TORTS from liability fro the latter’s act.
The fundamental
TORTS DISTINGUISHED FROM BREACH OF
CONTRACT
CANGCO VS MANILA RAILROAD CO
FACTS
Jose Cangco was an employee of Manila Railroad
Company as clerk. He lived in San Mateo which is located
upon the line of the defendant railroad company. He used
to travel by trade to the office located in Manila for free.
On January 21, 1915, on his way home by rail and when
the train drew up to the station in San Mateo, he rose from
his seat, making his exit through the door. When he
stepped off from the train, one or both of his feet came in
contact with a sack of watermelons causing him to slip off
from under him and he fell violently on the platform. He
rolled and was drawn under the moving car. He was badly
crushed and lacerated. He was hospitalized which resulted
to amputation of his hand. He filed the civil suit for
damages against defendant in CFI of Manila founding his
action upon the negligence of the employees of defendant
in placing the watermelons upon the platform and in
leaving them so placed as to be a menace to the security
of passengers alighting from the train. The trial court after
having found negligence on the part of defendant,
adjudged saying that plaintiff failed to use due caution in
alighting from the coach and was therefore precluded
from recovering, hence this appeal.
ISSUE
Is the negligence of the employees attributable to their
employer whether the negligence is based on contractual
obligation or on torts?
HELD
YES. It cannot be doubted that the employees of
defendant were guilty of negligence in piling these sacks
on the platform in the manner stated. It necessarily
follows that the defendant company is liable for the
damage thereby occasioned unless recovery is barred by
the plaintiff’s own contributory negligence. It is to note
that the foundation of the legal liability is the contract of
carriage. However Art. 1903 relates only to culpa
aquiliana and not to culpa contractual, as the Court
cleared on the case of Rakes v. Atlantic Gulf. It is not
accurate to say that proof of diligence and care in the
selection and control of the servant relieves the master
distinction between obligation of this character and those
which arise from contract, rest upon the fact that in cases
of non-contractual obligations it is the wrongful or
negligent act or omission itself which creates the
vinculum juris, whereas in contractual relations the
vinculum exists independently of the breach of the
voluntary duty assumed by the parties when entering into
the contractual relation.
When the source of obligation upon which plaintiff’s
cause of action depends is a negligent act or omission, the
burden of proof rest upon the plaintiff to prove
negligence. On the other hand, in contractual undertaking,
proof of the contract and of its nonperformance is suffient
prima facie to warrant recovery. The negligence of
employee cannot be invoked to relieve the employer from
liability as it will make juridical persons completely
immune from damages arising from breach of their
contracts. Defendant was therefore liable for the injury
suffered by plaintiff, whether the breach of the duty were
to be regarded as constituting culpa aquiliana or
contractual.
As Manresa discussed, whether negligence occurs as an
incident in the course of the performance of a contractual
undertaking or is itself the source of an extra-contractual
obligation, its essential characteristics are identical. There
is always an act or omission productive of damage due to
carelessness or inattention on the part of the defendant.
The contract of defendant to transport plaintiff carried
with it, by implication, the duty to carry him in safety and
to provide safe means of entering and leaving its trains.
Contributory negligence on the part of petitioner as
invoked by defendant is untenable. In determining the
question of contributory negligence in performing such
act- that is to say, whether the passenger acted prudently
or recklessly- age, sex, and physical condition of the
passenger are circumstances necessarily affecting the
safety of the passenger, and should be considered. It is to
be noted that the place was perfectly familiar to plaintiff
as it was his daily routine. Our conclusion is there is
slightly underway characterized by imprudence and
therefore was not guilty of contributory negligence. The
decision of the trial court is REVERSED.
1
JAPAN AIRLINES VS SIMANGAN
FACTS:
Respondent needed to go to the US to donate his
kidney to his ailing cousin. Having obtained an
emergency US Visa, respondent purchased a round trip
ticket from petitioner JAL. He was scheduled to a flight
bound for LA via Japan. On the date of his flight,
respondent passed through rigid immigration and security
routines before being allowed to board a JAL plane.
While inside the plane, respondent was asked to
show his travel documents. After which he was ordered
by the crew to leave the plane, imputing that respondent
is carrying falsified travel documents. Respondent
pleaded but was ignored and under constraint he gets off
the plane. The plane took off and respondent was left
behind.
Respondent was refunded with the cost of his
ticket minus 500 USD, when JAL found out eventually
that his travel documents were not falsified and in order.
Respondent filed an action for damages against JAL.
RTC RULING: JAL is liable for beach of contract of
carriage, and should pay 1M as MD, 500K as ED, 250K
as AF + cost of suit. JAL appealed contending it is not
guilty of breach of contract of carriage and not liable for
damages.
CA RULING: Affirmed RTC decision with modification
as to amount of damages for being scandalously
excessive. 500K MD, 250K ED and NO AT.
ISSUE:
WON JAL is guilty of breach of contract of carriage.
WON Simangan is entitled to moral and exemplary
damages.
HELD:
JAL is guilty of breach of contract of carriage and is liable
for damages. Petition of JAL was denied. CA decision
was affirmed with modification. 500K ED, 100K ED,
200K AF.
RATIO:
Breach of contract of carriage
In an action for breach of contract of carriage, all that is
required of plaintiff is to prove the existence of such
contract and its non-performance by the carrier through
the failure to carry the passenger safely to his destination.
Simangan complied with these requisites. Damage was
accrued by JAL when Simangan was bumped off despite
his protestations and valid travel documents and
notwithstanding his contract of carriage with JAL.
Award of moral damages in breach of contract of carriage.
As a general rule, moral damages are not recoverable in
actions for damages predicated on a breach of contract for
it is not enumerated under Art 2219 NCC. As an
exception, such damages are recoverable in:
1. Mishaps resulting to a death of a passenger (Art.
1764 NCC)
2. When carrier is guilty of fraud or bad faith (Art.
2220)
JAL breached its contract of carriage with respondent in
bad faith, when its crew ordered respondent to disembark
while the latter is already settled in his assigned seat under
the guise of verifying the genuineness of his travel
documents. Inattention to and lack of care for the interest
of its passengers who are entitled ot its utmost
consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to award
of moral damages.
Award of exemplary damages in breach of contract of
carriage.
Exemplary damages maybe recovered in contractual
obligations as a way of example or correction for the
public good.JAL is liable for exemplary damages as its
acts constitute wanton, oppressive and malevolent acts
against respondent. Passengers have the right to be treated
by the carrier’s employees with kindness, respect,
courtesy and due consideration and are entitled to be
protected against personal misconduct, injurious
language, indignities and abuses from such employees.
2
RADIO COMMUNICATIONS VS CA
Facts:
Loreto Dionela filed a complaint of damages against
Radio Communiciations of the Philippines, Inc. (RCPI)
due to the telegram sent through its Manila Office to the
former, reading as follows:
176 AS JR 1215PM 9 PAID MANDALUYONG JUL
22-66 LORETO DIONELA CABANGAN LEGASPI
CITY
WIRE ARRIVAL OF CHECK FER
LORETO DIONELA-CABANGAN-
WIRE ARRIVAL OF CHECK-PER
115 PM
SA IYO WALANG PAKINABANG DUMATING KA
DIYAN-WALA-KANG PADALA DITO KAHIT
BULBUL MO
Loreto Dionela alleges that the defamatory words on the
telegram sent to him wounded his feelings, caused him
undue embarrassment and affected adversely his business
because other people have come to know of said
defamatory words. RCPI alleges that the additional words
in Tagalog was a private joke between the sending and
receiving operators, that they were not addressed to or
intended for plaintiff and therefore did not form part of
the telegram, and that the Tagalog words are not
defamatory.
The RTC ruled that the additional words are libelous for
any person reading the same would logically think that
they refer to Dionela, thus RCPI was ordered to pay moral
damages in the amount of P40, 000.00. The Court
of Appeals affirmed the decision ruling that the company
was negligent and failed to take precautionary steps to
avoid the occurrence of the humiliating incident, and the
fact that a copy of the telegram is filed among other
telegrams and open to public is sufficient publication;
however reducing the amount awarded to P15, 000.00
Issue:
Whether or not the company should answer directly and
primarily for the civil liability arising from the criminal
act of its employee.
Ruling:
Yes. The cause of action of the private respondent is based
on Arts. 19 and 20 of the New Civil Code, as well as on
respondent’s breach of contract thru the negligence of its
own employees. By adding extraneous and libelous
matters in the message sent to the private respondent,
there is a clear breach of contract; for upon payment of
the fixed rate, the company undertakes to transmit the
message accurately.
In contracts, the negligence of the employee (servant) is
the negligence of the employer (master). This is the
master and servant rule. As a corporation, the petitioner
can act only through its employees. Hence the acts of
its employees in receiving and transmitting messages are
the acts of the petitioner. To hold that the petitioner is not
liable directly for the acts of its employees in the pursuit
of petitioner’s business is to deprive the general public
availing of the services of the petitioner of an effective
and adequate remedy.
