservation, still the civil action cannot be instituted until final judgment has been rendered in thecriminal action;

But, this rule (Section 2, Rule 111, Revised Rules of Court) is subject to exemptions, the same being those provided for in Section 3 of the same rule which states:

Sec. 3. When civil action may proceed independently. — In the cases provided for in Articles 32,33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action which was been

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reserved may be brought by the offended party, shall proceed independently of the criminalaction, and shall require only a preponderance of evidence.

Besides, the requirement in Section 2 of Rule 111 of the former Rules on Criminal Procedure that there be areservation in the criminal case of the right to institute an independent civil action has been declared as not inaccordance with law. It is regarded as an unauthorized amendment to our substantive law, i .e., the Civil Code whichdoes not require such reservation. In fact, the reservation of the right to file an independent civil action has beendeleted from Section 2, Rule 111 of the 1985 Rules on Criminal Procedure, in consonance with the decisions of this

Court declaring such requirement of a reservation as ineffective. (Bonite vs. Zosa, 162 SCRA 180).

Further, the Court rules that a subrogee-plaintiff may institute and prosecute the civil action, it being allowed by Article2207 of the Civil Code.

After their motion for reconsideration of said July 21, 1993 Order was denied, petitioners elevated thematter to this Court via petition for certiorari which was, however, referred to public respondent Court of Appeals for disposition. On February 24, 1995, a decision adverse to petitioners once again wasrendered by respondent court, upholding the assailed Manila Regional Trial Court Order in this wise:

A separate civil action lies against the offender in a criminal act, whether or not he is criminally prosecuted and foundguilty or acquitted, provided that the offended party is not allowed (if the tortfeasor is actually charged also criminally),to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the two,assuming the awards made in the two cases vary.

To subordinate the civil action contemplated in the said articles to the result of the criminal prosecution — whether it beconviction or acquittal — would render meaningless the independent character of the civil action and the clear injunction in Art. 31, that this action may proceed independently of the criminal proceedings and regardless of the resultof the latter.

In Yakult Phil . vs. CA, the Supreme Court said:

Even if there was no reservation in the criminal case and that the civil action was not filed beforethe filing of the criminal action but before the prosecution presented evidence in the criminalaction, and the judge handling the criminal case was informed thereof, then the actual filing of thecivil action is even far better than a compliance with the requirement of an express reservationthat should be made by the offended party before the prosecution presented its evidence.

The purpose of this rule requiring reservation is to prevent the offended party from recovering damages twice for thesame act or omission.

Substantial compliance with the reservation requirement may, therefore, be made by making a manifestation in thecriminal case that the private respondent has instituted a separate and independent civil action for damages.

Oft-repeated is the dictum that courts should not place undue importance on technicalities when by so doingsubstantial justice is sacrificed. While the rules of procedure require adherence, it must be remembered that said rulesof procedure are intended to promote, not defeat, substantial justice, and therefore, they should not be applied in a veryrigid and technical sense.

Hence, this petition for review after a motion for reconsideration of said respondent court judgment was denied.

The two (2) crucial issues to be resolved, as posited by petitioners, are:

1) If a criminal case was filed, can an independent civil action based on quasi-delict under Article 2176 of the Civil Code be filed if no reservation was made in the said criminal case?

2) Can a subrogee of an offended party maintain an independent civil action during the pendency of acriminal action when no reservation of the right to file an independent civil action was made in the criminalaction and despite the fact that the private complainant is actively participating through a privateprosecutor in the aforementioned criminal case?

We rule for petitioners.

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On the chief issue of "reservation", at the fore is Section 3, Rule 111 of the Rules of Court which reads:

Sec. 3. When civil action may proceed independently. — In the cases provided for in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action which has been reserved may be brought by the offendedparty, shall proceed independently of the criminal action, and shall require only a preponderance of evidence.

There is no dispute that these so-called "independent civil actions" based on the aforementioned

Civil Code articles are the exceptions to the primacy of the criminal action over the civil action asset forth in Section 2 of Rule 111.

3 However, it is easily deducible from the present wording of

Section 3 as brought about by the 1988 amendments to the Rules on Criminal Procedure — particularly the phrase ". . . which has been reserved " — that the "independent" character of these civil actions does not do away with the reservation requirement. In other words, prior reservation is a condition sine qua non before any of these independent civil actions can beinstituted and thereafter have a continuous determination apart from or simultaneous with thecriminal action. That this should now be the controlling procedural rule is confirmed by no lessthan retired Justice Jose Y. Feria, remedial law expert and a member of the committee whichdrafted the 1988 amendments, whose learned explanation on the matter was aptly pointed out bypetitioners, to wit:

The 1988 amendment expands the scope of the civil action which his deemed impliedly instituted with the criminal

action unless waived, reserved or previously instituted. . . . Under the present Rule as amended, such a civil action includes not only recovery of indemnity under the RevisedPenal Code and damages under Articles 32, 33, 34 of the Civil Code of the Philippines, but also damages under Article2176 of the said code. . . .

Objections were raised to the inclusion in this Rule of quasi-delicts under Article 2176 of the Civil Code of thePhilippines. However, in view of Article 2177 of the said code which provides that the offended party may not recover twice for the same act or omission of the accused, and in line with the policy of avoiding multiplicity of suits, theseobjections were overruled. In any event, the offended party is not precluded from filing a civil action to recover damages arising from quasi-delict before the institution of the criminal action, or from reserving his right to file such aseparate civil action, just as he is not precluded from filing a civil action for damages under Articles 32, 33 and 34before the institution of the criminal action, or from reserving his right to file such a separate civil action. It is only inthose cases where the offended party has not previously filed a civil action or has not reserved his right to file aseparate civil action that his civil action is deemed impliedly instituted with the criminal action.

It should be noted that while it was ruled in Abella vs. Marave (57 SCRA 106) that a reservation of the right to file anindependent civil action is not necessary, such a reservation is necessary under the amended rule. Without suchreservation, the civil action is deemed impliedly instituted with the criminal action, unless previously waived or instituted . (Emphasis ours, Justice Jose Y. Feria [Ret.], 1988 Amendments to the 1985 Rules on Criminal Procedure, a

pamphlet, published by Central Lawbook Publishing Co., Inc., Philippine Legal Studies, Series No. 3, 5-6).4

Sharing the same view on the indispensability of a prior reservation is Mr. Justice Florenz D. Regalado,whose analysis of the historical changes in Rule 111 since the 1964 Rules of Court is equally illuminating.Thus,

1. Under Rule 111 of the 1964 Rules of Court, the civil liability arising from the offense charged was impliedly institutedwith the criminal action, unless such civil action was expressly waived or reserved. The offended party was authorizedto bring an independent civil action in the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Codeprovided such right was reserved.

In the 1985 Rules on Criminal Procedure, the same Rule 111 thereof reiterated said provision on the civil liabilityarising from the offense charged. The independent civil actions, however, were limited to the cases provided for in

Articles 32, 33 and 34 of the Civil Code, obviously because the actions contemplated in Articles 31 and 2177 of saidCode are not liabilities ex-delicto. Furthermore, no reservation was required in order the civil actions in said Articles 32,33 and 34 may be pursued separately.

2. The present amendments introduced by the Supreme Court have the following notable features on this particular procedural aspect, viz :

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a. The civil action which is impliedly instituted with the criminal action, barring a waiver, reservation or prior institutionthereof, need not arise from the offense charged, as the phrase "arising from the offense charged" which creates thatnexus has been specifically eliminated.

b. The independent civil actions contemplated in the present Rule 111 include the quasi-delicts provided for in Art.2176 of the Civil Code, in addition to the cases provided in Arts. 32, 33 and 34 thereof. It is necessary, however, thatthe civil liability under all the said articles arise "from the same act or omission of the accused." Furthermore, areservation of the right to institute these separate civil actions is again required otherwise, said civil actions are

impliedly instituted with the criminal action, unless the former are waived or filed ahead of the criminal action.(Emphasis supplied.)

5

In fact, a deeper reading of the "Yakult Phils. vs. CA" case6 relied upon by respondent court reveals an

acknowledgment of the reservation requirement. After recognizing that the civil case instituted by privaterespondent therein Roy Camaso (represented by his father David Camaso) against petitioner YakultPhils. (the owner of the motorcycle that sideswiped Roy Camaso, only five years old at the time of theaccident) and Larry Salvado (the driver of the motorcycle) during the pendency of the criminal caseagainst Salvado for reckless imprudence resulting to slight physical injuries, as one based on tort, thisCourt said:

The civil liability sought arising from the act or omission of the accused in this case is a quasi-delict as defined under Article 2176 of the Civil Code as follows:

xxx xxx xxx

The aforecited rule [referring to the amended Section l, Rule 111] requiring, such previous reservation also coversquasi-delict as defined under Article 2176 of the Civil Code arising from the same act or omission of the accused(emphasis supplied).

But what prompted the Court to validate the institution and non-suspension of the civil caseinvolved in "Yakult" was the peculiar facts attendant therein. Thus,

Although the separate civil action filed in this case was without previous reservation in the criminal case, neverthelesssince it was instituted before the prosecution presented evidence in the criminal action, and the judge handling thecriminal case was informed thereof, then the actual filing of the civil action is even far better than a compliance with therequirement of an express reservation that should be made by the offended party before the prosecution presents itsevidence.

The distinct factual scenario in "Yakult" simply does not obtain in this case. No satisfactory proof exists toshow that private respondent PISC's damage suit was instituted before the prosecution presented itsevidence in the criminal case pending in the Pasig Regional Trial Court. Neither is there any indicationthat the judge presiding over the criminal action has been made aware of the civil case. It is in this lightthat reliance on the "Yakult" case is indeed misplaced.

Now that the necessity of a prior reservation is the standing rule that shall govern the institution of theindependent civil actions referred to in Rule 111 of the Rules of Court, past pronouncements that view thereservation requirement as an "unauthorized amendment" to substantive law — i .e., the Civil Code,should no longer be controlling. There must be a renewed adherence to the time-honored dictum thatprocedural rules are designed, not to defeat, but to safeguard the ends of substantial justice. And for thisnoble reason, no less than the Constitution itself has mandated this Court to promulgate rules concerning

the enforcement of rights with the end in view of providing a simplified and inexpensive procedure for thespeedy disposition of cases which should not diminish, increase or modify substantive rights.

7 Far from

altering substantive rights, the primary purpose of the reservation is, to borrow the words of the Court in"Caños v. Peralta":

8

. . . to avoid multiplicity of suits, to guard against oppression and abuse, to prevent delays, to clear congested dockets,to simplify the work of the trial court; in short, the attainment of justice with the least expense and vexation to theparties-litigants.

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Clearly then, private respondent PISC, as subrogee under Article 2207 of the Civil Code,9 is not exempt

from the reservation requirement with respect to its damages suit based on quasi-delict arising from thesame act or ommission of petitioner Javier complained of in the criminal case. As private respondentPISC merely stepped into the shoes of Ms. Jao (as owner of the insured Toyota van), then it is bound toobserve the procedural requirements which Ms. Jao ought to follow had she herself instituted the civilcase.

WHEREFORE, premises considered, the assailed decision of the Court of Appeals dated February 24,1995 and the Resolution dated April 3, 1995 denying the motion for reconsideration thereof are herebyREVERSED and SET ASIDE. The "MANIFESTATION AND MOTION TO SUSPEND CIVILPROCEEDINGS" filed by petitioners is GRANTED.

SO ORDERED.

Regalado, Melo, Puno and Mendoza, JJ., concur.

Footnotes

1 See Complaint, Rollo, pp. 35-38.

2 Annex F, Rollo, pp. 43-47.

3 Section 2, Rule 111 of the Rules of Court reads in part:

Sec. 2. Institution of separate civil action. — Except in the cases provided for in Section 3 hereof,after the criminal action has been commenced, the civil action which has been reserved cannotbe instituted until final judgment has been rendered in the criminal action.

xxx xxx xxx

4 Petition, pp. 10-11; Rollo, pp. 11-12.

5 Regalado, Remedial Law Compendium, Volume II, 1995 Edition, p. 275.

6 190 SCRA 357, October 5, 1990.

7 Article VIII, Section 5(5), 1987 Constitution.

8 115 SCRA 843.

9 Article 2207. "If the plaintiffs property has been insured, and he has received indemnity from the insurance companyfor the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall besubrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If theamount paid by the insurance company does not fully cover the injury or loss, the aggrieved a party shall be entitled torecover the deficiency from the person causing the loss or injury.

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SUPREME COURTManila

THIRD DIVISION

G.R. No. 120553 June 17, 1997

PHILTRANCO SERVICE ENTERPRISES, INC. and ROGACIONES MANILHIG,petitioner,vs.COURT OF APPEALS and HEIRS OF THE LATE RAMON ACUESTA, respondents.

DAVIDE, JR., J .:

The petitioners interposed this appeal by way of a petition for review under Rule 45 of the Rules of Court from the 31 January 1995 Decision of the Court of Appeals in CA-

G.R. CV No. 411401

affirming the 22 January 19932

Decision of Branch 31 of theRegional Trial Court, Calbayog City, in Civil Case No. 373, which ordered the petitionersto pay the private respondents damages as a result of a vehicular accident.

Civil Case No. 373 was an action against herein petitioners for damages instituted bythe heirs of Ramon A. Acuesta, namely, Gregorio O. Acuesta; Julio O. Acuesta; RamonO. Acuesta, Jr.; Baltazar O. Acuesta; Rufino O. Acuesta; Maximo O. Acuesta; Neri O.