In most cases, negligence must be proved in order that
plaintiff may recover. However, since negligence may be
hard to substantiate in some cases, we may apply
the doctrine of RES IPSA LOQUITUR (the thing speaks
for itself), by considering the presence of facts or
circumstances surrounding the injury.
The judgment of the CA is affirmed.
SYQUIA VS CA
FACTS:
1. Petitioners were the parents and siblings, respectively,
of the deceased Vicente Juan Syquia. On March 5, 1979,
they filed a complaint in the then Court of First Instance
against herein private respondent, Manila Memorial Park
Cemetery, Inc. for recovery of damages arising from
breach of contract and/or quasi-delict.
2. According to the complaint, the petitioners and
respondent to inter the remains of deceased in the Manila
Memorial Park Cemetery in the morning of July 25, 1978.
They also alleged that the concrete vault encasing the
coffin of the deceased had a hole approximately three (3)
inches in diameter. Upon opening the vault, it became
apparent that there was evidence of total flooding, the
coffin was entirely damaged and the exposed parts of the
deceased’s remains were damaged.
3. The complaint prayed that judgment be rendered
ordering defendant-appellee to pay plaintiffs-appellants
P30,000.00 for actual damages, P500,000.00 for moral
damages, etc.
3
DECISION OF LOWER COURTS:
1. Trial Court: dismissed the complaint. the contract
between the parties did not guarantee that the cement
vault would be waterproof; that there could be no quasi-
delict because the defendant was not guilty of any fault or
negligence, and because there was a pre- existing
contractual relation.
Contention of the defense: "The hole had to be bored
through the concrete vault because if it has no hole the
vault will (sic) float and the grave would be filled with
water and the digging would caved (sic) in the earth, the
earth would caved (sic) in the (sic) fill up the grave."
2. Court of Appeals: affirmed dismissal.
ISSUE: whether the Manila Memorial Park Cemetery,
Inc., breached its contract with petitioners; or,
alternatively, whether private respondent was guilty of a
tort.
RULING:
NO, there was no negligent act on the part of the
cemetery.
Although a pre-existing contractual relation between
the parties does not preclude the existence of aculpa
aquiliana, We find no reason to disregard the
respondent's Court finding that there was no
negligence.
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
Syquias and the Manila Memorial Park Cemetery, Inc.,
entered into a contract entitled "Deed of Sale and
Certificate of Perpetual Care" on August 27, 1969. That
agreement governed the relations of the parties and
defined their respective rights and obligations. Hence, had
there been actual negligence on the part of the Manila
Memorial Park Cemetery, Inc., it would be held liable not
for a quasi-delict or culpa aquiliana, but for culpa
contractual as provided by Article 1170 of the Civil
Code, to wit: Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are
liable for damages.
There was no stipulation in the Deed of Sale and
Certificate of Perpetual Care and in the Rules and
Regulations of the Manila Memorial Park Cemetery, Inc.
that the vault would be waterproof.
The law defines negligence as the "omission of that
diligence which is required by the nature of the
obligation and corresponds with the circumstances of
the persons, of the time and of the place." In the
absence of stipulation or legal provision providing the
contrary, the diligence to be observed in the
performance of the obligation is that which is expected
of a good father of a family.
Private respondent has exercised the diligence of a good
father of a family in preventing the accumulation of water
inside the vault which would have resulted in the caving
in of earth around the grave filling the same with earth
FEBTC VS CA
FACTS: Luis Luna has a FAREASTCARD issued
by Far East Bank and Trust Company. with a
supplemental card issued to Clarita S. Luna. Clarita lost
her credit card and informed Far East. She submitted an
affidavit of loss. In cases of this nature, the bank would
record the lost card, along with the principal card, as a
"Hot Card" or "Cancelled Card" in its master file.
When Luis had lunch for a close friend at a restaurant in
a hotel, the card was not honored then Luis was forced to
pay in cash so he felt embarrassed. Luis Luna demanded
from Far East the payment of damages. The vice-
president of the bank, expressed the bank's apologies to
Luis in a letter. A letter was also sent to the restaurant to
assure that Luis was "very valued clients" of Far East. The
hotel wrote back to say that the credibility of Luis had
never been "in question." Still evidently feeling aggrieved
Luis filed a complaint for damages. RTC found Far East
liable and ordered to pay Luna. The CA affirmed the
decision of the trial court.
ISSUE: Whether or not this is an action for quasi-delict.
HELD: No. The Court has not in the process overlooked
another rule that a quasi-delict can be the cause for
breaching a contract that might thereby permit the
application of applicable principles on tort even where
there is a pre-existing contract between the plaintiff and
the defendant (Phil. Airlines vs. Court of Appeals, 106
SCRA 143; Singson vs. Bank of Phil. Islands, 23 SCRA
1117; and Air France vs. Carrascoso, 18 SCRA 155). This
4
doctrine, unfortunately, cannot improve Luna's case for it
can aptly govern only where the act or omission
complained of would constitute an actionable tort
independently of the contract. The test (whether a quasi-
delict can be deemed to underlie the breach of a contract)
can be stated thusly: Where, without a pre-existing
contract between two parties, an act or omission can
nonetheless amount to an actionable tort by itself, the fact
that the parties are contractually bound is no bar to the
application of quasi-delict provisions to the case. Here,
Luna's damage claim is predicated solely on their
contractual relationship; without such agreement, the act
or omission complained of cannot by itself be held to
stand as a separate cause of action or as an independent
actionable tort. WHEREFORE, the appealed decision is
MODIFIED by deleting the award of moral and
exemplary damages to Luna; in its stead, Far East is
ordered to pay an amount of P5,000.00 by way of nominal
damages.
REGINO VS PANGASINAN COLLEGES OF
SCIENCE AND TECHNOLOGY
FACTS:
 Petitioner Khristine Rea M. Regino was a first year
computer science student at Respondent Pangasinan
Colleges of Science and Technology (PCST).
 She comes from a very poor family and she was only
able to go to school by means of financial support
from her relatives.
 During her second semester of school year 2001-
2002, she was enrolled in logic and statistics subjects
under Repondents Rachelle A. Gamurot and Elissa
Baladad (her teachers)
 It was in February 2002 that the college arranged a
fund raising campaign called “Rave Party and Dance
Revolution”. The proceeds of this dance will be used
to construct the school’s tennis and volleyball courts.
 Everyone was required to buy at least two tickets
priced at 100 pesos each. People who bought the
tickets will be given additional points in their test
scores but those who did not buy will not be allowed
to take the final exams.
 Khristine, having no money and religious restrictions,
refused to buy the tickets.
 Thus on the examination dates, she was not allowed
by her two teachers, Gamurot and Balalad, to take her
final exam on statistics and logic.
 The next day, the teacher announced to the whole
class that khristine and another student was not
permitted to take the exam because of the failure to
buy the tickets then subsequently ejected the two from
class.
 Khristine continued to plead with the teachers to
allow her but they kept their stand and defended their
position saying that they were complying with
PCST’s policy.
 Khristine filed in the RTC as a pauper litigant against
PCST and her two teachers for damages.
 The respondents filed a motion to dismiss based on
the khristine’s failure to exhaust administrative
remedies as they are contending that the case
should’ve been filed in the CHED (commission of
higher education) and not in the RTC
 Khristine on the other hand says that prior exhaustion
of administrative remedies was unnecessary, because
her action was not administrative in nature, but one
purely for damages arising from respondents breach
of the laws on human relations
 RTC
o The RTC dismissed the complaint for the lack of
cause of action. It said that considering the case
was between a school, two teachers and a student,
CHED has jurisdiction over the case and not
RTC. And it dismissed the case for the lack of
cause of action without explaining their ground.
ISSUE/s:
1. W/N the doctrine of exhaustion of administrative
remedies is applicable
2. W/N the Complaint stated sufficient cause(s) of
action.
HELD:
1. Yes
5
The Supreme Court ruled that the doctrine of exhaustion course. Considering that the fee was not part of the
of administrative remedies has no bearing on the present student-school contract entered into at the start of the
case because the petitioner was not asking for the reversal year, it cannot be unilaterally imposed to the prejudice of
of the policies of the PCST neither was she demanding the enrollees.
that the school allow her to take the final examinations
It should be noted that the student-school contract is not
(considering that she was already enrolled in a different
an ordinary one and is imbued with public interest
school). The acts of the respondent can no longer be
considering that it is protected by the constitution and by
reversed and even if it was reversed, it would not be
a legislative act called the Education Act of 1982.
adequate to redress her grievances
b. Liability for Tort
The Supreme Court also held that the doctrine can only be
applied when there is competence on the part of the In her complaint, Khristine wrote that she was inhumanly
administrative body to act upon the matter complained of. punished by reason only of their poverty, religious
Thus in the case at bar, the CHED does not have the power practive or lowly station I life which inculcated feelings
to award damages to the petitioner. of guilt, disgrace and unworthiness and as a result she was
unable to finish her subjects for the second semester and
And lastly, the doctrine cannot be applied when the issue
had to lag her studies for a full year. The acts caused her
is purely legal and well within the jurisdiction of the trial
extreme humiliation and mental agony and she asks for
court. The petitioner’s action for damages calls for the
compensation as the respondents violated Article 19, 21,
application of the Civil Code which falls within the
and 26 of the Civil Code.
jurisdiction of the courts.
The court held that generally, tort arises only between
2. Yes
partieis not otherwise bound by a contract. But in the case
a. Breach of Action of PSBA vs. CA an academic institution may be held
liable for tort even if it has an existing contract with its
In the case of Alcuaz v. PSBA, the court characterized the
students, since the act that violated the contract may also
relationship between the school and the student as a
be a tort.
contract, where the student, once admitted by the school
is considered enrolled for one semester. And in a The Respondent CANNOT use the right to academic
succeeding case (Non v. Dames), the court ruled that it is freedom as a defense because According to present
not merely for one semester but an entire period that the jurisprudence, academic freedom encompasses the
student is expected to complete it. Thus it can be seen that independence of an academic institution to determine for
when it comes to the court, the relationship between the itself (1) who may teach, (2) what may be taught, (3) how
school and the student is contractual in nature. it shall teach, and (4) who may be admitted to study.
Being that the relationship is reciprocal, where the school DISPOSITIVE: WHEREFORE, the Petition is hereby
would be providing the education while the student will GRANTED, and the assailed Orders REVERSED. The
be abiding by the rules and regulations of the school. The trial court is DIRECTED to reinstate the Complaint and,
terms of the contract are defined at the moment of its with all deliberate speed, to continue the proceedings in
inception- upon enrollment of the student. Thus it is in Civil Case No. U-7541. No costs.
practice that the student makes a down payment at the
beginning of the semester and succeeding payments paid
before every preliminary, midterm and final examination.
Their failure to pay their financial obligation is regarded
as a valid ground for the school to deny them the
opportunity to take these examinations.
In the present case, the PCST imposed a revenue raising
measure in the middle of the semester. It made the
financial contribution of the student as a condition for the
students to take their final examinations which ultimately
is translated to the recognition of their ability to finish the

6
TORTS DISTINGUISHED FROM CIVIL
LIABILITY ARISING FROM CRIME
PEOPLE VS LIGON
Facts:
Accused-appellant, Fernando Gabat was convicted of the
crime of Robbery with homicide and was sentenced to
reclusion perpetua. Gabat allegedly robbed Jose
“Rosales” Ortiz, a 17 year old working student, who was
a cigarette vendor. According to Prudencio Castillo, a taxi
driver, who allegedly saw the incident that transpired on
the night Ortiz died. According to Castillo, he was at a
distance of about 3 meters travelling on the same lane and
was behind the Kombi driven by Rogelio Ligon together
with Gabat.
Castillo, in his testimony, said that Gabat grabbed the box
of cigarettes from Rosales. That while waiting for the
traffic light to change from red to green, Castillo idly
watched the Volkswagon Kombi and saw Gabat signal to
Ortiz. While Ortiz was handling the cigarettes to Gabat,
the traffic light changed to green and as the Kombi moved
forward, Gabat grabbed the box from Ortiz. Ortiz ran
beside the Jombi and was able to hold on to the
windowsill with his right hand. Howeverm as the Kombi
continued to speed towards the C.M. Rector underpass,
Gabat forcibly remove the hand of Rosales from the said
windowsill and as a result fell face down on the ground.
On the other hand, according to Gabat, after Ortiz handed
the two sticks cigarettes Gabat in turn paid him a 5 peso
bill. In order to change the said bill, Ortiz placed his box
between the arm of Gabat and the window frame. When
the traffic light changed to green, Ligon moved the
vehicle forward. That in spite of Gabat’s order to stop the
vehicle, Ligon said that it could not be done due the the
moving vehicular traffic. When Ortiz fell down, Gabat
shouted at Ligon but the latter replied that they should go
on to Las Pinas and report the incident to the parents of
Gabat and that later they would come back to the scene of
the incident. At this point, the Kombi was blocked by
Castillo’s taxi and the jeep driven by the policeman.
The trial court gave full credence to Castillo’s testimony
and dismissed Gabat’s testimony on the ground that it is
of common knowledge that cigarette vendors do not let go
of their cigarette. Gabat was convicted by the trial court;
Hence, this appeal.
Issue: Whether a person who is not criminally liable is
also free from civil liability.
Held:
According to the Court of Appeals, although Castillo is a
disinterested witness, his testimony even if not tainted
with bias is not entirely free from doubt because his
observation of the event could have been faulty. Castillo’s
taxi was driving a car lower in height compared to the
Kombi. The windshield of the Kombi (1978 model) is
occupying approximately 1/3 of the rear end of the vehicle
making it visually difficult for Castillo to observe what
clearly transpired. Also, Castillo’s statement given to the
police on the evening of the incident did not mention that
he saw Gabat forcibly prying off the hand of Rosales from
the windowsill though such appeared in the police report.
Given the circumstances, the Court is not convinced with
moral certainty that the guilt of Gabat was established
beyond reasonable doubt. As such he is acquitted.
However, such does not necessarily exempt him from
civil liability as such only requires a preponderance of
evidence and such evidence is sufficient to establish
Gabat’s liability. The Court finds Gabat’s act and
omission with fault and negligence caused damage to
Ortiz. That he failed to prevent the driver from moving
forward while the purchase was completed; He failed to
help Ortiz while the latter clung to the moving vehicle; e
did not enforce his order to Ligon to stop; and that he
acquiesced in the driver’s act of speeding away instead of
stopping and picking up Ortiz.
His acquittal in the criminal prosecution does not bar the
heirs of Ortiz from recovering damages. The judgment of
acquittal extinguishes the civil liability only when it
includes a declaration that the facts from which the civil
liability might arise did not exist.
Wherefore, Gabat is sentenced to indemnify the heirs of
Ortiz the amount of P15,000 for the latter’s death, P1,733
for hospital and medical expenses, 4,100 for funeral
expenses, and the alleged loss of income amounting to
P20,000.
7
RUFO MAURICIO CONST VS IAC
FACTS:
Illustre Cabiliza was charged before the RTC of Legaspi
with homicide and damage to property through reckless
imprudence because he had willfully, unlawfully and
feloniously driven the Izusu dump truck owned by Rufo
Mauricio Construction. The vehicle hit the Colt Gallant
driven and owned by Judge Arsenio Solidum and directly
caused his untimely death.Cabiliza filed a Notice of
Appeal but his appeal did not pursue because he died. A
notice of death was filed by his counsel and on the same
notice, Atty. Beltran manifested Rufo Mauricio’s
intention to proceed with the case on appeal pursuant to
hisright as employer who is subsidiarily liable.The lower
court ordered the heirs of Cabiliza to appear and to
substitute him as appeallant for the civil aspect of the case.
On motion of the heirs of the victim, the court ordered a
writ of execution. However, the writ was returned
unsatisfied because Cabiliza was found insolvent as
manifested by the Certificate of Insolvency issued by the
Register of Deeds of Cagayan.The victim’s widow filed a
motion for the Issuance of a subsidiary writ of
executiontobe enforced against the employer of Cabiliza,
Rufo Mauricio and/or Rufo Mauricio Construction Co.
This was granted by the lower court and which was
affirmed by the Court of Appeals. Hence, Rufo filed an
appeal to SC.
ISSUE:
W/N, the dismissal of criminal case against the accused
wipes out not only the employee’s primarily civil liability
but also the employer’s subsidiary liability;
W/N, the petitioner can be condemned to pay the damages
without the opportunity to examine the witness;
RULING:
No. The death of the accused during the pendency of his
appeal or before the judgment of conviction (which
became final and executory) extinguished his criminal
liability to serve the imprisonment imposed and his
pecuniary liability for fines ,but not his civil liability
should the liability or obligation arise (not from a crime,
for here, no crime was committed, the accused not having
been convicted by final judgment, and therefore still
regarded as innocent) but from a quasi-delict(See Arts.
2176 and 2177,Civil Code), as in this case .The liability
of the employer here would not be subsidiary but solidary
with his driver(unless said employer can prove there was
no negligence on his part at all, thatis, if he can prove due
diligence in the selection and supervision of his driver).
Inasmuch as the employer (petitioner herein) was not a
party in the criminal case, and to grant him his day in court
for the purpose of cross-examining the prosecution
witnesses on their testimonies on the driver's alleged
negligence and the amount of damages to which the heirs
of the victim are entitled, as well as to introduce any
evidence or witnesses he may care to present in his
defense, the hearing on the motion to quash the subsidiary
writ of execution must be reopened precisely for the
purpose adverted to hereinabove.