Acuesta; Iluminada O. Acuesta; Rosario Acuesta-Sanz; and Pamfilo O. Acuesta. Atty.Julio O. Acuesta also appeared as counsel for the plaintiffs (herein privaterespondents). 3 The private respondents alleged that the petitioners were guilty of grossnegligence, recklessness, violation of traffic rules and regulations, abandonment of

victim, and attempt to escape from a crime.

To support their allegations, the private respondents presented eight witnesses. On 10February 1992, after the cross-examination of the last witness, the private respondents'counsel made a reservation to present a ninth witness. The case was then set for continuation of the trial on 30 and 31 March 1992. Because of the non-appearance of the petitioners' counsel, the 30 March 1992 hearing was cancelled. The next day,private respondents' counsel manifested that he would no longer present the ninthwitness. He thereafter made an oral offer of evidence and rested the case. The trialcourt summarized private respondents' evidence in this wise:

[I]n the early morning of March 24, 1990, about 6:00 o'clock, the victim Ramon A. Acuesta was riding in his easy rider bicycle (Exhibit "O"), along the Gomez Street of Calbayog City. The Gomez Street is along the side of Nijaga Park. On the MagsaysayBlvd., also in Calbayog City, defendant Philtranco Service Enterprises, Inc. (Philtranco for brevity) Bus No. 4025 with plate No. EVA-725 driven by defendant Rogasiones Manilhigy Dolira was being pushed by some persons in order to start its engine. The MagsaysayBlvd. runs perpendicular to Gomez St. and the said Philtranco bus 4025 was heading inthe general direction of the said Gomez Street. Some of the persons who were pushingthe bus were on its back, while the others were on the sides. As the bus was pushed, itsengine started thereby the bus continued on its running motion and it occurred at the time

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when Ramon A. Acuesta who was still riding on his bicycle was directly in front of thesaid bus. As the engine of the Philtranco bus started abruptly and suddenly, its runningmotion was also enhanced by the said functioning engine, thereby the subject busbumped on the victim Ramon A. Acuesta who, as a result thereof fell and, thereafter, wasrun over by the said bus. The bus did not stop although it had already bumped and ran[sic ] over the victim; instead, it proceeded running towards the direction of the RosalesBridge which is located at one side of the Nijaga Park and towards one end of the GomezSt., to which direction the victim was then heading when he was riding on his bicycle.P/Sgt. Yabao who was then jogging thru the Gomez Street and was heading and meetingthe victim Ramon A. Acuesta as the latter was riding on his bicycle, saw when thePhiltranco bus was being pushed by some passengers, when its engine abruptly startedand when the said bus bumped and ran over the victim. He approached the bus driver defendant Manilhig herein and signalled to him to stop, but the latter did not listen. So thepolice officer jumped into the bus and introducing himself to the driver defendant aspoliceman, ordered the latter to stop. The said defendant driver stopped the Philtrancobus near the Nijaga Park and Sgt. Yabao thereafter, told the driver to proceed to thePolice Headquarter which was only 100 meters away from Nijaga Park because he wasapprehensive that the said driver might be harmed by the relatives of the victim whomight come to the scene of the accident. Then Sgt. Yabao cordoned the scene where thevehicular accident occurred and had P/Cpl. Bartolome Bagot, the Traffic Investigator,

conduct an investigation and make a sketch of the crime scene. Sgt. Yambao Yabao wasonly about 20 meters away when he saw the bus of defendant Philtranco bumped [ sic ]and [sic ] ran over the victim. From the place where the victim was actually bumped by thebus, the said vehicle still had run to a distance of about 15 meters away.

4

For their part, the petitioners filed an Answer 5 wherein they alleged that petitioner Philtranco exercised the diligence of a good father of a family in the selection andsupervision of its employees, including petitioner Manilhig who had excellent record asa driver and had undergone months of rigid training before he was hired. Petitioner Manilhig had always been a prudent professional driver, religiously observing trafficrules and regulations. In driving Philtranco's buses, he exercised the diligence of a verycautious person.

As might be expected, the petitioners had a different version of the incident. Theyalleged that in the morning of 24 March 1990, Manilhig, in preparation for his trip back toPasay City, warmed up the engine of the bus and made a few rounds within the cityproper of Calbayog. While the bus was slowly and moderately cruising along GomezStreet, the victim, who was biking towards the same direction as the bus, suddenlyovertook two tricycles and swerved left to the center of the road. The swerving wasabrupt and so sudden that even as Manilhig applied the brakes and blew the bus horn,the victim was bumped from behind and run over by the bus. It was neither willful nor deliberate on Manilhig's part to proceed with the trip after his bus bumped the victim, thetruth being that when he looked at his rear-view window, he saw people crowdingaround the victim, with others running after his bus. Fearing that he might be mobbed,he moved away from the scene of the accident and intended to report the incident to thepolice. After a man boarded his bus and introduced himself as a policeman, Manilhiggave himself up to the custody of the police and reported the accident in question.

The petitioners further claimed that it was the negligence of the victim in overtaking twotricycles, without taking precautions such as seeing first that the road was clear, which

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caused the death of the victim. The latter did not even give any signal of his intention toovertake. The petitioners then counterclaimed for P50,000 as and for attorney's fees; P1million as moral damages; and P50,000 for litigation expenses.

However, the petitioners were not able to present their evidence, as they were deemed

to have waived that right by the failure of their counsel to appear at the scheduledhearings on 30 and 31 March 1992. The trial court then issued an Order 6 declaring thecase submitted for decision. Motions for the reconsideration of the said Order were bothdenied.

On 22 January 1992, the trial court handed down a decision ordering the petitioners to jointly and severally pay the private respondents the following amounts:

1) P55, 615.72 as actual damages;

2) P200,000 as death indemnity for the death of the victim Ramon A. Acuesta;

3) P1 million as moral damages;

4) P500,000 by way of exemplary damages;

5) P50,000 as attorney's fees; and

6) the costs of suit.7

Unsatisfied with the judgment, the petitioners appealed to the Court of Appeals imputingupon the trial court the following errors:

(1) in preventing or barring them from presenting their evidence;

(2) in finding that petitioner Manilhig was at fault;

(3) in not finding that Ramon was the one at fault and his own fault caused, or at leastcontributed to, his unfortunate accident;

(4) in awarding damages to the private respondents; and

(5) in finding that petitioner Philtranco was solidarily liable with Manilhig for damages. 8

In its decision of 31 January 1995, the Court of Appeals affirmed the decision of the trialcourt. It held that the petitioners were not denied due process, as they were given anopportunity to present their defense. The records show that they were notified of theassignment of the case for 30 and 31 March 1992. Yet, their counsel did not appear onthe said dates. Neither did he file a motion for postponement of the hearings, nor did heappeal from the denial of the motions for reconsideration of the 31 March 1992 Order of the trial court. The petitioners have thereby waived their right to present evidence. Their expectation that they would have to object yet to a formal offer of evidence by the

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private respondents was "misplaced," for it was within the sound discretion of the courtto allow oral offer of evidence.

As to the second and third assigned errors, the respondent court disposed as follows:

. . . We cannot help but accord with the lower court's finding on appellant Manilhig's fault.First, it is not disputed that the bus driven by appellant Manilhig was being pushed at thetime of the unfortunate happening. It is of common knowledge and experience that whena vehicle is pushed to a jump-start, its initial movement is far from slow. Rather, itsmovement is abrupt and jerky and it takes a while before the vehicle attains normalspeed. The lower court had thus enough basis to conclude, as it did, that the bumping of the victim was due to appellant Manilhig's actionable negligence and inattention.Prudence should have dictated against jump-starting the bus in a busy section of the city.Militating further against appellants' posture was the fact that the precarious pushing of subject bus to a jumpstart was done where the bus had to take a left turn, thereby makingthe move too risky to take. The possibility that pedestrians on Gomez Street, where thebus turned left and the victim was biking, would be unaware of a vehicle being pushed toa jumpstart, was too obvious to be overlooked. Verily, contrary to their bare arguments,there was gross negligence on the part of appellants.

The doctrine of last clear chance theorized upon by appellants, is inapplicable under thepremises because the victim, who was bumped from behind, obviously, did not of courseanticipate a Philtranco bus being pushed from a perpendicular street.

The respondent court sustained the awards of moral and exemplary damages and of attorney's fees, for they are warranted under Articles 2206, 2231, and 2208(1),respectively, of the Civil Code. Anent the solidary liability of petitioner Philtranco, thesame finds support in Articles 2180 and 2194 of the said Code. The defense thatPhiltranco exercised the diligence of a good father of a family in the selection andsupervision of its employees crumbles in the face of the gross negligence of its driver,

which caused the untimely death of the victim.

Their motion for reconsideration having been denied, the petitioners came to usclaiming that the Court of Appeals gravely erred

I

. . . IN HOLDING THAT PETITIONERS WAIVED THEIR RIGHT TO PRESENT THEIREVIDENCE, AND THAT PETITIONERS WERE NOT DENIED DUE PROCESS.

II

. . . IN APPLYING ART. 2194, INSTEAD OF ART. 2180, OF THE CIVIL CODE, AND INHOLDING THAT PETITIONER PHILTRANCO CAN NOT INVOKE THE DEFENSE OFDILIGENCE OF A GOOD FATHER OF A FAMILY.

III

. . . IN AWARDING DAMAGES TO RESPONDENTS AND/OR IN NOT FINDING THETRIAL COURT'S AWARD OF DAMAGES EXCESSIVE.

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We resolved to give due course to the petition and required the parties to submit their respective memoranda after due consideration of the allegations, issues, andarguments adduced in the petition, the comment thereon by the private respondents,and the reply to the comment filed by the petitioners. The petitioners filed their memorandum in due time; while the private respondents filed theirs only on 3 January

1997, after their counsel was fined in the amount of P1,000 for failure to submit therequired memorandum.

The first imputed error is without merit. The petitioners and their counsel, Atty. JoseBuban, were duly notified in open court of the order of the trial court of 10 February1992 setting the case for hearing on 30 and 31 March 1992. 9 On both dates neither thepetitioners nor their counsel appeared. In his motion for reconsideration, 10 Atty. Bubangave the following reasons for his failure to appear on the said hearings:

1. That when this case was called on March 27, 1992, counsel was very much indisposeddue to the rigors of a very hectic campaign as he is a candidate for City Councilor of Tacloban; he wanted to leave for Calbayog City, but he was seized with slight fever on

the morning of said date; but then, during the last hearing, counsel was made tounderstand that plaintiffs would formally offer their exhibits in writing, for which reason,counsel for defendants waited for a copy of said formal offer, but counsel did not receiveany copy as counsel for plaintiffs opted to formally offer their exhibits orally in open court;

2. That counsel for defendants, in good faith believed that he would be given reasonabletime within which to comment on the formal offer in writing, only to know that counsel for plaintiffs orally offered their exhibits in open court and that the same were admitted by theHonorable Court; and that when this case was called on March 30 and 31, 1992, theundersigned counsel honestly believed that said schedule would be cancelled, pendingon the submission of the comments made by the defendants on the formal offer; but itwas not so, as the exhibits were admitted in open court.

11

In its order of 26 May 1992, the trial court denied the motion, finding it to be "devoid of meritorious basis," as Atty. Buban could have filed a motion for postponement. 12 Atty.Buban then filed a motion to reconsider 13 the order of denial, which was likewise deniedby the trial court in its order of 12 August 1992. 14 Nothing more was done by thepetitioners after receipt of the order of 12 August 1992. A perusal of the first and secondmotions for reconsideration discloses absence of any claim that the petitioners havemeritorious defenses. Clearly, therefore, the trial court committed no error in declaringthe case submitted for decision on the basis of private respondent's evidence.

The second imputed error is without merit either.

Civil Case No. 373 is an action for damages based on quasi-delict 15 under Article 2176and 2180 of the Civil Code against petitioner Manilhig and his employer, petitioner Philtranco, respectively. These articles pertinently provide:


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Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's ownacts or omissions, but also for those of persons for whom one is responsible.

xxx xxx xxx

The owners and managers of an establishment or enterprise are likewise responsible for

damages caused by their employees in the service of the branches in which the latter areemployed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and householdhelpers acting within the scope of their assigned tasks even though the former are notengaged in any business or industry.

xxx xxx xxx

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

We have consistently held that the liability of the registered owner of a public servicevehicle, like petitioner Philtranco, 16 for damages arising from the tortious acts of thedriver is primary, direct , and joint and several or solidary with the driver. 17 As tosolidarity, Article 2194 expressly provides:

Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict issolidary.

Since the employer's liability is primary, direct and solidary, its only recourse if the judgment for damages is satisfied by it is to recover what it has paid from itsemployee who committed the fault or negligence which gave rise to the actionbased on quasi-delict. Article 2181 of the Civil Code provides:

Art. 2181. Whoever pays for the damage caused by his dependents or employees mayrecover from the latter what he has paid or delivered in satisfaction of the claim.

There is, however, merit in the third imputed error.

The trial court erroneously fixed the "death indemnity" at P200,000. The privaterespondents defended the award in their Opposition to the Motion for Reconsiderationby saying that "[i]n the case of Philippine Airlines, Inc . vs. Court of Appeals, 185 SCRA110, our Supreme Court held that the award of damages for death is computed on thebasis of the life expectancy of the deceased." In that case, the "death indemnity" was

computed by multiplying the victim's gross annual income by his life expectancy, lesshis yearly living expenses. Clearly then, the "death indemnity" referred to was theadditional indemnity for the loss of earning capacity mentioned in Article 2206(1) of theCivil Code, and not the basic indemnity for death mentioned in the first paragraphthereof. This article provides as follows:

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Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be atleast three thousand pesos, even though there may have been mitigating circumstances.In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, andthe indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be

assessed and awarded by the court, unless the deceased on account of permanentphysical disability not caused by the defendant, had no earning capacity at the time of hisdeath;

(2) If the deceased was obliged to give support according to the provisions of article 291,the recipient who is not an heir called to the decedent's inheritance by the law of testateor intestate succession, may demand support from the person causing the death, for aperiod of not exceeding five years, the exact duration to be fixed by the court;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceasedmay demand moral damages for mental anguish by reason of the death of the deceased.

We concur with petitioners' view that the trial court intended the award of "P200,000.00

as death indemnity" not as compensation for loss of earning capacity. Even if the trialcourt intended the award as indemnity for loss of earning capacity, the same must bestruck out for lack of basis. There is no evidence on the victim's earning capacity andlife expectancy.

Only indemnity for death under the opening paragraph of Article 2206 is due, theamount of which has been fixed by current jurisprudence at P50,000. 18

The award of P1 million for moral damages to the heirs of Ramon Acuesta has nosufficient basis and is excessive and unreasonable. This was based solely on thetestimony of one of the heirs, Atty. Julio Acuesta, contained in his "Direct Testimony . . .

As Plaintiff, conducted by Himself," 19 to wit:

Q. What was your feeling or reaction as a result of the death of your father Ramon A. Acuesta?

A. We, the family members, have suffered much from wounded feelings,moral shock, mental anguish, sleepless nights, to which we are entitledto moral damages at the reasonable amount of ONE MILLION(P1,000,000.00) PESOS or at the sound discretion of this Hon. Court.

Since the other heirs of the deceased did not take the witness stand, the trial court hadno basis for its award of moral damages to those who did not testify thereon.

Moral damages are emphatically not intended to enrich a plaintiff at the expense of thedefendant. They are awarded only to allow the former to obtain means, diversion, or amusements that will serve to alleviate the moral suffering he has undergone due to thedefendant's culpable action and must, perforce, be proportional to the suffering inflicted.20 In light of the circumstances in this case, an award of P50,000 for moral damages isin order.

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The award of P500,000 for exemplary damages is also excessive. In quasi-delicts,exemplary damages may be awarded if the party at fault acted with gross negligence. 21 The Court of Appeals found that there was gross negligence on the part of petitioner Manilhig. 22 Under Article 2229 of the Civil Code, exemplary damages are imposed byway of example or correction for the public good, in addition to the moral, temperate,

liquidated, or compensatory damages. Considering its purpose, it must be fair andreasonable in every case and should not be awarded to unjustly enrich a prevailingparty. In the instant case, an award of P50,000 for the purpose would be adequate, fair,and reasonable.

Finally, the award of P50,000 for attorney's fees must be reduced. The general rule isthat attorney's fees cannot be recovered as part of damages because of the policy thatno premium should be placed on the right tolitigate. 23 Stated otherwise, the grant of attorney's fees as part of damages is theexception rather than the rule, as counsel's fees are not awarded every time a partyprevails in a suit. 24 Such attorney's fees can be awarded in the cases enumerated in

Article 2208 of the Civil Code, and in all cases it must be reasonable. In the instantcase, the counsel for the plaintiffs is himself a co-plaintiff; it is then unlikely that hedemanded from his brothers and sisters P100,000 as attorney's fees as alleged in thecomplaint and testified to byhim. 25 He did not present any written contract for his fees. He is, however, entitled to areasonable amount for attorney's fees, considering that exemplary damages areawarded. Among the instances mentioned in Article 2208 of the Civil Code whenattorney's fees may be recovered is "(1) when exemplary damages are awarded."Under the circumstances in this case, an award of P25,000 for attorney's fees isreasonable.

The petitioners did not contest the award for actual damages fixed by the trial court.Hence, such award shall stand.

IN VIEW OF THE FOREGOING, the petition is hereby partly granted and thechallenged decision of CA-G.R. CV No. 41140 is AFFIRMED, subject to modificationsas to the damages awarded, which are reduced as follows:

(a) Death indemnity, from P200,000 to P50,000;

(b) Moral damages, from P1 million to P50,000;

(c) Exemplary damages, from P500,000 to P50,000; and

(d) Attorney's fees, from P50,000 to P25,000.

No pronouncements as to costs in this instance.

SO ORDERED.

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Narvasa, C.J., Melo and Panganiban, JJ., concur.

Francisco, J., is on leave.

Footnotes

1 Rollo, 28-36. Per Purisima, F., J ., with Rasul, J ., and Adefuin-de la Cruz, B.A., JJ .,concurring.

2 Original Record (OR), 169-184. Per Judge Clemente C. Rosales.

3 OR, 1-7.

4 OR, 177-178.

5 Id ., 18-22.

6 OR, 132.

7 OR, 184; Rollo, 32.

8 Rollo, CA-G.R. CV No. 41140, 38.

9 OR, 129.

10 Id ., 135-136.

11 OR, 135.

12 Id ., 145.

13 Id ., 148.

14 Id ., 156.

15 Also called culpa aquiliana or culpa extra-contractual , V ARTURO M. TOLENTINO,CIVIL CODE OF THE PHILIPPINES 591-592 (1992) (hereafter V TOLENTINO).

16 The allegation in the complaint that it is "a privately owned big bus company" (OR, 1)is admitted without qualification in the Answer (id ., 18.)

17 Gelisan v. Alday, 154 SCRA 388, 394 [1987], Vargas v. Langcay, 116 Phil. 478, 481[1962]. See V TOLENTINO 616; V EDGARDO L. PARAS, et al., CIVIL CODE OF THEPHILIPPINES 1129, 1154 (13th ed. 1995).

18 People v. Galas, G.R. No. 114007, 24 September 1996; People v. Tabag, G.R. No.116511, 12 February 1997, 11.

19 Exh. "K," OR, 119.

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20 Grand Union Supermarket, Inc. v. Espino, 94 SCRA 953, 966 [1979]; R and B Surety& Insurance Co. v. Intermediate Appellate Court, 129 SCRA 736, 745 [1984];Prudenciado v. Alliance Transport System, Inc. 148 SCRA 440, 449 [1987]; RadioCommunications of the Phils., Inc. v. Rodriguez, 182 SCRA 899, 907 [1990]; VisayanSawmill Company, Inc. v. Court of Appeals, 219 SCRA 378, 392 [1993].

21 Article 2231, New Civil Code.

22 Rollo, 35.

23 Firestone Tire and Rubber Co. of the Phil, v. Ines Chaves Co., 18 SCRA 356, 358[1966]; Philippine Air Lines v. Miano, 242 SCRA 235, 240 [1995].

24 Scott Consultants and Resource Development Corp. v. Court of Appeals, 242 SCRA393, 406 [1995].

25 OR, 6; Exh. "K," id , 121.


Manila

SECOND DIVISION

G.R. No. 104392 February 20, 1996

RUBEN MANIAGO, petitioner,

vs.THE COURT OF APPEALS (First Division) HON. RUBEN C. AYSON, in his capacityas Acting Presiding Judge, Regional Trial Court, Branch IV, Baguio City, andALFREDO BOADO, respondents.

MENDOZA, J .:

Petitioner Ruben Maniago was the owner of shuttle buses which were used intransporting employees of the Texas Instruments, (Phils.), Inc. from Baguio City

pLoakan, Baguio City.roper to its plant site at the Export Processing Authority in

On January 7, 1990, one of his buses figured in a vehicular accident with a passenger jeepney owned by private respondent Alfredo Boado along Loakan Road, Baguio City. As a result of the accident, a criminal case for reckless imprudence resulting in damageto property and multiple physical injuries was filed on March 2, 1990 against petitioner'sdriver, Herminio Andaya, with the Regional Trial Court of Baguio City, Branch III, whereit was docketed as Criminal Case No. 7514-R. A month later, on April 19, 1990, a civil

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case for damages was filed by private respondent Boado against petitioner himself. Thecomplaint, docketed as Civil Case No. 2050-R, was assigned to Branch IV of the samecourt.

Petitioner moved for the suspension of the proceedings in the civil case against him,

citing the pendency of the criminal case against his driver. But the trial court, in its order dated August 30, 1991, denied petitioner's motion on the ground that pursuant to theCivil Code, the action could proceed independently of the criminal action, in addition tothe fact that the petitioner was not the accused in the criminal case.

Petitioner took the matter on certiorari and prohibition to the Court of Appeals,maintaining that the civil action could not proceed independently of the criminal casebecause no reservation of the right to bring it separately had been made in the criminalcase.

On January 31, 1992, the Court of Appeals dismissed his petition on the authority of

Garcia v . Florido,

1

and Abellana v . Marave,

2

which it held allowed a civil action for damages to be filed independently of the criminal action even though no reservation tofile the same has been made. Therefore, it was held, the trial court correctly deniedpetitioner's motion to suspend the proceedings in the civil case. 3

Hence this petition for review on certiorari . There is no dispute that private respondent,as offended party in the criminal case, did not reserve the right to bring a separate civilaction, based on the same accident, either against the driver, Herminio Andaya, or against the latter's employer, herein petitioner Ruben Maniago. The question is whether despite the absence of such reservation, private respondent may nonetheless bring anaction for damages against petitioner under the following provisions of the Civil Code:


Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's ownacts or omissions, but also for those of persons for whom one is responsible.

. . . .

Employers shall be liable for the damages caused by their employees and householdhelpers acting within the scope of their assigned tasks, even though the former are not

engaged in any business or industry.

Art. 2177 states that responsibility for fault or negligence under the above-quotedprovisions is entirely separate and distinct from the civil liability arising from negligenceunder the Revised Penal Code.

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However, Rule III of the Revised Rules of Criminal Procedure, while reiterating that acivil action under these provisions of the Civil Code may be brought separately from thecriminal action, provides that the right to bring it must be reserved. This Rule reads:

Sec. I. Institution of criminal and civil actions. — When a criminal action is instituted, thecivil action for the recovery of civil liability is impliedly instituted with the criminal action,

unless the offended party waives the civil action, reserves his right to institute itseparately, or institutes the civil action prior to the criminal action.

Such civil action includes recovery of indemnity under the Revised Penal Code, anddamages under Articles 32, 33, and 2176 of the Civil Code of the Philippines arising fromthe same act or omission of the accused.

. . . .

The reservation of the right to institute the separate civil actions shall be made before theprosecution starts to present its evidence and under circumstances affording theoffended party a reasonable opportunity to make such reservation.

Sec. 3. When civil action may proceed independently . — In the cases provided for in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civilaction which has been reserved may be brought by the offended party, shall proceedindependently of the criminal action, and shall require only a preponderance of evidence.

Based on these provisions, petitioner argues that the civil action against him wasimpliedly instituted in the criminal action previously filed against his employee becauseprivate respondent did not reserve his right to bring this action separately. (The recordsshow that while this case was pending in the Court of Appeals, the criminal action wasdismissed on July 10, 1992 for failure of the prosecution to file a formal offer of itsevidence, with the consequence that the prosecution failed to prosecute its case.

Accordingly, it seems to be petitioner's argument that since the civil action to recover damages was impliedly instituted with the criminal action, the dismissal of the criminalcase brought with it the dismissal of the civil action.)

Private respondent admits that he did not reserve the right to institute the present civilaction against Andaya's employer. He contends, however, that the rights provided in

Arts. 2176 and 2177 of the Civil Code are substantive rights and, as such, their enforcement cannot be conditioned on a reservation to bring the action to enforce themseparately. Private respondent cites in support of his position statements made in

Abellana v . Marave, 4 Tayag v . Alcantara, 5

Madeja v . Caro, 6 and Jarantilla v . Court of

Appeals, 7 to the effect that the requirement to reserve the civil action is substantive in

character and, therefore, is beyond the rule making power of this Court under theConstitution. 8

After considering the arguments of the parties, we have reached the conclusion that theright to bring an action for damages under the Civil Code must be reserved as requiredby Rule III, §1, otherwise it should be dismissed.

I.

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A. To begin with, §1 quite clearly requires that a reservation must be made to instituteseparately all civil actions for the recovery of civil liability, otherwise they will be deemedto have been instituted with the criminal case. Such civil actions are not limited to thosewhich arise "from the offense charged," as originally provided in Rule III before theamendment of the Rules of Court in 1988. In other words the right of the injured party to

sue separately for the recovery of the civil liability whether arising from crimes (ex delicto) or from quasi delict under Art. 2176 of the Civil Code must be reservedotherwise they will be deemed instituted with the criminal action. 9

Thus Rule III, §1 of the Revised Rules of Criminal Procedure expressly provides:

Sec. 1. Institution of criminal and civil actions. — When a criminal action is instituted, thecivil action for the recovery of civil liability is impliedly instituted with the criminal action,unless the offended party waives the civil action, reserves his right to institute itseparately, or institutes the civil action prior to the criminal action.

Such civil action includes recovery of indemnity under the Revised Penal Code, and

damages under Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines arisingfrom the same act or omission of the accused.

B. There are statements in some cases implying that Rule III, §§1 and 3 are beyond therule making power of the Supreme Court under the Constitution. A careful examinationof the cases, however, will show that approval of the filing of separate civil action for damages even though no reservation of the right to institute such civil action had beenreserved rests on considerations other than that no reservation is needed.