DULAY VS CA
FACTS:
 December 7, 1988: Due to a heated argument, Benigno
Torzuela, the security guard on duty at Big Bang Sa
Alabang carnival, shot and killed Atty. Napoleon
Dulay
 Maria Benita A. Dulay, widow of the deceased
Napoleon Dulay, in her own behalf and in behalf of her
minor children filed an action for damages against
Benigno Torzuela for wanton and reckless discharge
of the firearm and Safeguard Investigation and
Security Co., Inc., (Safeguard) and/or Superguard
Security Corp. (Superguard) as employers
for negligence having failed to exercise the diligence
of a good father of a family in the supervision and
control of its employee to avoid the injury
 Superguard:
 Torzuela's act of shooting Dulay was beyond the
scope of his duties, and was committed with
deliberate intent (dolo), the civil liability therefor
is governed by Article 100 of the Revised Penal
Code, which states:
Art. 100. Civil liability of a person guilty of a felony. —
Every person criminally liable for a felony is also civilly
liable.
 civil liability under Article 2176 applies only to
quasi-offenses under Article 365 of the Revised
Penal Code
 CA Affirmed RTC: dismising the case of Dulay
8
ISSUE:
W/N Superguard and Safeguard commited an actionable
breach and can be civilly liable even if Benigno Torzuela
is already being prosecuted for homicide
HELD:
YES. Petition for Review is Granted. remanded to RTC
for trial on the merits
 Rule 111 of the Rules on Criminal Procedure
provides:
Sec. 1. Institution of criminal and civil actions. When a
criminal action is instituted, the civil 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 it separately 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
arising from the same act or omission of the accused
 Contrary to the theory of private respondents,
there is no justification for limiting the scope of
Article 2176 of the Civil Code to acts or
omissions resulting from negligence. Well-
entrenched is the doctrine that article 2176 covers
not only acts committed with negligence, but also
acts which are voluntary and intentional.
 Article 2176, where it refers to "fault or
negligence," covers not only acts "not punishable
by law" but also acts criminal in character;
whether intentional and voluntary or negligent.
Consequently, a separate civil action against the
offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or
acquitted, provided that the offended party is not
allowed, if he is actually charged also criminally,
to recover damages on both scores, and would be
entitled in such eventuality only to the bigger
award of the two, assuming the awards made in
the two cases vary
 extinction of civil liability referred to in Par. (e)
of Section 3, Rule 111, refers exclusively to civil
liability founded on Article 100 of the Revised
Penal Code, whereas the civil liability for the
same act considered as quasi-delict only and not
as a crime is not extinguished even by a
declaration in the criminal case that the criminal
act charged has not happened or has not been
committed by the accused
 It is enough that the complaint alleged that
Benigno Torzuela shot Napoleon Dulay resulting
in the latter's death; that the shooting occurred
while Torzuela was on duty; and that either
SUPERGUARD and/or SAFEGUARD was
Torzuela's employer and responsible for his acts.
CHUA VS CA
Facts: On 28 February 1996, Lydia Hao, treasurer of
Siena Realty Corporation, filed a complaint-affidavit with
the City Prosecutor of Manila charging Francis Chua and
his wife, Elsa Chua, of four counts of falsification of
public documents pursuant to Article 172[3] in relation to
Article 171[4] of the Revised Penal Code. The charge
reads: "That on or about May 13, 1994, in the City of
Manila, Philippines, the said accused, being then a private
individual, did then and there willfully, unlawfully and
feloniously commit acts of falsification upon a public
document, to wit: the said accused prepared, certified, and
falsified the Minutes of the Annual Stockholders meeting
of the Board of Directors of the Siena Realty Corporation,
duly notarized before a Notary Public, Atty. Juanito G.
Garcia and entered in his Notarial Registry as Doc No.
109, Page 22, Book No. IV and Series of 1994, and
therefore, a public document, by making or causing it to
appear in said Minutes of the Annual Stockholders
Meeting that one LYDIA HAO CHUA was present and
has participated in said proceedings, when in truth and in
fact, as the said accused fully well knew that said Lydia
C. Hao was never present during the Annual Stockholders
Meeting held on April 30, 1994 and neither has
participated in the proceedings thereof to the prejudice of
public interest and in violation of public faith and
destruction of truth as therein proclaimed. Contrary to
Law."
Thereafter, the City Prosecutor filed the Information
(Criminal Case 285721) for falsification of public
document, before the Metropolitan Trial Court (MeTC) of
Manila, Branch 22, against Francis Chua but dismissed
the accusation against Elsa Chua. Francis Chua, was
arraigned and trial ensued thereafter. During the trial in
the MeTC, Atty. Evelyn Sua-Kho and Atty. Ariel Bruno
Rivera appeared as private prosecutors and presented Hao
9
as their first witness. After Hao’s testimony, Chua moved
to exclude Hao’s counsels as private prosecutors in the
case on the ground that Hao failed to allege and prove any
civil liability in the case. In an Order, dated 26 April 1999,
the MeTC granted Chua’s motion and ordered the
complainant’s counsels to be excluded from actively
prosecuting Criminal Case 285721. Hao moved for
reconsideration but it was denied. Hao filed a petition for
certiorari (SCA 99-94846), before the Regional Trial
Court (RTC) of Manila, Branch 19. The RTC gave due
course to the petition and on 5 October 1999, the RTC in
an order reversed the MeTC Order. Chua moved for
reconsideration which was denied. Dissatisfied, Chua
filed before the Court of Appeals a petition for certiorari.
On 14 June 2001, the appellate court promulgated its
Decision denying the petition. The Court of Appeals held
that the action was indeed a derivative suit, for it alleged
that petitioner falsified documents pertaining to projects
of the corporation and made it appear that Chua was a
stockholder and a director of the corporation. According
to the appellate court, the corporation was a necessary
party to the petition filed with the RTC and even if Hao
filed the criminal case, her act should not divest the
Corporation of its right to be a party and present its own
claim for damages. Chua moved for reconsideration but it
was denied in a Resolution dated 20 November 2001.
Hence, the petition by Chua.
Issue: Whether the criminal complaint was in the nature
of a derivative suit.
Held: Under Section 36 of the Corporation Code, read in
relation to Section 23, where a corporation is an injured
party, its power to sue is lodged with its board of directors
or trustees. An individual stockholder is permitted to
institute a derivative suit on behalf of the corporation
wherein he holds stocks in order to protect or vindicate
corporate rights, whenever the officials of the corporation
refuse to sue, or are the ones to be sued, or hold the control
of the corporation. In such actions, the suing stockholder
is regarded as a nominal party, with the corporation as the
real party in interest. A derivative action is a suit by a
shareholder to enforce a corporate cause of action. The
corporation is a necessary party to the suit. And the relief
which is granted is a judgment against a third person in
favor of the corporation. Similarly, if a corporation has a
defense to an action against it and is not asserting it, a
stockholder may intervene and defend on behalf of the
corporation. Under the Revised Penal Code, every person
criminally liable for a felony is also civilly liable. When a
criminal action is instituted, the civil action for the
recovery of civil liability arising from the offense charged
shall be deemed instituted with the criminal action, unless
the offended party waives the civil action, reserves the
right to institute it separately or institutes the civil action
prior to the criminal action. Not every suit filed in behalf
of the corporation is a derivative suit. For a derivative suit
to prosper, it is required that the minority stockholder
suing for and on behalf of the corporation must allege in
his complaint that he is suing on a derivative cause of
action on behalf of the corporation and all other
stockholders similarly situated who may wish to join him
in the suit. It is a condition sine qua non that the
corporation be impleaded as a party because not only is
the corporation an indispensable party, but it is also the
present rule that it must be served with process. The
judgment must be made binding upon the corporation in
order that the corporation may get the benefit of the suit
and may not bring subsequent suit against the same
defendants for the same cause of action. In other words,
the corporation must be joined as party because it is its
cause of action that is being litigated and because
judgment must be a res adjudicata against it. Herein, the
complaint was instituted by Hao against Chua for
falsifying corporate documents whose subject concerns
corporate projects of Siena Realty Corporation. Clearly,
Siena Realty Corporation is an offended party. Hence,
Siena Realty Corporation has a cause of action. And the
civil case for the corporate cause of action is deemed
instituted in the criminal action. However, the board of
directors of the corporation in this case did not institute
the action against Chua. Hao was the one who instituted
the action. Nowhere is it stated that she is filing the same
in behalf and for the benefit of the corporation. Thus, the
criminal complaint including the civil aspect thereof
could not be deemed in the nature of a derivative suit.
Additional:
Under the Revised Penal Code, every person criminally
liable for a felony is also civilly liable. When a criminal
action is instituted, the civil action for the recovery of civil
liability arising from the offense charged shall be deemed
instituted with the criminal action, unless the offended
party waives the civil action, reserves the right to institute
it separately or institutes the civil action prior to the
criminal action.