In Garcia v . Florido 10 the right of an injured person to bring an action for damages evenif he did not make a reservation of his action in the criminal prosecution for physicalinjuries through reckless imprudence was upheld on the ground that by bringing the civilaction the injured parties had "in effect abandoned their right to press for recovery of damages in the criminal case. . . . Undoubtedly an offended party loses his right tointervene in the prosecution of a criminal case, not only when he has waived the civilaction or expressly reserved his right to institute, but also when he has actuallyinstituted the civil action. For by either of such actions his interest in the criminal casehas disappeared." 11 The statement that Rule III, §1 of the 1964 Rules is "anunauthorized amendment of substantive law, Articles 32, 33, and 34 of the Civil Code,which do not provide for the reservation" is not the ruling of the Court but only an aside,quoted from an observation made in the footnote of a decision in another case. 12

Another case cited by private respondent in support of his contention that the civil caseneed not be reserved in the criminal case is Abellana v . Marave 13 in which the right of persons injured in a vehicular accident to bring a separate action for damages wassustained despite the fact that the right to bring it separately was not reserved. But thebasis of the decision in that case was the fact that the filing of the civil case wasequivalent to a reservation because it was made after the decision of the City Courtconvicting the accused had been appealed. Pursuant to Rule 123, §7 of the 1964 Rules,this had the effect of vacating the decision in the criminal case so that technically, theinjured parties could still reserve their right to institute a civil action while the criminal

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case was pending in the Court of First Instance. The statement "the right of a party tosue for damages independently of the criminal action is a substantive right which cannotbe frittered away by a construction that could render it nugatory" without raising a"serious constitutional question" 14 was thrown in only as additional support for the rulingof the Court.

On the other hand, in Madeja v . Caro 15 the Court held that a civil action for damagescould proceed even while the criminal case for homicide through reckless imprudencewas pending and did not have to await the termination of the criminal case preciselybecause the widow of the deceased had reserved her right to file a separate civil actionfor damages. We do not see how this case can lend support to the view of privaterespondent.

In Jarantilla v . Court of Appeals 16 the ruling is that the acquittal of the accused in thecriminal case for physical injuries through reckless imprudence on the ground of reasonable doubt is not a bar to the filing of an action for damages even though the

filing of the latter action was not reserved. This is because of Art. 29 of the Civil Codewhich provides that "when an accused is acquitted on the ground that his guilt has notbeen proved beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted." This ruling obviously cannot apply to this case because thebasis of the dismissal of the criminal case against the driver is the fact that theprosecution failed to prove its case as a result of its failure to make a formal offer of itsevidence. Rule 132, §34 of the Revised Rules on Evidence provides that "The courtshall consider no evidence which has not been formally offered. The purpose for whichthe evidence is offered must be specified."

To the same effect are the holdings in Tayag , Sr . v . Alcantara, 17 Bonite v . Zosa 18 and

Diong Bi Chu v . Court of Appeals.

19

Since Art. 29 of the Civil Code authorizes thebringing of a separate civil action in case of acquittal on reasonable doubt and under theRevised Rules of Criminal procedure such action is not required to be reserved, it isplain that the statement in these cases that to require a reservation to be made wouldbe to sanction an unauthorized amendment of the Civil Code provisions is a meredictum. As already noted in connection with the case of Garcia v . Florido, that statementwas not the ruling of the Court but only an observation borrowed from another case. 20

The short of it is that the rulings in these cases are consistent with the propositionherein made that, on the basis of Rule III, §§1-3, a civil action for the recovery of civilliability is, as a general rule, impliedly instituted with the criminal action, except only (1)when such action arising from the same act or omission, which is the subject of thecriminal action, is waived; (2) the right to bring it separately is reserved or (3) suchaction has been instituted prior to the criminal action. Even if an action has not beenreserved or it was brought before the institution of the criminal case, the acquittal of theaccused will not bar recovery of civil liability unless the acquittal is based on a findingthat the act from which the civil liability might arise did not exist because of Art. 29 of theCivil Code.

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Indeed the question on whether the criminal action and the action for recovery of thecivil liability must be tried in a single proceeding has always been regarded a matter of procedure and, since the rule making power has been conferred by the Constitution onthis Court, it is in the keeping of this Court. Thus the subject was provided for by G.O.No. 58, the first Rules of Criminal Procedure under the American rule. Sec. 107 of these

Orders provided:

The privileges now secured by law to the person claiming to be injured by thecommission of an offense to take part in the prosecution of the offense and to recover damages for the injury sustained by reason of the same shall not be held to be abridgedby the provisions of this order; but such person may appear and shall be heard either individually or by attorney at all stages of the case, and the court upon conviction of theaccused may enter judgment against him for the damages occasioned by his wrongfulact. It shall, however, be the duty of the promotor fiscal to direct the prosecution, subjectto the right of the person injured to appeal from any decision of the court denying him alegal right.

This was superseded by the 1940 Rules of Court, Rule 106 of which provided:

Sec. 15. Intervention of the offended party in criminal action. — Unless the offended partyhas waived the civil action or expressly reserved the right to institute it after thetermination of the criminal case, and subject to the provisions of section 4 hereof, he mayintervene, personally or by attorney, in the prosecution of the offense.

This Rule was amended thrice, in 1964, in 1985 and lastly in 1988. Through all theshifts or changes in policy as to the civil action arising from the same act or omission for which a criminal action is brought, one thing is clear: The change has been effected bythis Court. Whatever contrary impression may have been created by Garcia v . Florido 21 and its progeny 22 must therefore be deemed to have been clarified and settled by thenew rules which require reservation of the right to recover the civil liability, otherwise theaction will be deemed to have been instituted with the criminal action.

Contrary to private respondent's contention, the requirement that before a separate civilaction may be brought it must be reserved does not impair, diminish or defeatsubstantive rights, but only regulates their exercise in the general interest of orderlyprocedure. The requirement is merely procedural in nature. For that matter the RevisedPenal Code, by providing in Art. 100 that any person criminally liable is also civilly liable,gives the offended party the right to bring a separate civil action, yet no one has ever questioned the rule that such action must be reserved before it may be broughtseparately.

Indeed, the requirement that the right to institute actions under the Civil Code separatelymust be reserved is not incompatible with the independent character of such actions.There is a difference between allowing the trial of civil actions to proceed independentlyof the criminal prosecution and requiring that, before they may be instituted at all, areservation to bring them separately must be made. Put in another way, it is the conductof the trial of the civil action — not its institution through the filing of a complaint — which is allowed to proceed independently of the outcome of the criminal case.

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C. There is a practical reason for requiring that the right to bring an independent civilaction under the Civil Code separately must be reserved. It is to avoid the filing of morethan one action for the same act or omission against the same party. Any award madeagainst the employer, whether based on his subsidiary civil liability under Art. 103 of theRevised Penal Code or his primary liability under Art. 2180 of the Civil Code, is

ultimately recoverable from the accused.

23

In the present case, the criminal action was filed against the employee, bus driver. Hadthe driver been convicted and found insolvent, his employer would have been heldsubsidiarily liable for damages. But if the right to bring a separate civil action (whether arising from the crime or from quasi delict) is reserved, there would be no possibility thatthe employer would be held liable because in such a case there would be nopronouncement as to the civil liability of the accused. In such a case the institution of aseparate and independent civil action under the Civil Code would not result in theemployee being held liable for the same act or omission. The rule requiring reservationin the end serves

to implement the prohibition against double recovery for the same act or omission.

24

Asheld in Barredo v . Garcia, 25 the injured party must choose which of the available causesof action for damages he will bring. If he fails to reserve the filing of a separate civilaction he will be deemed to have elected to recover damages from the bus driver on thebasis of the crime. In such a case his cause of action against the employer will belimited to the recovery of the latter's subsidiary liability under Art. 103 of the RevisedPenal Code.

II.

Nor does it matter that the action is against the employer to enforce his vicarious liability

under Art. 2180 of the Civil Code. Though not an accused in the criminal case, theemployer is very much a party, as long as the right to bring or institute a separate action(whether arising from crime or from quasi delict) is not reserved. 26 The ruling that adecision convicting the employee is binding and conclusive upon the employer "not onlywith regard to its civil liability but also with regard to its amount because the liability of an employer cannot be separated but follows that of his employee" 27 is true not onlywith respect to the civil liability arising from crime but also with respect to the civil liabilityunder the Civil Code. Since whatever is recoverable against the employer is ultimatelyrecoverable by him from the employee, the policy against double recovery requires thatonly one action be maintained for the same act or omission whether the action isbrought against the employee or against his employer. Thus in Dulay v . Court of

Appeals 28 this Court held that an employer may be sued under Art. 2180 of the CivilCode and that the right to bring the action did not have to be reserved because, havingbeen instituted before the criminal case against the employee, the filing of the civilaction against the employer constituted an express reservation of the right to institute itseparately.

WHEREFORE, the decision appealed from is REVERSED and the complaint againstpetitioner is DISMISSED.

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SO ORDERED.

Regalado, Romero and Puno, JJ., concur.

Footnotes

1 52 SCRA 420 (1973).

2 57 SCRA 106 (1974).

3 Per Justice Antonio M. Martinez concurred in by Justices Asaali S. Isnani andRegina G. Ordoñez-Benitez.

4 Supra at note 2.

5 98 SCRA 723 (1980).

6 126 SCRA 293 (1983).

7 171 SCRA 429 (1989).

8 Art. VIII, §5 (5) of the Constitution provides that the Supreme Court shall havethe power to "Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, theadmission to the practice of law, the Integrated Bar, and legal assistance to theunder privileged. Such rules shall provide a simplified and inexpensive procedurefor the speedy disposition of cases, shall be uniform for all courts of the samegrade, and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall remain effectiveunless disapproved by the Supreme Court."

9 Dulay v. Court of Appeals, 243 SCRA 220 (1995); Yakult v. Court of Appeals,190 SCRA 347 (1990).

10 52 SCRA 420 (1973).

11 Id . at 428.

12 Corpus v. Paje, 28 SCRA 1062, n. 2 at 1069 (1969).

13 57 SCRA 106 (1974).

14 Id . at 112.

15 126 SCRA 293 (1983).

16 171 SCRA 429 (1989).

17 98 SCRA 723 (1980).

18 162 SCRA 173 (1988).

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19 192 SCRA 554 (1990).

20 Supra p. 8.

21 Supra at note 1.

22 Abellana v. Marave, 57 SCRA 106 (1974); Tayag v. Alcantara, 98 SCRA 723(1980); Madeja v. Caro, 126 SCRA 293 (1983); Jarantilla v. Court of Appeals,171 SCRA 429 (1989); Bonite v. Zosa, 162 SCRA 173 (1988); Diong Bi Chu v.Court of Appeals, 192 SCRA 554 (1990).

23 Civil Code, Art. 2181; Emerencia v. Gonzales, 104 Phil. 1059 (1958).

24 Yakult v. Court of Appeals, 190 SCRA 347 (1990).

25 73 Phil. 607 (1942). Accord , Joaquin v. Aniceto, 120 Phil. 1100 (1964).

26 Yasay v. Adil, 164 SCRA 494 (1988); Pajarito v. Seneris, 87 SCRA 275

(1978).

27 Miranda v. Malate Garage and Taxicab, Inc., 99 Phil. 670 (1956).

28 Supra at note 9.

FIRST DIVISION

[G.R. No. 160039. June 29, 2004]

RAYMUNDO ODANI SECOSA, EL BUENASENSO SY and DASSAD WAREHOUSING andPORT SERVICES, INCORPORATED, petitioners, vs. HEIRS OF ERWIN SUAREZFRANCISCO, respondents.

D E C I S I O N

YNARES-SANTIAGO, J .:

This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of thedecision of the Court of Appeals dated February 27, 2003 in CA-G.R. CV No. 61868, whichaffirmed in toto the June 19, 1998 decision of Branch 20 of the Regional Trial Court of Manila inCivil Case No. 96-79554.

The facts are as follows:

On June 27, 1996, at around 4:00 p.m., Erwin Suarez Francisco, an eighteen year old third year physical therapy student of the Manila Central University, was riding a motorcycle along Radial

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10 Avenue, near the Veteran Shipyard Gate in the City of Manila. At the same time, petitioner,Raymundo Odani Secosa, was driving an Isuzu cargo truck with plate number PCU-253 on thesame road. The truck was owned by petitioner, Dassad Warehousing and Port Services, Inc.

Traveling behind the motorcycle driven by Francisco was a sand and gravel truck, which in turn

was being tailed by the Isuzu truck driven by Secosa. The three vehicles were traversing thesouthbound lane at a fairly high speed. When Secosa overtook the sand and gravel truck, he bumped the motorcycle causing Francisco to fall. The rear wheels of the Isuzu truck then ranover Francisco, which resulted in his instantaneous death. Fearing for his life, petitioner Secosaleft his truck and fled the scene of the collision.

Respondents, the parents of Erwin Francisco, thus filed an action for damages against RaymondOdani Secosa, Dassad Warehousing and Port Services, Inc. and Dassad‘s president, El

Buenasucenso Sy. The complaint was docketed as Civil Case No. 96-79554 of the RTC of Manila, Branch 20.

On June 19, 1998, after a full-blown trial, the court a quo rendered a decision in favor of hereinrespondents, the dispositive portion of which states:

WHEREFORE, premised on the foregoing, judgment is hereby rendered in favor of the plaintiffsordering the defendants to pay plaintiffs jointly and severally:

1. The sum of P55,000.00 as actual and compensatory damages;

2. The sum of P20,000.00 for the repair of the motorcycle;

3. The sum of P100,000.00 for the loss of earning capacity;

4. The sum of P500,000.00 as moral damages;

5. The sum of P50,000.00 as exemplary damages;

6. The sum of P50,000.00 as attorney‘s fees plus cost of suit.

SO ORDERED.

Petitioners appealed the decision to the Court of Appeals, which affirmed the appealed decisionin toto.

Hence the present petition, based on the following arguments:

I.

THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT AFFIRMED THE DECISIONOF THE TRIAL COURT THAT PETITIONER DASSAD DID NOT EXERCISE THEDILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND

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SUPERVISION OF ITS EMPLOYEES WHICH IS NOT IN ACCORDANCE WITH ARTICLE2180 OF THE NEW CIVIL CODE AND RELATED JURISPRUDENCE ON THE MATTER.

II.

THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT AFFIRMED THE DECISIONOF THE TRIAL COURT IN HOLDING PETITIONER EL BUENASENSO SY SOLIDARILYLIABLE WITH PETITIONERS DASSAD AND SECOSA IN VIOLATION OF THECORPORATION LAW AND RELATED JURISPRUDENCE ON THE MATTER.

III.

THE JUDGMENT OF THE TRIAL COURT AS AFFIRMED BY THE COURT OF APPEALSAWARDING P500,000.00 AS MORAL DAMAGES IS MANIFESTLY ABSURD,MISTAKEN AND UNJUST.

The petition is partly impressed with merit.

On the issue of whether petitioner Dassad Warehousing and Port Services, Inc. exercised thediligence of a good father of a family in the selection and supervision of its employees, we findthe assailed decision to be in full accord with pertinent provisions of law and established jurisprudence.

Article 2176 of the Civil Code provides:

Whoever by act or omission causes damage to another, there being fault or negligence, is obligedto pay for the damage done. Such fault or negligence, if there is no pre-existing contractual

relation between the parties, is called a quasi-delict and is governed by the provisions of thisChapter.

On the other hand, Article 2180, in pertinent part, states:

The obligation imposed by article 2176 is demandable not only for one‘s own acts or omissions,

but also for those of persons for whom one is responsible x x x.

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

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

Based on the foregoing provisions, when an injury is caused by the negligence of an employee,there instantly arises a presumption that there was negligence on the part of the employer either in the selection of his employee or in the supervision over him after such selection. The presumption, however, may be rebutted by a clear showing on the part of the employer that it

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exercised the care and diligence of a good father of a family in the selection and supervision of his employee. Hence, to evade solidary liability for quasi-delict committed by an employee, theemployer must adduce sufficient proof that it exercised such degree of care.

How does an employer prove that he indeed exercised the diligence of a good father of a family

in the selection and supervision of his employee? The case of Metro Manila Transit Corporationv. Court of Appeals is instructive:

In fine, the party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of presenting at the trial such amount of evidence required by law to obtain a favorable judgment . . . In making proof in its or his case, it is paramount that the best and most completeevidence is formally entered.

Coming now to the case at bar, while there is no rule which requires that testimonial evidence, tohold sway, must be corroborated by documentary evidence, inasmuch as the witnesses‘testimonies dwelt on mere generalities, we cannot consider the same as sufficiently persuasive

proof that there was observance of due diligence in the selection and supervision of employees.Petitioner‘s attempt to prove its ―deligentissimi patris familias‖ in the selection and supervision

of employees through oral evidence must fail as it was unable to buttress the same with any other evidence, object or documentary, which might obviate the apparent biased nature of thetestimony.

Our view that the evidence for petitioner MMTC falls short of the required evidentiary quantumas would convincingly and undoubtedly prove its observance of the diligence of a good father of a family has its precursor in the underlying rationale pronounced in the earlier case of CentralTaxicab Corp. vs. Ex-Meralco Employees Transportation Co., et al., set amidst an almostidentical factual setting, where we held that:

―The failure of the defendant company to produce in court any ‗record‘ or other documentary

proof tending to establish that it had exercised all the diligence of a good father of a family in theselection and supervision of its drivers and buses, notwithstanding the calls therefor by both thetrial court and the opposing counsel, argues strongly against its pretensions.

We are fully aware that there is no hard-and-fast rule on the quantum of evidence needed to prove due observance of all the diligence of a good father of a family as would constitute a validdefense to the legal presumption of negligence on the part of an employer or master whoseemployee has by his negligence, caused damage to another. x x x (R)educing the testimony of Albert to its proper proportion, we do not have enough trustworthy evidence left to go by. Weare of the considered opinion, therefore, that the believable evidence on the degree of care anddiligence that has been exercised in the selection and supervision of Roberto Leon y Salazar, isnot legally sufficient to overcome the presumption of negligence against the defendant company.

The above-quoted ruling was reiterated in a recent case again involving the Metro Manila TransitCorporation, thus:

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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 supervisionof employees, employers should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for breaches thereof. To establish thesefactors in a trial involving the issue of vicarious liability, employers must submit concrete proof,

including documentary evidence.

In this case, MMTC sought to prove that it exercised the diligence of a good father of a familywith respect to the selection of employees by presenting mainly testimonial evidence on itshiring procedure. According to MMTC, applicants are required to submit professional drivinglicenses, certifications of work experience, and clearances from the National Bureau of Investigation; to undergo tests of their driving skills, concentration, reflexes, and vision; and, tocomplete training programs on traffic rules, vehicle maintenance, and standard operating procedures during emergency cases.

x x x x x x x x x

Although testimonies were offered that in the case of Pedro Musa all these precautions werefollowed, the records of his interview, of the results of his examinations, and of his service werenot presented. . . [T]here is no record that Musa attended such training programs and passed thesaid examinations before he was employed. No proof was presented that Musa did not have anyrecord of traffic violations. Nor were records of daily inspections, allegedly conducted bysupervisors, ever presented. . . The failure of MMTC to present such documentary proof puts indoubt the credibility of its witnesses.

Jurisprudentially, therefore, the employer must not merely present testimonial evidence to provethat he observed the diligence of a good father of a family in the selection and supervision of his

employee, but he must also support such testimonial evidence with concrete or documentaryevidence. The reason for this is to obviate the biased nature of the employer‘s testimony or thatof his witnesses.

Applying the foregoing doctrines to the present case, we hold that petitioner DassadWarehousing and Port Services, Inc. failed to conclusively prove that it had exercised therequisite diligence of a good father of a family in the selection and supervision of its employees.

Edilberto Duerme, the lone witness presented by Dassad Warehousing and Port Services, Inc. tosupport its position that it had exercised the diligence of a good father of a family in the selectionand supervision of its employees, testified that he was the one who recommended petitioner Raymundo Secosa as a driver to Dassad Warehousing and Port Services, Inc.; that it was his dutyto scrutinize the capabilities of drivers; and that he believed petitioner to be physically andmentally fit for he had undergone rigid training and attended the PPA safety seminar.

Petitioner Dassad Warehousing and Port Services, Inc. failed to support the testimony of its lonewitness with documentary evidence which would have strengthened its claim of due diligence inthe selection and supervision of its employees. Such an omission is fatal to its position, on

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account of which, Dassad can be rightfully held solidarily liable with its co-petitioner RaymundoSecosa for the damages suffered by the heirs of Erwin Francisco.

However, we find that petitioner El Buenasenso Sy cannot be held solidarily liable with his co- petitioners. While it may be true that Sy is the president of petitioner Dassad Warehousing and

Port Services, Inc., such fact is not by itself sufficient to hold him solidarily liable for theliabilities adjudged against his co-petitioners.

It is a settled precept in this jurisdiction that a corporation is invested by law with a personalityseparate from that of its stockholders or members. It has a personality separate and distinct fromthose of the persons composing it as well as from that of any other entity to which it may berelated. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not in itself sufficient ground for disregarding the separatecorporate personality. A corporation‘s authority to act and its liability for its actions are separateand apart from the individuals who own it.

The so-called veil of corporation fiction treats as separate and distinct the affairs of a corporationand its officers and stockholders. As a general rule, a corporation will be looked upon as a legalentity, unless and until sufficient reason to the contrary appears. When the notion of legal entityis used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law willregard the corporation as an association of persons. Also, the corporate entity may be disregardedin the interest of justice in such cases as fraud that may work inequities among members of thecorporation internally, involving no rights of the public or third persons. In both instances, theremust have been fraud and proof of it. For the separate juridical personality of a corporation to bedisregarded, the wrongdoing must be clearly and convincingly established. It cannot be presumed.

The records of this case are bereft of any evidence tending to show the presence of any groundsenumerated above that will justify the piercing of the veil of corporate fiction such as to hold the president of Dassad Warehousing and Port Services, Inc. solidarily liable with it.

The Isuzu cargo truck which ran over Erwin Francisco was registered in the name of DassadWarehousing and Port Services, Inc., and not in the name of El Buenasenso Sy. RaymundoSecosa is an employee of Dassad Warehousing and Port Services, Inc. and not of El BuenasensoSy. All these things, when taken collectively, point toward El Buenasenso Sy‘s exclusion from

liability for damages arising from the death of Erwin Francisco.

Having both found Raymundo Secosa and Dassad Warehousing and Port Services, Inc. liable for negligence for the death of Erwin Francisco on June 27, 1996, we now consider the question of moral damages which his parents, herein respondents, are entitled to recover. Petitioners assailthe award of moral damages of P500,000.00 for being manifestly absurd, mistaken and unjust.We are not persuaded.

Under Article 2206, the ―spouse, legitimate and illegitimate descendants and ascendants of thedeceased may demand moral damages for mental anguish for the death of the deceased.‖ The

reason for the grant of moral damages has been explained in this wise:

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. . . the award of moral damages is aimed at a restoration, within the limits possible, of thespiritual status quo ante; and therefore, it must be proportionate to the suffering inflicted. Theintensity of the pain experienced by the relatives of the victim is proportionate to the intensity of affection for him and bears no relation whatsoever with the wealth or means of the offender.‖

In the instant case, the spouses Francisco presented evidence of the searing pain that they feltwhen the premature loss of their son was relayed to them. That pain was highly evident in thetestimony of the father who was forever deprived of a son, a son whose untimely death came atthat point when the latter was nearing the culmination of every parent‘s wish to educate their children. The death of Francis has indeed left a void in the lives of the respondents. AntonioFrancisco testified on the effect of the death of his son, Francis, in this manner:

Q: (Atty. Balanag): What did you do when you learned that your son was killed on June 27,1996?

A: (ANTONIO FRANCISCO): I boxed the door and pushed the image of St. Niño telling why

this happened to us.

Q: Mr. Witness, how did you feel when you learned of the untimely death of your son, ErwinSuares (sic)?

A: Masakit po ang mawalan ng anak. It‘s really hard for me, the thought that my son is dead.

x x x x x x x x x

Q: How did your family react to the death of Erwin Suarez Francisco?

A: All of my family and relatives were felt (sic) sorrow because they knew that my son is (sic)good.

Q: We know that it is impossible to put money terms(s) [on] the life of [a] human, but since youare now in court and if you were to ask this court how much would you and your familycompensate? (sic)

A: Even if they pay me millions, they cannot remove the anguish of my son (sic).

Moral damages are emphatically not intended to enrich a plaintiff at the expense of thedefendant. They are awarded to allow the former to obtain means, diversion or amusements that

will serve to alleviate the moral suffering he has undergone due to the defendant‘s culpableaction and must, perforce, be proportional to the suffering inflicted. We have previously held as proper an award of P500,000.00 as moral damages to the heirs of a deceased family member whodied in a vehicular accident. In our 2002 decision in Metro Manila Transit Corporation v. Court

of Appeals, et al ., we affirmed the award of moral damages of P500,000.00 to the heirs of thevictim, a mother, who died from injuries she sustained when a bus driven by an employee of the petitioner hit her. In the case at bar, we likewise affirm the portion of the assailed decisionawarding the moral damages.

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Since the petitioners did not question the other damages adjudged against them by the court a

quo, we affirm the award of these damages to the respondents.

WHEREFORE, the petition is DENIED. The assailed decision is AFFIRMED with theMODIFICATION that petitioner El Buenasenso Sy is ABSOLVED from any liability adjudged

against his co-petitioners in this case.

Costs against petitioners.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.

Penned by Justice Danilo B. Pine and concurred in by Justices Eugenio S. Labitoria and RenatoC. Dacudao. Rollo, pp. 25-31.

Penned by Judge Virgilio D. Quijano, Presiding Judge.

Rollo, pp. 25-26.

Id ., p. 31.

Id ., p. 15.

Baliwag Transit, Inc. v. Court of Appeals, et al., G.R. No. 116624, 20 September 1996, 262SCRA 230. See also, Philippine Air Lines v. Court of Appeals, G.R. No. L-46036, 18 May1990, 185 SCRA 449.

G.R. No. 104408, 21 June 1993, 223 SCRA 521.

Citing Republic v. Court of Appeals, G.R. No. 84966, 21 November 1991, 204 SCRA 160.

U.S. v. Tria, 17 Phil. 303 (1910).

Garcia v. Gonzales, G.R. No. 48184, 12 March 1990, 183 SCRA 72.

54 O.G., No. 31, 7415 (1958).

Metro Manila Transit Corporation v. Court of Appeals, et al., G.R. No. 116617, 16 November 1998, 298 SCRA 495.

Campo v. Camarote, 100 Phil. 459, 463 (1956).