The basis of civil liability arising from crime is the
fundamental postulate that every man criminally liable is
also civilly liable. When a person commits a crime he
offends two entities namely (1) the society in which he
lives in or the political entity called the State whose law
10
he has violated; and (2) the individual member of the
society whose person, right, honor, chastity or property
has been actually or directly injured or damaged by the
same punishable act or omission. An act or omission is
felonious because it is punishable by law, it gives rise to
civil liability not so much because it is a crime but because
it caused damage to another. Additionally, what gives rise
to the civil liability is really the obligation and the moral
duty of everyone to repair or make whole the damage
caused to another by reason of his own act or omission,
whether done intentionally or negligently. The indemnity
which a person is sentenced to pay forms an integral part
of the penalty imposed by law for the commission of the
crime. The civil action involves the civil liability arising
from the offense charged which includes restitution,
reparation of the damage caused, and indemnification for
consequential damages.
Under the Rules, where the civil action for recovery of
civil liability is instituted in the criminal action pursuant
to Rule 111, the offended party may intervene by counsel
in the prosecution of the offense.
Private respondent did not waive the civil action, nor did
she reserve the right to institute it separately, nor institute
the civil action for damages arising from the offense
charged. Thus, we find that the private prosecutors can
intervene in the trial of the criminal action.
LUMANTAS VS CALAPIZ
FACTS:
In 1995, Spouses Hilario Calapiz, Jr. and Herlita Calapiz
brought their 8-year-old son, Hanz Calapiz (Hanz), to the
Misamis Occidental Provincial Hospital, Oroquieta City,
for an emergency appendectomy. Hanz was attended to
by the petitioner, who suggested to the parents that Hanz
also undergo circumcision at no added cost to spare him
the pain. With the parents’ consent, the petitioner
performed the coronal type of circumcision on Hanz after
his appendectomy. On the following day, Hanz
complained of pain in his penis, which exhibited blisters.
His testicles were swollen. The parents noticed that the
child urinated abnormally after the petitioner forcibly
removed the catheter, but the petitioner dismissed the
abnormality as normal. Hanz was discharged from the
hospital over his parents’ protestations, and was directed
to continue taking antibiotics. After a few days, Hanz was
confined in a hospital because of the abscess formation
between the base and the shaft of his penis. Presuming
that the ulceration was brought about by Hanz’s
appendicitis, the petitioner referred him to Dr. Henry Go,
an urologist, who diagnosed the boy to have a damaged
urethra. Thus, Hanz underwent cystostomy, and thereafter
was operated on three times to repair his damaged urethra.
When his damaged urethra could not be fully repaired and
reconstructed, Hanz’s parents brought a criminal charge
against the petitioner for reckless imprudence resulting to
serious physical injuries. In his defense, the petitioner
denied the charge. He contended that at the time of his
examination of Hanz, he had found an accumulation of
pus at the vicinity of the appendix two to three inches
from the penis that had required immediate surgical
operation; that after performing the appendectomy, he had
circumcised Hanz with his parents’ consent by using a
congo instrument, thereby debunking the parents’ claim
that their child had been cauterized; that he had then
cleared Hanz once his fever had subsided; that he had
found no complications when Hanz returned for his
follow up check-up; and that the abscess formation
between the base and the shaft of the penis had been
brought about by Hanz’s burst appendicitis.
The RTC acquitted the petitioner of the crime charged for
insufficiency of the evidence. It held that the
Prosecution’s evidence did not show the required
standard of care to be observed by other members of the
medical profession under similar circumstances.
Nonetheless, the RTC ruled that the petitioner was liable
for moral damages because there was a preponderance of
evidence showing that Hanz had received the injurious
trauma from his circumcision by the petitioner. The
Petitioner appealed his case to the CA contending that he
could not be held civilly liable because there was no proof
of his negligence. The CA affirmed the RTC, sustaining
the award of moral damages.
ISSUE:
Whether the CA erred in affirming the petitioner’s civil
liability despite his acquittal of the crime of reckless
imprudence resulting in serious physical injuries.
HELD:
NO.
It is axiomatic that every person criminally liable for a
felony is also civilly liable. xxx Our law recognizes two
kinds of acquittal, with different effects on the civil
liability of the accused. First is an acquittal on the ground
that the accused is not the author of the act or omission
11
complained of. This instance closes the door to civil award as a sincere means of adjusting the value of the
liability, for a person who has been found to be not the award to a level that is not only reasonable but just and
perpetrator of any act or omission cannot and can never commensurate. Unless we make the adjustment in the
be held liable for such act or omission. There being no permissible manner by prescribing legal interest on the
delict, civil liability ex delicto is out of the question, and award, his sufferings would be unduly compounded. For
the civil action, if any, which may be instituted must be that purpose, the reckoning of interest should be from the
based on grounds other than the delict complained of. filing of the criminal information on April 17, 1997, the
This is the situation contemplated in Rule 111 of the Rules making of the judicial demand for the liability of the
of Court. The second instance is an acquittal based on petitioner.
reasonable doubt on the guilt of the accused. In this case,
even if the guilt of the accused has not been satisfactorily
established, he is not exempt from civil liability which
may be proved by preponderance of evidence only.
The petitioner’s contention that he could not be held
civilly liable because there was no proof of his negligence
deserves scant consideration. The failure of the
Prosecution to prove his criminal negligence with moral
certainty did not forbid a finding against him that there
was preponderant evidence of his negligence to hold him
civilly liable. With the RTC and the CA both finding that
Hanz had sustained the injurious trauma from the hands
of the petitioner on the occasion of or incidental to the
circumcision, and that the trauma could have been
avoided, the Court must concur with their uniform
findings. In that regard, the Court need not analyze and
weigh again the evidence considered in the proceedings a
quo. The Court, by virtue of its not being a trier of facts,
should now accord the highest respect to the factual
findings of the trial court as affirmed by the CA in the
absence of a clear showing by the petitioner that such
findings were tainted with arbitrariness, capriciousness or
palpable error.
Every person is entitled to the physical integrity of his
body. Although we have long advocated the view that any
physical injury, like the loss or diminution of the use of
any part of one’s body, is not equatable to a pecuniary
loss, and is not susceptible of exact monetary estimation,
civil damages should be assessed once that integrity has
been violated. The assessment is but an imperfect
estimation of the true value of one’s body. The usual
practice is to award moral damages for the physical
injuries sustained. In Hanz’s case, the undesirable
outcome of the circumcision performed by the petitioner
forced the young child to endure several other procedures
on his penis in order to repair his damaged urethra. Surely,
his physical and moral sufferings properly warranted the
amount of P50,000.00 awarded as moral damages.
Many years have gone by since Hanz suffered the injury.
Interest of 6% per annum should then be imposed on the
12
INDEPENDENT CIVIL ACTION, RATIONALE
AND PREJUDICIAL QUESTION
SANTOS VS PIZARRO
Facts: In April 1994, Viron Transit driver Sibayan was
charged with reckless imprudence resulting to multiple
homicide and multiple physical injuries for which
Sibayan was eventually convicted in December 1998. As
there was a reservation to file a separate civil action, no
pronouncement of civil liability was made by the MCTC.
In October 2000 Santos filed a complaint for damages
against Sibayan and Rondaris, the president and chairman
of Viron Transit. Viron Transit moved for the dismissal
of the complaint citing, among others, prescription
alleging that actions based on quasi delict prescribe in 4
years from the accrual of the cause of action.
Issue:
Held: Petitioners expressly made a reservation of their
right to file a separate civil action as a result of the crime
committed by Sibayan. On account of this reservation the
MCTC did not make any pronouncement as to the latter’s
civil liability. Although there were allegations of
negligence on the part of Sibayan and Viron Transit, such
does not necessarily mean that petitioners were pursuing
a cause of action based on quasi delict, considering that at
the time of the filing of the complaint, the cause of action
ex quasi delicto had already prescribed. Besides, in cases
of negligence, the offended party has the choice between
an action to enforce liability arising from crime under the
Revised Penal Code and an action for quasi delict under
the Civil Code.
An act or omission causing damage to another
may give rise to 2 separate civil liabilities on the part of
the offender, i.e. (1) civil liability ex delicto, under Article
100 of the RPC; and (2) independent civil liabilities (a)
not arising from an act or omission complained of as a
felony, e.g., culpa contractual or obligations arising from
law under Article 31 of the Civil Code, intentional torts
under Articles 32 and 34, and culpa aquiliana under
Article 2176 of the Civil Code; or (b) where the injured
party is granted a right to file an action independent and
distinct from the criminal proceedings.