Ernesto Syki v. Salvador Begasa, G.R. No. 149149, 23 October 2003.

Rollo, p. 27.

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http://sc.judiciary.gov.ph/jurisprudence/2003/oct2003/149149.htm







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Villanueva, Philippine Commercial Law Review, 1998 edition, p. 345.

Sunio v. NLRC, G.R. No. L-57767, 31 January 1984, 127 SCRA 390.

Jentz, Miller, Cross and Clarkson, West’s Business Law, 4th edition, p. 614.

Volume 1, Fletcher Cyclopedia Corporations, Chapter 2, Section 41.7.

Matuguina Integrated Wood Products, Inc. v. Court of Appeals, G.R. No. 98310, 24 October 1996, 263 SCRA 490, 509.

Avelina G. Ramoso, et al. v. Court of Appeals, et al., G.R. No. 117416, 8 December 2000, 347SCRA 463.

Sangco, Torts and Damages, 986 [1994 ed.].

TSN, March 20, 1997, pp. 4-6.

Philtranco Service Enterprises v. Court of Appeals, et al., G.R. No. 120553, 17 June 1997, 273SCRA 562.

G.R. No. 141089, 1 August 2002.

T H I R D D I V I S I O N

AMERICAN EXPRESS

INTERNATIONAL, INC.,

Petitioner,

G.R. No. 138550

Present:

PANGANIBAN, J ., Chairman,





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- versus -

NOEL CORDERO,

Defendant.

SANDOVAL-GUTIERREZ,

CORONA,

CARPIO MORALES, and

GARCIA, JJ .

Promulgated:

October 14, 2005

x-------------------------------------------------------------------------------------------------x

D E C I S I O N

SANDOVAL-GUTIERREZ, J .:

This is a petition for review on certiorari of the Decision[1] of the Court

of Appeals dated April 30, 1999 in CA-G.R. CV No. 51671, entitled, “Noel

Cordero, Plaintiff-Appellee versus American Express International, Inc.,

Defendant-Appellant .”




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Petitioner is a foreign corporation that issues charge cards to its

customers, which the latter then use to purchase goods and services at

accredited merchants worldwide. Sometime in 1988, Nilda Cordero, wife of

respondent Noel Cordero, applied for and was issued an American Express

charge card with No. 3769-895901-010020. The issuance of the charge card

was covered by an Amex Cardmember Agreement. As cardholder, Nilda, upon

signing the back portion of the card, manifested her acceptance of the terms of

the Agreement.

An extension charge card, with No. 3769-895901-01010, was likewise

issued to respondent Noel Cordero which he also signed.[2]

On November 29, 1991, respondent, together with his wife, Nilda,

daughter, sisters-in-law and uncle-in-law, went on a three-day holiday trip to

Hong Kong. In the early evening of November 30, 1991, at about 7:00 o’clock,

the group went to the Watson’s Chemist Shop located at 277C Ocean Gallery,

Kowloon, Hong Kong. Noel picked up some chocolate candies and handed to

the sales clerk his American Express extension charge card to pay for his

purchases. The sales clerk verified the card by making a telephone call to the

American Express Office in Hong Kong. Moments later, Susan Chong, the store

manager, emerged from behind the counter and informed respondent that she





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had to confiscate the card. Thereupon, she cut respondent’s American

Express card in half with a pair of scissors. This, according to respondent,

caused him embarrassment and humiliation considering that it was done in

front of his family and the other customers lined up at the check-out counter.

Hence, Nilda had to pay for the purchases using her own American Express

charge card.[3]

When they returned to the Excelsior Hotel, Nilda called up petitioner’s

Office in Hong Kong. She was able to talk to Senior Authorizer Johnny Chen,

who informed her that on November 1, 1991, a person in Hong Kong

attempted to use a charge card with the same number as respondent’s card.

The Hong Kong American Express Office called up respondent and after

determining that he was in Manila and not in Hong Kong, placed his card in

the “Inspect Airwarn Support System.” This is the system utilized by

petitioner as a protection both for the company and the cardholders against

the fraudulent use of their charge cards. Once a card suspected of

unauthorized use is placed in the system, the person to whom the card is

tendered must verify the identity of the holder. If the true identity of the card

owner is established, the card is honored and the charges are approved.

Otherwise, the card is revoked or confiscated.[4]









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When the Watson’s sales clerk called up petitioner’s Hong Kong Office,

its representative said he wants to talk to respondent in order to verify the

latter’s identity, pursuant to the procedure observed under the “Inspect

Airwarn Support System.” However, respondent refused. Consequently,

petitioner’s representative was unable to establish the identity of the

cardholder.[5] This led to the confiscation of respondent’s card.

On March 31, 1992, respondent filed with the Regional Trial Court,

Branch V, Manila, a complaint for damages against petitioner, docketed as

Civil Case No. 92-60807. He prayed for the award of moral damages and

exemplary damages, as well as attorney’s fees as a result of the humiliation he

suffered.

The trial court found that “the inexcusable failure of defendant

(petitioner herein) to inform plaintiff (respondent herein) of the November 1,

1991 incident despite sufficient time was the proximate cause of the

confiscation and cutting of plaintiff’s extension card which exposed the latter

to public humiliation for which defendant should be held liable.”[6] On

February 20, 1995, the trial court promulgated its Decision, the dispositive

portion of which reads:









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―WHEREFORE, judgment is hereby rendered in favor of the plaintiff and

against the defendant, ordering the latter to pay the former the following

amounts, namely:

a) The sum of P300,000.00 as and by way of moral damages;

b) The sum of P200,000.00 as exemplary damages;

c) The sum of P100,000.00 as and for reasonable attorney‘s fees;

and

d) The costs of the suit.

SO ORDERED.‖[7]

Upon appeal, the Court of Appeals rendered the assailed Decision

affirming the trial court’s Decision with modification in the sense that the

amounts of damages awarded were reduced, thus:

―WHEREFORE, in view of the foregoing, the appealed decision dated

February 20, 1995 of the Regional Trial Court of Manila, Branch V, in Civil Case

No. 92-60807 is hereby AFFIRMED, subject to modifications with respect to the

amount of damages awarded, which are reduced as follows:

(a) Moral damages from P300,000.00 to P150,000.00; and





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(b) Exemplary damages from P200,000.00 to P100,000.00.

No pronouncement as to costs.

SO ORDERED.‖

Hence, the instant petition raising the following issues:

“A. Whether the lower courts gravely erred in attributing

the ‘public humiliation’ allegedly suffered by Cordero to Amex.

B. Whether the lower courts gravely erred in holding

Amex liable to Cordero for moral damages, exemplary damages

and attorney’s fees.”[8]

Respondent filed his comment contending in the main that the petition

raises questions of fact beyond this Court’s domain.

While it is true that under Rule 45 of the 1997 Rules of Civil Procedure,

as amended, this Court may review only errors of law, however, this rule

admits of well-known recognized exceptions, thus:

―. . . (1) the conclusion is a finding grounded entirely on speculation,

surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there

is grave abuse of discretion; (4) the judgment is based on a misapprehension of

facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went beyond

the issues of the case and its findings are contrary to the admissions of both





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parties; (7) the findings of fact of the Court of Appeals are contrary to those of the

trial court; (8) said findings of fact are conclusions without citation of specific

evidence on which they are based; (9) the facts set forth in the petition are not

disputed by the respondents; and (10) the findings of fact of the Court of Appeals

are premised on the supposed absence of evidence and contradicted by the

evidence on record.‖[9]

In this case, the inference made by the courts below is manifestly

mistaken. Therefore, we are justified in reviewing the records of this case

and rendering judgment based on our own findings.

In his complaint, respondent claimed that he suffered embarrassment

and humiliation because his card was unceremoniously confiscated and cut in

half by Susan Chong of Watson’s Chemist Shop.

Respondent anchors his cause of action on the following provision of the

Civil Code:

―Art. 2176. Whoever by act or omission causes damage to another,

there being fault or negligence, is obliged to pay for the damage done. Such

fault or negligence, if there is no pre-existing contractual relation between the

parties, is called a quasi-delict and is governed by the provisions of this

Chapter.‖[10]

In order that an obligation based on quasi-delict may arise, there must

be no pre-existing contractual relation between the parties. But there are









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exceptions. There may be an action for quasi-delict notwithstanding that

there is a subsisting contract between the parties. A liability for tort may

arise even under a contract, where tort is that which breaches the contract.

Stated differently, when an act which constitutes a breach of contract would

have itself constituted the source of a quasi-delictual liability, the contract can

be said to have been breached by tort, thereby allowing the rules on tort to

apply.[11]

Furthermore, to constitute quasi-delict, the fault or negligence must be

the proximate cause of the damage or injury suffered by the plaintiff.

Proximate cause is that cause which, in natural and continuous sequence,

unbroken by any efficient intervening cause, produces the injury and without

which the result would not have occurred. Proximate cause is determined by

the facts of each case upon mixed considerations of logic, common sense,

policy and precedent .[12]

According to the trial court, petitioner should have informed

respondent that on November 1, 1991, a person in Hong Kong attempted to

use a charge card bearing similar number to that of respondent’s card; and

that petitioner’s inexcusable failure to do so is the proximate cause of the









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“confiscation and cutting of [respondent’s] extension card which exposed the

latter to public humiliation for which [petitioner] should be held liable.”[13]

We cannot sustain the trial court’s conclusion.

As explained by respondent himself, he could have used his card upon

verification by the sales clerk of Watson that indeed he is the authorized

cardholder. This could have been accomplished had respondent talked to

petitioner’s representative, enabling the latter to determine that respondent is

indeed the true holder of the card. Clearly, no negligence which breaches the

contract can be attributed to petitioner. If at all, the cause of respondent’s

humiliation and embarrassment was his refusal to talk to petitioner’s

representative.

That respondent refused to talk to petitioner’s representative can be

gleaned from the testimony of Mr. Chen Heng Kun a.k.a. Johnny Chen during

the deposition in Hong Kong,[14] thus:

“Question No 9 : Was AEII required under its existing policies

and/or membership agreement with its cardholders to advise

said cardholders of their card have been put under the support

INSPECT – Strictly Question (for identification) cardmembers

before approving any charge?








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Mr. Johnny Chen : Under the existing policies of AEII, we don‘t

have to inform the cardholders if they have to pass the

INSPECT –Strictly Questions (for identification).

Question No 10 : If the answer to Q9 is in the negative, please

explain why not?

Mr. Johnny Chen : The reason why we don‘t have to are

because, first, we are not terminating the service to the

cardholder. Second, it doesn‘t mean that we are going to limit

the service to the cardholder. Third, as long as the cardholder

can present an identification card of his membership, we allow

him to use the card. He can show this by telephoning the

company or by presenting us his passport or travel document.

When Watson Company called AEII for authorization, AEII

representative requested that he talk to Mr. Cordero but

he refused to talk to any representative of AEII. AEII could

not prove then that he is really the real card holder.‖

Mr. Chen Heng Kun was briefly cross-examined by respondent’s

counsel, thus:

―Question No 10 : Question 9 is objected to since the best

evidence would be the membership agreement between

plaintiffs and AEII.‖

Significantly, paragraph 16 of the Cardmember Agreement signed by

respondent provides:

“16. THE CARD REMAINS OUR PROPERTY

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―The Card r emains our property and we can revoke your right and the

right of ay Additional Cardmember to use it at any time, we can do this with or

without giving you notice. If we have revoked the Card without cause, we will

refund a proportion of your annual Card Account fee. We may list revoked Cards

in our ―Cancellation Bulletin‖, or otherwise inform Establishments that the Card

issued to you and, if you are the basic Cardmember, any Additional Cards havebeen revoked or cancelled.

―If we revoke the card or it expires, you must return it to us if we request.

Also, if any Establishment asks you to surrender an expired or revoked Card, you

must do so. You may not use the Card after it has expired or after it has been

revoked.

―The revocation, repossession or request for the return of the Card is not,and shall not constitute any reflection of your character or credit-worthiness and

we shall not be liable in any way for any statement made by any person

requesting the return or surrender of the Card.‖[15]

To be sure, pursuant to the above stipulation, petitioner can revoke

respondent’s card without notice, as was done here. It bears reiterating that

the subject card would not have been confiscated and cut had respondent

talked to petitioner’s representative and identified himself as the genuine

cardholder. It is thus safe to conclude that there was no negligence on the

part of petitioner and that, therefore, it cannot be held liable to respondent for

damages.

WHEREFORE, the petition is GRANTED. The assailed Decision of the

Court of Appeals in CA-G.R. CV No. 51671 is REVERSED.





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SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ

Associate J ustice

WE CONCUR:

ARTEMIO V. PANGANIBAN

Associate J ustice

Chairman

RENATO C. CORONA

Associate J ustice

CONCHITA CARPIO MORALES

Associate J ustice

CANCIO C. GARCIA

Associate J ustice

ATTESTATION

I attest that the conclusions in the above Decision were reached in

consultation before the case was assigned to the writer of the opinion of the Court's

Division.

ARTEMIO V. PANGANIBAN

Associate J ustice

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Chairman, Third Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division

Chairman's Attestation, it is hereby certified that the conclusions in the above

Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR.

Chief J ustice

[1] Rollo at 9-25, at 25; penned by Associate Justice B.A. Adefuin-Dela Cruz (retired), concurred in byAssociate Justices Eugenio S. Labitoria and Presbitero J. Velasco, Jr. (now Court Administrator).

[2] Exh. ―3-C‖.

[3] TSN, March 25, 1993 at 6-11.

[4] TSN, May 4, 1993 at 13.

[5] TSN of Deposition of Johnny Chen, February 28, 1994, at 6.

[6] Rollo at 154-159, 158.

[7] Id., at 159; penned by Presiding Judge Zeus O. Abrogar.

[8] Petition at 8; Rollo at 60.

[9] Baricuatro v. Court of Appeals, G.R. No. 105902, February 9, 2000, 325 SCRA 137.

[10] Civil Code, Article 2176

[11] Light Rail Transit Authority, et al. v. Navidad, et al ., G.R. No. 145804, February 6, 2003, 397 SCRA 75.

[12] The Consolidated Bank & Trust Co. v. Court of Appeals, G.R. No. 138569, September 11, 2003, 410

SCRA 562

[13] Rollo at 158

[14] Deposition upon Written Interrogatories and Cross-Examination Re Case of Mr. Johnny Chen beforeVice Consul Marlene Brigida B. Agmata at the Philippine Consultate General, 21-22/F Regent Centre, 88Queen‘s Road, Central, Hong Kong, 28 Fenruary 1994 at 5-6.

[15] Exh. ―3-A‖.














































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MALACAÑANG M a n i l a

PRESIDENTIAL DECREE No. 1152

PHILIPPINE ENVIRONMENTAL CODE

WHEREAS, the broad spectrum of environment has become a matter of vital concern to the government;

WHEREAS, the national leadership has taken a step towards this direction by creating the National Environmental ProtectionCouncil under Presidential Decree No. 1121;

WHEREAS, it is necessary that the creation of the Council be implemented with the launching of a comprehensive program of environmental protection and management;

WHEREAS, such a program can assume tangible and meaningful significance only by establishing specific environmentmanagement policies and prescribing environment quality standards in a Philippine Environment Code:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines , by virtue of the powersvested in me by the Constitution, do hereby order and decree:

Section 1. Short Title. This Decree shall be known and cited as the "Philippine Environment Code."

TITLE IAIR QUALITY MANAGEMENT

Section 2. Purposes. The purposes of this Title are:

(a) to achieve and maintain such levels of air quality as to protect public health; and

(b) to prevent to the greatest extent practicable, injury and/or damage to plant and animal life and property, and promote the social and economic development of the country.

Chapter IStandards

Section 3. Ambient Air Quality Standards. There shall be established ambient air quality standards which shall prescribe themaximum concentration of air pollutants permissible in the atmosphere consistent with public health, safety and general welfare.

In the establishment of ambient air quality standards, factors such as local atmospheric conditions, location and land use, andavailable technology, shall be considered among others.

Section 4. National Emission Standards. There shall be established national emission standards for new and existing stationaryand mobile sources of pollution which shall consider among others such factors as type of industry, practicable controltechnology available, location and land use, and the nature of pollutants emitted.

Section 5. Community Noise Standards. Appropriate standards for community noise levels shall be established considering,among others, location, zoning and land use classification.

Section 6. Standards for Noise-Producing Equipment. There shall be established a standard for noise producing equipment suchas construction equipment, transportation equipment, stationary engines, and electrical or electronic equipment and such similar equipment or contrivances. The standards shall set a limit on the acceptable level of noise emitted from a given equipment for the

protection of public health and welfare, considering among others, the magnitude and condition of use, the degree of noisereduction achievable through the application of best available technology and the cost of compliance.

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The Installation of any noise-producing equipment shall conform with the requirements of Presidential Decree No. 1096 andother applicable laws as well as their implementing rules and regulations.

Section 7. Aircraft Emission and Sonic Booms. Appropriate government agencies shall encourage research studies on the harmfuleffects of aircraft emissions in the environment in order to establish permissible emission standards.

Research and studies shall also be undertaken to mitigate and/or minimize the effects of sonic booms in the environment.

Chapter IIRegulation and Enforcement

Section 8. Air Quality and Noise Standards. The National Pollution Control Commission in coordination with appropriategovernment agencies shall be responsible for the enforcement of ambient air quality emission and noise standards, including themonitoring and surveillance of air pollutants, licensing and permitting of air pollution control facilities, and the promulgation of appropriate rules and regulations.

Existing air quality emission and noise standards may be revised and/or modified consistent with new development andtechnology.

Section 9. Aircraft Noise. Community noise standards around airports shall be implemented by the Civil Aeronautics

Administration in coordination with the National Pollution Control Commission.

Section 10. Vehicular Emissions. The Land Transportation Commission, in coordination with the National Pollution ControlCommission, shall implement emission standards for motor vehicles and may deputize other appropriate law enforcementagencies for the purpose.

Section 11. Radioactive Emissions. The release and emission of radioactivity into the environment incident to the establishmentor possession of nuclear energy facilities and radioactive materials, handling, transport, production, storage, use and disposal of radioactive materials shall be regulated by the Philippine Atomic Energy Commission in coordination with other appropriategovernment agencies.

Chapter IIIMonitoring

Section 12. Air Quality Monitoring. The National Pollution Control Commission, in coordination with appropriate governmentagencies, shall establish to the greatest extent practicable an air quality monitoring network. Such air quality monitoring network shall put to maximum use the capabilities of these agencies.

The National Environmental Protection Council shall be furnished with the results of air quality monitoring activities.

Section 13. Weather Modification. The Philippine Atmospheric, Geophysical and Astronomical Services Administration shallmonitor regularly meteorological factors affecting environmental conditions in order to effectively guide air pollution monitoringactivities.

Activities relating to weather modification such as rainfall stimulation and storm seeding experiments shall be undertaken inconsultation and/or in coordination with the Philippine Atmospheric, Geophysical and Astronomical Service Administration.

TITLE IIWATER QUALITY MANAGEMENT

Section 14. Purpose. It is the purpose of this Title to prescribe management guidelines aimed to protect and improve the qualityof Philippine water resources through:

(a) classification of Philippine waters;

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(b) establishment of water quality standards;

(c) protection and improvement of the quality of the Philippine water resources, and

(d) responsibilities for surveillance and mitigation of pollution incidents.

Chapter IClassification and Standards

Section 15. Classification of Philippine Waters. The National Pollution Control Commission, in coordination with appropriategovernment agencies, shall classify Philippine waters, according to their best usage. In classifying said waters, the NationalPollution Control Commission shall take into account, among others, the following:

(a) the existing quality of the body of water at the time of classification;

(b) the size, depth, surface area covered, volume, direction, rate of flow, gradient of stream; and

(c) the most beneficial uses of said bodies of water and lands bordering them for residential, agricultural, commercial,industrial, navigational, recreational, and aesthetic purposes.

Section 16. Reclassification of Waters Based on Intended Beneficial Use. Where the public interest so requires, the NationalPollution Control Commission, in coordination with appropriate government agencies, shall reclassify a body of water based onthe intended beneficial use and take such steps as may be necessary to upgrade the quality of said water. Other governmentagencies may adopt higher standards for a particular body of water, subject to the approval of the National Pollution ControlCommission.

Section 17. Upgrading of Water Quality. Where the quality of water has deteriorated to a degree where its state will adverselyaffect its best usage, the government agencies concerned shall take such measures as may be necessary to upgrade the quality of such water to meet the prescribed water quality standards.

Section 18. Water Quality Standards. The National Pollution Control Commission shall prescribe quality and effluent standardsconsistent with the guidelines set by the National Environmental Protection Council and the classification of waters prescribed inthe preceding sections, taking into consideration, among others, the following:

(a) the standard of water quality or purity may vary according to beneficial uses; and

(b) the technology relating to water pollution control.

Chapter IIProtection and Improvement of Water Quality

Section 19. Enforcement and Coordination. The production, utilization, storage and distribution of hazardous, toxic and other substances such as radioactive materials, heavy metals, pesticides, fertilizers, and oils, and the disposal, discharge and dumpingof untreated wastewater, mine tailings and other substances that may pollute any body of water of the Philippines resulting fromnormal operations of industries, water-borne sources, and other human activities as well as those resulting from accidental spillsand discharge shall be regulated by appropriate government agencies pursuant to their respective charters and enablinglegislations. In the performance of the above functions, the government agencies concern shall coordinate with the NationalEnvironmental Protection Council and furnish the latter with such information as may be necessary to enable it to attain itsobjectives under Presidential Decree No. 1121.

Section 20. Clean-up Operations. It shall be the responsibility of the polluter to contain, remove and clean up water pollutionincidents at his own expense. In case of his failure to do so, the government agencies concerned shall undertake containment,removal and clean-up operations and expenses incurred in said operations shall be charged against the persons and/or entitiesresponsible for such pollution.

Section 21. Water Quality Monitoring and Surveillance. The various government agencies concerned with environmental

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protection shall establish to the greatest extent practicable a water quality surveillance and monitoring network with sufficientstations and sampling schedules to meet the needs of the country. Said water quality surveillance network shall put to maximumuse the capabilities of such government agencies. Each agency involved in such network shall report to the NationalEnvironmental Protection Council the results of these monitoring activities as the need arises.

TITLE IIILAND USE MANAGEMENT

Section 22. Purpose. The purposes of this Title are:

(a) to provide a rational, orderly and efficient acquisition, utilization and disposition of land and its resources in order to derive therefrom maximum benefits; and

(b) to encourage the prudent use and conservation of land resources in order to prevent and imbalance between thenation's needs and such resources.

Section 23. National Land Use Scheme. The Human Settlements Commission, in coordination with the appropriate agencies of the government, shall formulate and recommend to the National Environmental Protection Council a land use scheme consistent

ith the purpose of this Title.

The Land Use Scheme shall include among others, the following:

(a) a science-based and technology-oriented land inventory and classification system;

(b) a determination of present land uses, the extent to which they are utilized, underutilized, rendered idle or abandoned;

(c) a comprehensive and accurate determination of the adaptability of the land for community development, agriculture,industry, commerce and other fields of endeavor;

(d) a method of identification of areas where uncontrolled development could result in irreparable damage to importanthistoric, cultural, or aesthetic values, or natural systems or processes of national significance;

(e) a method for exercising control by the appropriate government agencies over the use of land in areas of criticalenvironmental concern and areas impacted by public facilities including, but not limited to, airports, highways, bridges,

ports and wharves, buildings and other infrastructure projects;

(f) a method to ensure the consideration of regional development and land use in local regulations;

(g) policy for influencing the location of new communities and methods for assuring appropriate controls over the useof land around new communities;

(h) a system of controls and regulations pertaining to areas and development activities designed to ensure that anysource of pollution will not be located where it would result in a violation of any applicable environmental pollutioncontrol regulations; and

(i) a recommended method for the periodic revisions and updating of the national land use scheme to meet changingconditions.

Section 24. Location of Industries. In the location of industries, factories, plants, depots and similar industrial establishments, theregulating or enforcing agencies of the government shall take into consideration the social, economic, geographic and significantenvironmental impact of said establishments.

TITLE IVNATURAL RESOURCES MANAGEMENT AND CONSERVATION

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Section 25. Purposes. The purposes of this Title are:

(a) to provide the basic policy on the management and conservation of the country's natural resources to obtain theoptimum benefits therefrom and to preserve the same for the future generations; and

(b) to provide general measures through which the aforesaid policy may be carried out effectively.

Chapter IFisheries and Aquatic Resources

Section 26. Management Policy. The National government, through the Department of Natural Resources, shall establish asystem of rational exploitation of fisheries and aquatic resources within the Philippine territory and shall encourage citizen

participation therein to maintain and/or enhance the optimum and continuous productivity of the same.

Section 27. Measures for National Exploitation. Measures for the national exploitation of fisheries and other aquatic resourcesmay include, but shall not be limited to, the following:

(a) undertaking manpower and expertise development;

(b) acquiring the necessary facilities and equipment;

(c) regulating the marketing of threatened species of fish or other aquatic resources;

(d) reviewing all existing rules and regulations on the exploitation of fisheries and aquatic resources with a view of formulating guidelines for the systematic and effective enforcement thereof; and

(e) conserving the vanishing species of fish and aquatic resources such as turtles, sea snakes, crocodiles, corals, as wellas maintaining the mangrove areas, marshes and inland waters, coral reef-areas and islands serving as sanctuaries for fish and other aquatic life.

Chapter IIWildlife

Section 28. Management Policy. The national government through the Department of Natural Resources, shall establish a systemof rational exploitation and conservation of wildlife resources and shall encourage citizen participation in the maintenance and/or enhancement of their continuous productivity.

Section 29. Measures for Rational Exploitation. Measures for rational exploitation of wildlife resources may include, but shallnot be limited to, the following:

(a) regulating the marketing of threatened wildlife resources.

(b) reviewing all existing rules and regulations on the exploitation of wildlife resources with a view of formulatingguidelines for the systematic and effective enforcement thereof; and

(c) conserving the threatened species of fauna, increasing their rate of reproduction, maintaining their original habitat,

habitat manipulation, determining bag/creel limits, population control in relation to the carrying capacity of any givenarea, banning of indiscriminate and/or destructive means of catching or hunting them.

Chapter IIIForestry and Soil Conservation

Section 30. Management Policy for Forestry. The national government, through the Department of Natural Resources, shallundertake a system of rational exploitation of forest resources and shall encourage citizen participation therein to keep the

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country's forest resources at maximum productivity at all time.