While the cause of action ex quasi delicto had already
prescribed, petitioners can still pursue the remaining
avenue opened for them by their reservation, i.e., the
surviving cause of action ex delicto. This is so because the
prescription of the action ex quasi delicto does not operate
as a bar to an action to enforce the civil liability arising
from crime especially as the latter action had been
expressly reserved.
We held that the dismissal of the action based on
culpa aquiliana is not a bar to the enforcement of the
subsidiary liability of the employer. Once there is a
conviction for a felony, final in character, the employer
becomes subsidiarily liable if the commission of the crime
was in discharge of the duties of the employees. This is so
because Article 103 of the RPC operates the controlling
force to obviate the possibility of the aggrieved party
being deprived of indemnity even after the rendition of a
final judgment convicting the employee.
L.G FOODS CORP VS PAGAPONG-
AGRAVIADOR
FACTS:
Review on certiorari of a decision of the CA on 25 April
2003 affirming an order of Bacolod RTC, which in turn
denied the petitioners’ motion to dismiss an action for
damages arising from a vehicular accident instituted by
the Vallejera spouses.
On February 26, 1996, Charles Vallereja, a 7-year old son
of the Vallejera spouses, was hit by a Ford Fiera van
owned by LG Foods Corporation (LG Foods) and driven
by their employee, Vincent Norman Yeneza y Ferrer.
Charles died as a result of the accident.
An information for reckless imprudence resulting to
homicide was filed against the driver before the Bacolod
MTCC. Before the trial could be concluded, however, the
accused driver committed suicide. The case was then
dismissed.
On June 23, 1999, the spouses Vallejera filed a complaint
for damages against LG Foods alleging that as employers,
they failed to exercise due diligence in the selection and
supervision of their employees
In their defense, LG Foods denied liability by claiming to
have exercised such diligence and prayed for dismissal for
lack of cause of action. Also in their motion to dismiss,
they argued that the complaint was a claim for subsidiary
liability against an employer under A1035, RPC and, as
such, there must first be a judgment of conviction against
their driver to hold them liable. Since such condition was
not fulfilled due to the latter’s death, they argued, the
spouses had no cause of action.
13
The trial court denied the motion for lack of merit. Also,
it denied the motion for reconsideration of the matter. LG
Foods then went on certiorari to the CA alleging grave
abuse of discretion of the part of the trial judge.
The CA, however, affirmed the RTC decision ruling that
the complaint by the spouses does not purport to be based
on subsidiary liability since the basic elements of such
liability, such as conviction and insolvency of the accused
employee, were not even alleged in said complaint. It then
said that the complaint purports to exact responsibility for
fault or negligence under A2176, CC, which is entirely
separate and distinct from civil liability arising from
negligence under the A103, RPC. Liability under A2180,
CC is direct and immediate, and not conditioned upon
prior recourse against the negligent employee or showing
of insolvency.
Issue: Whether the cause of action of the Vallejera
spouses is founded on CC or RPC.
Ruling
The case is a negligence suit brought under A2176, CC to
recover damages primarily from LG Foods as employers
responsible for their negligent driver pursuant to A2180,
CC. The obligation imposed by A2176 is demandable not
only for one's own acts or omissions, but also for those of
persons for whom one is responsible. Thus, the employer
is liable for damages caused by his employees.
First. Nothing in the allegations in the complaint suggests
that the LG Foods are being made to account for their
subsidiary liability under Article 103 of the Revised Penal
Code. Plus, the complaint did not even aver the basic
elements for the subsidiary liability of an employer under
said provision.
Second. While not explicitly stated that the suit was for
damages based on quasi-delict, it alleged gross fault and
negligence on the part of the driver and the failure of LG
Foods, as employers, to exercise due diligence in the
selection and supervision of their employees. It was
further alleged that LG Foods is civilly liable for the
negligence/imprudence of their driver since they failed to
exercise the necessary diligence required of a good father
of the family in the selection and supervision of their
employees, which diligence, if exercised, could have
prevented the vehicular accident that resulted to the death
of their 7-year old son.
Third. Section 2, Rule 2, of the 1997 Rules of Civil
Procedure defines cause of action as the "act or omission
by which a party violates the right of another." Such act
or omission gives rise to an obligation which may come
from law, contracts, quasi contracts, delicts or quasi-
delicts.
Corollarily, an act or omission causing damage to another
may give rise to two separate civil liabilities on the part
of the offender, i.e., 1) civil liability ex delicto, and 2)
independent civil liabilities, such as those (a) not arising
from an act or omission complained of as felony (e.g.,
culpa contractual or obligations arising from law; the
intentional torts;14 and culpa aquiliana15); or (b) where
the injured party is granted a right to file an action
independent and distinct from the criminal action. Either
of these two possible liabilities may be enforced against
the offender.
Stated otherwise, victims of negligence or their heirs have
a choice between an action to enforce the civil liability
arising from culpa criminal under Article 100 of the
Revised Penal Code, and an action for quasi-delict (culpa
aquiliana) under Articles 2176 to 2194 of the Civil Code.
This is illustrated in A1161, CC providing that civil
obligation arising from criminal offenses shall be
governed by penal laws subject to the provision of A2177
and of the pertinent provision of Chapter 2, Preliminary
Title on Human Relation, and of Title XVIII of this Book,
regulating damages. This means that A2177 provides an
alternative remedy for the plaintiff. The choice is with the
plaintiff.
Fourth. Under Article 2180 of the Civil Code, the liability
of the employer is direct or immediate, not conditioned
upon prior recourse against the negligent employee and a
prior showing of insolvency. This was the recourse of the
spouses since there was no conviction in the criminal case
against the driver.
Fifth. LG Foods has been alleging that "they had
exercised due diligence in the selection and supervision
of [their] employees." This defense is an admission that
indeed the petitioners acknowledged the private
respondents' cause of action as one for quasi-delict under
A2180, CC.
Sixth. Since it is as if there was no criminal case to speak
of due to its premature termination, the fact that there was
no prior reservation made to institute a separate civil
action is of no moment.
14
CONSING JR VS PEOPLE
Doctrine: An independent civil action based on fraud
initiated by the defrauded party does not raise a
prejudicial question to stop the proceedings in a pending
criminal prosecution of the defendant for estafa through
falsification. This is because the result of the independent
civil action is irrelevant to the issue of guilt or innocence
of the accused.
Facts: Petitioner negotiated with and obtained for himself
and his mother, Cecilia de la Cruz (de la Cruz) various
loans totaling P18,000,000.00 from Unicapital Inc.
(Unicapital). The loans were secured by a real estate
mortgage constituted on a parcel of land registered under
the name of de la Cruz. In accordance with its option to
purchase the mortgaged property, Unicapital agreed to
purchase one-half of the property for a total consideration
of P21,221,500.00. Payment was effected by off-setting
the amounts due to Unicapital under the promissory notes
of de la Cruz and Consing in the amount
of P18,000,000.00 and paying an additional amount
of P3,145,946.50. The other half of the property was
purchased by Plus Builders, Inc. (Plus Builders), a joint
venture partner of Unicapital. Before Unicapital and Plus
Builders could develop the property, they learned that the
title to the property was really TCT No. 114708 in the
names of Po Willie Yu and Juanito Tan Teng, the parties
from whom the property had been allegedly acquired by
de la Cruz. TCT No. 687599 held by De la Cruz appeared
to be spurious. On its part, Unicapital demanded the
return of the total amount of P41,377,851.48 as of April
19, 1999 that had been paid to and received by de la Cruz
and Consing, but the latter ignored the demands.
Consing filed Civil Case No. 1759 in the Pasig City RTC
for injunctive relief, thereby seeking to enjoin Unicapital
from proceeding against him for the collection of
theP41,377,851.48 on the ground that he had acted as a
mere agent of his mother.
On the same date, Unicapital initiated a criminal
complaint for estafa through falsification of public
document against Consing and de la Cruz in the Makati
City Prosecutor’s Office.
Unicapital sued Consing in the RTC in Makati City (Civil
Case No. 99-1418) for the recovery of a sum of money
and damages, with an application for a writ of preliminary
attachment.
The Office of the City Prosecutor of Makati City filed
against Consing and De la Cruz an information for estafa
through falsification of public document in the RTC in
Makati City.
Consing moved to defer his arraignment in the Makati
criminal case on the ground of existence of a prejudicial
question due to the pendency of the Pasig and Makati civil
cases. On September 25, 2001, Consing reiterated his
motion for deferment of his arraignment, citing the
additional ground of pendency of CA-G.R. SP No. 63712
in the CA. On November 19, 2001, the Prosecution
opposed the motion.
On November 26, 2001, the RTC issued an order
suspending the proceedings in the Makati criminal case
on the ground of the existence of a prejudicial question,
and on March 18, 2001, the RTC denied the Prosecution’s
motion for reconsideration.
The State thus assailed in the CA the last two orders of
the RTC in the Makati criminal case via petition for
certiorari (C.A.-G.R. SP No. 71252).