Section 31. Measures for Rational Exploitation of Forest Resources. Measures for the rational exploitation of forest resourcesmay include, but shall not be limited to, the following:

(a) regulating the marketing of threatened forest resources;

(b) reviewing all existing rules and regulations on the exploitation of forest resources with a view of formulatingguidelines for the systematic and efficient enforcement thereof;

(c) conserving threatened species of flora as well as increasing their rate of propagation; the banning of destructivemodes of exploitation, kaingin making or shifting cultivation, indiscriminate harvesting of minor forest products therecycling methods of waste materials, and

(d) carrying out a continuing effect on reforestation; timber stand improvement; forest protection; land classification;forest occupancy management; agri-silviculture; range management; agri-silvicultural/kaingin management; industrialtree plantation; parks and wildlife management; multiple use forest; timber management and forest research.

Section 32. Use of Fertilizers and Pesticides. The use of fertilizers and pesticides in agriculture shall be regulated prescribingtherefor a tolerance level in their use. Their use shall be monitored by appropriate government agencies to provide empirical data

for effective regulation.

Section 33. Management Policy on Soil Conservation. The national government, through the Department of Natural Resourcesand the Department of Agriculture, shall likewise undertake a soil conservation program including therein the identification and

protection of critical watershed areas, encouragement of scientific farming techniques, physical and biological means of soilconservation, and short-term and long-term researches and technology for effective soil conservation.

Chapter IVFlood Control and Natural Calamities

Section 34. Measures in Flood Control Program. In addition to the pertinent provisions of existing laws, the following shall beincluded in a soil erosion, sediment and flood control program;

(a) the control of soil erosion on the banks of rivers, the shores of lakes, and the seashores;

(b) the control of flow and flooding in and from rivers and lakes;

(c) the conservation of water which, for purposes of this Section shall mean forms of water, but shall not includecaptive water;

(d) the needs of fisheries and wildlife and all other recreational uses of natural water;

(e) measures to control the damming, diversion, taking, and use of natural water, so far as any such act may affect thequality and availability of natural water for other purposes; and

(f) measures to stimulate research in matters relating to natural water and soil conservation and the application of

knowledge thereby acquired.

Section 35. Measures to Mitigate Destructive Effects of Calamities. The national government, through the PhilippineAtmospheric, Geophysical and Astronomical Services Administration, shall promote intensified and concerted research efforts on

eather modification, typhoon, earthquake, tsunami, storm surge, and other tropical natural phenomena in order to bring aboutany significant effect to mitigate or prevent their destructive effects.

Chapter VEnergy Development

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Section 36. Policy. Consistent with the environmental protection policies, the national government, through the EnergyDevelopment Board, shall undertake an energy development program encouraging the utilization of invariant sources such assolar, wind and tidal energy.

Section 37. Measures for Energy Development. Measures for energy development program may include, but shall not be limitedto, the following:

(a) setting up of pilot plants utilizing invariant sources of energy;

(b) training of technical personnel for purposes of energy development; and

(c) conducting researches aimed at developing technology for energy development.

Section 38. Safety Measures on Energy Development. Rules and regulations shall be promulgated to prevent or mitigate theadverse effects of energy development on the environment. For this purpose, all nuclear powered plants exploring and utilizinggeothermal energy, whether owned or controlled by private or government entities shall:

(a) observe internationally accepted standards of safety; and

(b) provide safety devices to ensure the health and welfare of their personnel as well as the surrounding community.

Chapter VIConservation and Utilization of Surface and Ground Waters

Section 39. Management Policy. In addition to existing laws, the national government through the National Water ResourcesCouncil in coordination with other appropriate government agencies, shall prescribe measures for the conservation andimprovement of the quality of Philippine water resources and provide for the prevention, control and abatement of water

pollution.

Chapter VIIMineral Resources

Section 40. Management Policy. - The national government, through the Department of Natural Resources, shall undertake a

system of gainful exploitation and rational and efficient utilization of mineral resources and shall encourage citizen participationin this endeavor.

Section 41. Measures for Exploitation and Utilization of Mineral Resources. Measures for the gainful exploitation and rationaland efficient utilization of such mineral resources may include, but shall not be limited to the following:

(a) increasing research and development in mineral resources technology;

(b) training of additional technical manpower needed in geology, geophysics, mining engineering, and related fields;

(c) regulating the exploitation of identified mineral reserves;

(d) accelerating the exploration of undiscovered mineral deposits; and

(e) encouraging the establishment of processing plants for refined metals.

TITLE VWASTE MANAGEMENT

Section 42. Purpose. The purposes of this Title are:

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(a) to set guidelines for waste management with a view to ensuring its effectiveness;

(b) to encourage, promote and stimulate technological, educational economic and social efforts to preventenvironmental damage and unnecessary loss of valuable resources of the nation through recovery, recycling and re-useof wastes and waste products; and

(c) to provide measures to guide and encourage appropriate government agencies in establishing sound, efficient,comprehensive and effective waste management.

Chapter IEnforcement and Guidelines

Section 43. Waste Management Programs. Preparation and implementation of waste management program shall be required of all provinces, cities and municipalities. The Department of Local Government and Community Development shall promulgateguidelines for the formulation and establishment of waste management programs.

Every waste management program shall include the following:

(a) an orderly system of operation consistent with the needs of the area concerned;

(b) a provision that the operation will not create pollution of any kind or will constitute public nuisance;

(c) a system for a safe and sanitary disposal of waste;

(d) a provision that existing plans affecting the development, use and protection of air, water or natural resources shall be considered;

(e) schedules and methods of implementing the development, construction and operation of the plan together with theestimated costs; and

(f) a provision for the periodic revision of the program to ensure its effective implementation.

Section 44. Responsibility of Local Governments. Each province, city or municipality shall provide measures to facilitate thecollection, transportation, processing and disposal of waste within its jurisdiction in coordination with other government agenciesconcerned. For this purpose, the national government shall provide the necessary subsidy, to local governments upon requestmade through the National Environmental Protection Council and subject to such terms and conditions as the latter may provide.

Chapter IIMethods of Solid Waste Disposal

Section 45. Solid Waste Disposal. Solid Waste disposal shall be by sanitary landfill, incineration, composing, and other methodsas may be approved by competent government authority.

Section 46. Sanitary Landfills. Local governments, including private individuals, corporations or organizations may operate oneor more sanitary landfills. Any entity proposing to operate a sanitary landfill shall submit to the appropriate government agencyan operational work plan showing, among other things, a map of the proposed work location, disposal areas for rubbish, garbage,

refuse and other waste matter; and the equipment or machinery needed to accomplish its operations. In no case shall landfill or ork locations under this Section be located along any shore or coastline, or along the banks of rivers and streams. lakesthroughout their entire length, in violation of any existing rules and regulations.

Section 47. Incineration and Composting Plants. The installation and establishment of incineration or composting plants, or thealteration/modification of any part thereof shall be regulated by the local governments concerned in coordination with the

National Pollution Control Commission.

Section 48. Disposal Sites. The location of solid waste disposal sites shall conform with existing zoning; land use standards, and

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pollution control regulations.

Section 49. Dumping into the Sea and Other Navigable Waters. The dumping or disposal of solid wastes into the sea and any body of water in the Philippines , including shorelines and river banks, where these wastes are likely to be washed into the water is prohibited. However, dumping of solid wastes or other materials into the sea or any navigable waters shall be permitted in caseof immediate or imminent danger to life and property, subject to the rules and regulations of the Philippine Coast Guard and the

National Pollution Control Commission.

Government agencies and private entities which are undertaking solid waste management programs shall make consultations withthe government agencies concerned with respect to the effects of such dumping to the marine environment and navigation.

Chapter IIIMethods of Liquid Waste Disposal

Section 50. Liquid Waste Disposal. Wastewater from manufacturing plants, industries, community, or domestic sources shall betreated either physically, biologically or chemically prior to disposal in accordance with the rules and regulations promulgated by

proper government authority.

Section 51. Applicability of Sec. 8. The provisions of Sec. 8 hereof shall likewise apply to the dumping or disposal of liquidaste into the sea and other bodies of water.

TITLE VIMISCELLANEOUS PROVISIONS

Section 52. Population-Environment Balance. In the assessment of development projects, the National Environmental ProtectionCouncil, hereinafter referred to in this Title as the "Council" shall take into consideration their effect on population with a view toachieving a rational and orderly balance between man and his environment.

Section 53. Environmental Education. The Department of Education and Culture shall integrate subjects on environmentaleducation in its school curricula at all levels. It shall also endeavor to conduct special community education emphasizing therelationship of man and nature as well as environmental sanitation and practices.

The Council and other government agencies implementing environmental protection laws in coordination with public informationagencies of the government shall undertake public information activities for the purpose of stimulating awareness andencouraging involvement in environmental protection.

Section 54. Environmental Research. The Council shall undertake and/or promote continuing studies and research programs onenvironmental management and shall, from time to time, determine priority areas of environmental research.

Section 55. Monitoring and Dissemination of Environmental Information of Foreign Origin. The Council shall keep itself informed of current environmental developments by obtaining information and literature from foreign sources through theDepartment of Foreign Affairs, government agencies and other entities, both domestic and foreign. Such information andliterature shall be given the widest dissemination possible.

Section 56. Incentives. To operate the installation and the utilization of pollution control facilities, the following incentives arehereby granted:

(a) exemption to the extent of fifty (50) per cent of tariff duties and compensating tax for the importation of pollutioncontrol equipment, devices, spare parts and accessories for a period of five (5) years from the effectivity of this Decreesubject to the conditions that will be imposed by the Council.

(b) a tax credit equivalent to fifty (50) per cent of the value of the compensating tax and tariff duties that would have been paid on the pollution control equipment, devices, spare parts and accessories had these items been imported shall,within a period of seven (7) years from the effectivity of this Decree be given to the person or firm who or which

purchases them from a domestic manufacturer, and another tax credit equivalent to twenty-five (25) per cent thereof shall be given to the said manufacturer subject to such conditions as may be imposed by the Council; and

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(c) deductions equivalent to fifty (50) per cent of the expenses actually incurred on research projects undertaken todevelop technologies for the manufacture of pollution control equipment which have been proven effective andcommercially reproducible, from the taxable income of the person or firm actually undertaking such projects subject tothe conditions that may be imposed by the Council.

The pollution control equipment, devices, spare parts and accessories acquired under this Section shall not be sold, transferred or disposed of within five (5) years from the date of acquisition without the prior approval of the Council otherwise the importer or

purchaser shall pay twice the amount of the tax exemption or tax credit granted.

Section 57. Financial Assistance/Grant. Financial assistance/grant for the study, design and construction of environmental protection facilities especially for waste disposal in favor of cities, municipalities, small and medium-scale industries may begranted on a case to case basis subject to such conditions as may be imposed by the Council.

Section 58. Participation of Local Government Units and Private Individuals. It shall be the responsibility of local governmentunits as well as private individuals to actively participate in the environmental management and protection programs of thegovernment.

Section 59. Preservation of Historic and Cultural Resources and Heritage. It shall be the duty of every person to help preservethe historic and cultural resources of the country such as sites, structures, artifacts, documents, objects, memorials and pricelesstrees.

Section 60. Government Offices Performing Environmental Protection Functions. Government agencies vested by law toexercise environmental management powers, shall continue to function as such within their respective jurisdictions. The Councilmay, however, in the exercise of its powers and functions under Presidential Decree No. 1121, inquire into any action or issue of environmental significance.

Section 61. Public Hearings. The Council may, whenever it deems necessary, conduct public hearings on issues of environmental significance.

Section 62. Definition of Terms. As used in this Code:

(a) "Ambient Air Quality" means the average atmospheric purity as distinguished from discharge measurements takenat the source of pollution. It is the general amount of pollution present in a broad area.

(b) "Emission" means the act of passing into the atmosphere an air contaminant, pollutant, gas stream and unwantedsound from a known source.

(c) "Water Quality" means the characteristics of water which define its use in terms of physical, chemical and biological contents; hence the quality of water for domestic use is different from industrial use.

(d) "Water Quality Surveillance" means a close and continuous supervision of the water quality to detect developmentmovements or changes in the characteristics of the water.

(e) "Water Quality Standard" means a plan that is established by governmental authority as a program for water pollution prevention and abatement. Such a standard may include water use classification and the criteria to support theuses of the water.

(f) "Effluent Standards" means restrictions established to limit levels of concentration of physical, chemical and biological constituents which are discharged from point sources.

(g) "Clean-up Operations" refers to activities conducted in removing the pollutants discharged or spilled in water torestore it to pre-spill condition.

(h) "Accidental Spills" refers to spills of oil or other hazardous substances in water that result from accidents involvingthe carriers of such substance such as collisions and grounding.

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(i) "Areas of Critical Environmental Concern" are areas where uncontrolled development could result in irreparabledamage to important historic, cultural, or aesthetic values or natural systems or processes of national significance.

(j) "Hazardous Substances" means elements or compounds which when discharged in any quantity present imminent or substantial danger to public health and welfare.

(k) "Areas Impacted by Public Facilities" refers to areas where the introduction of public facilities may tend to inducedevelopment and urbanization of more than local significance or impact.

(l) "Environmental Impact" is the alteration, to any degree, of environmental conditions or the creation of a new set of environmental conditions, adverse or beneficial, to be induced or caused by a proposed project.

(m) "Government Agencies" refers to national, local and regional agencies and instrumentalities including government-owned and controlled corporations.

TITLE VIIFINAL PROVISIONS

Section 63. Separability of Provisions. If any provision of this Code, or the application of such provisions to any person or circumstance, is declared unconstitutional, the remainder of the Code or the application of such provision to other persons or

circumstances shall not be affected by such declaration.