On May 20, 2003, the CA promulgated its decision in
C.A.-G.R. SP No. 71252, dismissing the petition for
certiorari and upholding the RTC’s questioned orders. On
August 18, 2003, the CA amended its decision, reversing
itself.
Consing filed a motion for reconsideration, but the CA
denied the motion through the second assailed resolution
of December 11, 2003. Hence, this appeal by petition for
review on certiorari.
Issue: Whether or not there is an existence of a prejudicial
question that warranted the suspension of the proceedings
in the Makati criminal case
Held: NO
Ruling: Consing has hereby deliberately chosen to ignore
the firm holding in the ruling in G.R. No. 148193 to the
effect that the proceedings in Criminal Case No. 00-120
could not be suspended because the Makati civil case was
an independent civil action, while the Pasig civil case
raised no prejudicial question. That was wrong for him to
do considering that the ruling fully applied to him due to
the similarity between his case with Plus Builders and his
case with Unicapital.
A perusal of Unicapital’s complaint in the Makati civil
case reveals that the action was predicated on fraud. This
was apparent from the allegations of Unicapital in its
complaint to the effect that Consing and de la Cruz had
acted in a "wanton, fraudulent, oppressive, or malevolent
15
manner in offering as security and later object of sale, a liable for conspiring to falsify public documents. Hence,
property which they do not own, and foisting to the public the determination of the issue involved in Civil Case No.
a spurious title." As such, the action was one that could SCA 1759 for Injunctive Relief is irrelevant to the guilt or
proceed independently of Criminal Case No. 00-120 innocence of the respondent in the criminal case for estafa
pursuant to Article 33 of the Civil Code. through falsification of public document.
It is well settled that a civil action based on defamation, WHEREFORE, the Court AFFIRMS the amended
fraud and physical injuries may be independently decision promulgated on August 18, 2003; and ORDERS
instituted pursuant to Article 33 of the Civil Code, and petitioner to pay the costs of suit.
does not operate as a prejudicial question that will justify
the suspension of a criminal case.
In the instant case, Civil Case No. 99-95381, for Damages
and Attachment on account of the alleged fraud
committed by respondent and his mother in selling the
disputed lot to PBI is an independent civil action under
Article 33 of the Civil Code. As such, it will not operate
as a prejudicial question that will justify the suspension of
the criminal case at bar.
Contrary to Consing’s stance, it was not improper for the
CA to apply the ruling in G.R. No. 148193 to his case with
Unicapital, for, although the Manila and Makati civil
cases involved different complainants (i.e., Plus Builders
and Unicapital), the civil actions Plus Builders and
Unicapital had separately instituted against him were
undeniably of similar mold, i.e., they were both based on
fraud, and were thus covered by Article 33 of the Civil
Code. Clearly, the Makati criminal case could not be
suspended pending the resolution of the Makati civil case
that Unicapital had filed.
As far as the Pasig civil case is concerned, the issue of
Consing’s being a mere agent of his mother who should
not be criminally liable for having so acted due to the
property involved having belonged to his mother as
principal has also been settled in G.R. No. 148193, to wit:
In the case at bar, we find no prejudicial question that
would justify the suspension of the proceedings in the
criminal case (the Cavite criminal case). The issue in Civil
Case No. SCA 1759 (the Pasig civil case) for Injunctive
Relief is whether or not respondent (Consing) merely
acted as an agent of his mother, Cecilia de la Cruz; while
in Civil Case No. 99-95381 (the Manila civil case), for
Damages and Attachment, the question is whether
respondent and his mother are liable to pay damages and
to return the amount paid by PBI for the purchase of the
disputed lot. Even if respondent is declared merely an
agent of his mother in the transaction involving the sale
of the questioned lot, he cannot be adjudged free from
criminal liability. An agent or any person may be held

16
ELEMENTS
SEA COMMERCIAL CO INC VS CA
FACTS: SEACOM is a corporation engaged in the
business of selling and distributing agricultural
machinery, products and equipment. On September 20,
1966, SEACOM and JII entered into a dealership
agreement whereby SEACOM appointed JII as its
exclusive dealer in the City and Province of Iloilo. Tirso
Jamandre executed a suretyship agreement binding
himself jointly and severally with JII to pay for all
obligations of JII to SEACOM. The agreement was
subsequently amended to include Capiz in the territorial
coverage and to make the dealership agreement on a non-
exclusive basis. In the course of the business relationship
arising from the dealership agreement, JII allegedly
incurred a balance of P18,843.85 for unpaid deliveries,
and SEACOM brought action to recover said amount plus
interest and attorney’s fees.
• JII filed an Answer denying the obligation and
interposing a counterclaim for damages representing
unrealized profits when JII sold to the Farm System
Development Corporation (FSDC) twenty one (21) units
of Mitsubishi power tillers. In the counterclaim, JII
alleged that as a dealer in Capiz, JII contracted to sell in
1977 twenty-four (24) units of Mitsubishi power tillers to
a group of farmers to be financed by said corporation,
which fact JII allegedly made known to petitioner, but the
latter taking advantage of said information and in bad
faith, went directly to FSDC and dealt with it and sold
twenty one (21) units of said tractors, thereby depriving
JII of unrealized profit of eighty-five thousand four
hundred fifteen and 61/100 pesos (P85,415.61).
ISSUES & ARGUMENTS
W/N SEACOM acted in bad faith when it competed with
its own dealer as regards the sale of farm machineries to
FSDC
HOLDING & RATIO DECIDENDI
• "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.” •
Article 19 was intended to expand the concept of torts by
granting adequate legal remedy for the untold number of
moral wrongs which is impossible for human foresight to
provide specifically in statutory law. If mere fault or
negligence in one’s acts can make him liable for damages
for injury caused thereby, with more reason should abuse
or bad faith make him liable. The absence of good faith is
essential to abuse of right. Good faith is an honest
intention to abstain from taking any unconscientious
advantage of another, even through the forms or
technicalities of the law, together with an absence of all
information or belief of fact which would render the
transaction unconscientious. In business relations, it
means good faith as understood by men of affairs.
• While Article 19 may have been intended as a mere
declaration of principle, the “cardinal law on human
conduct” expressed in said article has given rise to certain
rules, e.g. that where a person exercises his rights but does
so arbitrarily or unjustly or performs his duties in a
manner that is not in keeping with honesty and good faith,
he opens himself to liability. The elements of an abuse
of rights under Article 19 are: (1) there is a legal right
or duty; (2) which is exercised in bad faith; (3) for the
sole intent of prejudicing or injuring another.
• Clearly, the bad faith of SEACOM was established. By
appointing as a dealer of its agricultural equipment,
SEACOM recognized the role and undertaking of JII to
promote and sell said equipment. Under the dealership
agreement, JII was to act as a middleman to sell
SEACOM’s products, in its area of operations, i.e. Iloilo
and Capiz provinces, to the exclusion of other places, to
send its men to Manila for training on repair, servicing
and installation of the items to be handled by it, and to
comply with other personnel and vehicle requirements
intended for the benefit of the dealership After being
informed of the demonstrations JII had conducted to
promote the sales of SEACOM equipment, including the
operations at JII’s expense conducted for five months, and
the approval of its facilities (service and parts) by FSDC,
SEACOM participated in the bidding for the said
equipment at a lower price, placing itself in direct
competition with its own dealer. The actuations of
SEACOM are tainted by bad faith.
• Even if the dealership agreement was amended to make
it on a non-exclusive basis, SEACOM may not exercise
its right unjustly or in a manner that is not in keeping with
honesty or good faith; otherwise it opens itself to liability
under the abuse of right rule embodied in Article 19 of the
Civil Code above-quoted. This provision, together with
the succeeding article on human relation, was intended to
embody certain basic principles “that are to be observed
for the rightful relationship between human beings and for
the stability of the social order.” What is sought to be
written into the law is the pervading principle of equity
and justice above strict legalism
17
TEST WHEN PRINCIPLE MAY BE INVOLVED told Tobias to just confess or else the company would file
a hundred more cases against him until he landed in jail;
GLOBE MACKAY CABLE VS CA his (Hendry) scornful remarks about Filipinos (“You
Facts: Restituto Tobias, a purchasing agent and Filipinos cannot be trusted.”) as well as against Tobias
administrative assistant to the engineering operations (“crook”, and “swindler”); the writing of a letter to
manager, discovered fictitious purchases and other RETELCO stating that Tobias was dismissed by Globe
fraudulent transactions, which caused Globe Mackay Mackay due to dishonesty; and the filing of six criminal
Cable and Radio Corp loss of several thousands of pesos. cases by petitioners against private respondent. All these
He reported it to his immediate superior Eduardo T. reveal that petitioners are motivated by malicious and
Ferraren and to the Executive Vice President and General unlawful intent to harass, oppress, and cause damage to
Manager Herbert Hendry. A day after the report, Hendry private respondent. The imputation of guilt without basis
told Tobias that he was number one suspect and ordered and the pattern of harassment during the investigations of
him one week forced leave. When Tobias returned to Tobias transgress the standards of human conduct set
work after said leave, Hendry called him a “crook” and a forth in Article 19 of the Civil Code.
“swindler”, ordered him to take a lie detector test, and to
The Court has already ruled that the right of the employer
submit specimen of his handwriting, signature and initials
to dismiss an employee should not be confused with the
for police investigation. Moreover, petitioners hired a
manner in which the right is exercised and the effects
private investigator. Private investigation was still
flowing therefrom. If the dismissal is done abusively, then
incomplete; the lie detector tests yielded negative results;
the employer is liable for damages to the employee. Under
reports from Manila police investigators and from the
the circumstances of the instant case, the petitioners
Metro Manila Police Chief Document Examiner are in
clearly failed to exercise in a legitimate manner their right
favor of Tobias. Petitioners filed with the Fiscal’s Office
to dismiss Tobias, giving the latter the right to recover
of Manila a total of six (6) criminal cases against private
damages under Article 19 in relation to Article 21 of the
respondent Tobias, but were dismissed.
Civil Code.
Tobias received a notice of termination of his
DISPOSITIVE:
employment from petitioners in January 1973, effective
December 1972. He sought employment with the WHEREFORE, the petition is DENIED and the decision
Republic Telephone Company (RETELCO); but Hendry of the Court of Appeals in CA-G.R. CV No. 09055 is
wrote a letter to RETELCO stating that Tobias was AFFIRMED.
dismissed by Globe Mackay due to dishonesty. Tobias,
then, filed a civil case for damages anchored on alleged
unlawful, malicious, oppressive, and abusive acts of
petitioners. The Regional Trial Court of Manila, Branch
IX, through Judge Manuel T. Reyes rendered judgment in
favor of private respondent, ordering petitioners to pay
him eighty thousand pesos (P80,000.00) as actual
damages, two hundred thousand pesos (P200,000.00) as
moral damages, twenty thousand pesos (P20,000.00) as
exemplary damages, thirty thousand pesos (P30,000.00)
as attorney’s fees, and costs; hence, this petition for
review on certiorari.
Issue: Whether petitioners are liable for damages to
private respondent.
Held: Yes. The Court, after examining the record and
considering certain significant circumstances, finds that
all petitioners have indeed abused the right that they
invoke, causing damage to private respondent and for
which the latter must now be indemnified: when Hendry

18
REQUISITES TO BE LIABLE FOR DAMAGES
UNDER THE PRINCIPLE
HEIRS OF PURISIMA NALA VS CABANSAG
FACTS:
Respondent Cabansag filed a Civil Case for damages in
October 1991. According to respondent, he bought a 50-
square meter property from spouses Gomez on July 23,
1990. Said property is part of a 400-square meter lot
registered in the name of the Gomez spouses. In October
1991, he received a demand letter from Atty. Del Prado,
in behalf of Purisima Nala, asking for the payment of
rentals from 1987 to 1991 until he leaves the premises, as
said property is owned by Nala, failing which, criminal
and civil actions will be filed against him. Another
demand letter was sent on May 14, 1991. Because of such
demands, respondent suffered damages and was
constrained to file the case against Nala and Atty. Del
Prado.
Atty. Del Prado claimed that he sent the demand letters in
good faith and that he was merely acting in behalf of his
client, Nala, who disputed respondent's claim of
ownership. Nala alleged that said property is part of an
800-square meter property owned by her late husband,
Eulogio Duyan, which was subsequently divided into two
parts. The 400-square meter property was conveyed to
spouses Gomez in a fictitious deed of sale, with the
agreement that it will be merely held by them in trust for
the Duyan's children. Said property is covered by Transfer
Certificate of Title in the name of spouses Gomez. Nala
also claimed that respondent is only renting the property
which he occupies.
After trial, the RTC rendered its Decision in favor of
respondent. Nala and Atty. Del Prado appealed to the CA.
CA affirmed the RTC Decision with modification. Hence,
herein petition by the heirs of Nala.
ISSUE: WON the CA erred in awarding damages and
attorney's fees without any basis.
RULING: YES
The Court notes that both the RTC and the CA failed to
indicate the particular provision of law under which it
held petitioners liable for damages. Nevertheless, based
on the allegations in respondent's complaint, it may be
gathered that the basis for his claim for damages is Article
19 of the Civil Code, which provides: 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.
The foregoing provision sets the standards which may be
observed not only in the exercise of one's rights but also
in the performance of one's duties. When a right is
exercised in a manner which does not conform with the
norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the
wrongdoer must be held responsible. But a right, though
by itself legal because recognized or granted by law as
such, may nevertheless become the source of some
illegality. A person should be protected only when he acts
in the legitimate exercise of his right; that is, when he acts
with prudence and in good faith, but not when he acts with
negligence or abuse. There is an abuse of right when it is
exercised only for the purpose of prejudicing or injuring
another. The exercise of a right must be in accordance
with the purpose for which it was established, and must
not be excessive or unduly harsh; there must be no
intention to injure another.
In order to be liable for damages under the abuse of rights
principle, the following requisites must concur: (a) the
existence of a legal right or duty; (b) which is exercised
in bad faith; and (c) for the sole intent of prejudicing
or injuring another.11
It should be stressed that malice or bad faith is at the core
of Article 19 of the Civil Code. Good faith is presumed,
and he who alleges bad faith has the duty to prove the
same. Bad faith, on the other hand, does not simply
connote bad judgment to simple negligence, dishonest
purpose or some moral obloquy and conscious doing of a
wrong, or a breach of known duty due to some motives or
interest or ill will that partakes of the nature of fraud.
Malice connotes ill will or spite and speaks not in
response to duty. It implies an intention to do ulterior and
unjustifiable harm.
In the present case, there is nothing on record which will
prove that Nala and her counsel, Atty. Del Prado, acted in
bad faith or malice in sending the demand letters to
respondent. In the first place, there was ground for Nala's
actions since she believed that the property was owned by
her husband Eulogio Duyan and that respondent was
illegally occupying the same.
Respondent failed to show that Nala and Atty. Del Prado's
acts were done with the sole intention of prejudicing and
injuring him. It may be true that respondent suffered
mental anguish, serious anxiety and sleepless nights when
19
he received the demand letters; however, there is a
material distinction between damages and injury. Injury
is the legal invasion of a legal right while damage is the
hurt, loss or harm which results from the injury. Thus,
there can be damage without injury in those instances in
which the loss or harm was not the result of a violation of
a legal duty. In such cases, the consequences must be
borne by the injured person alone; the law affords no
remedy for damages resulting from an act which does not
amount to a legal injury or wrong. These situations are
often called damnum absque injuria.
Nala was acting well within her rights when she instructed
Atty. Del Prado to send the demand letters. She had to
take all the necessary legal steps to enforce her
legal/equitable rights over the property occupied by
respondent. One who makes use of his own legal right
does no injury. Thus, whatever damages are suffered by
respondent should be borne solely by him. Nala's acts in
protecting her rights over the property find further solid
ground in the fact that the property has already been
ordered reconveyed to her and her heirs.
NIKKO HOTEL MANILA GARDEN VS REYES
FACTS:
There are two versions of the story:
Mr. Reyes: On the eve of October 13, 1994, Mr. Reyes
while having coffee at the lobby of Nikko Hotel was
approached by Dr. Violet Filart, a friend several years
back. According to Mr. Reyes, Dr. Filart invited him to
join a birthday party at the penthouse for the hotel’s
former General Manager, Mr. Tsuruoka. Plaintiff agreed
as Dr. Filart agreed to vouch for him and carried a basket
of fruits, the latter’s gift. He lined up at the buffet table as
soon as it was ready but to his great shock, shame and
embarrassment, Ruby Lim, Hotel’s Executive Secretary,
asked him to leave in a loud voice enough to be heard by
the people around them. He was asked to leave the party
and a Makati policeman accompanied him to step-out the
hotel. All these time, Dr.Filart ignored him adding to his
shame and humiliation.
Ms. Ruby Lim: She admitted asking Mr. Reyes to leave
the party but not in the manner claimed by the plaintiff.
Ms. Lim approached several people including Dr. Filart’s
sister, Ms. ZenaidaFruto, if Dr. Filart did invite him as the
captain waiter told Ms. Lim that Mr. Reyes was with Dr.
Filart’s group. She wasn’t able to ask it personally with
Dr. Filart since the latter was talking over the phone and
doesn’t want to interrupt her. She asked Mr. Reyes to
leave because the celebrant specifically ordered that the
party should be intimate consisting only of those who part
of the list. She even asked politely with the plaintiff to
finish his food then leave the party.
During the plaintiff’s cross-examination, he was asked
how close Ms. Lim was when she approached him at the
buffet table. Mr. Reyes answered “very close because we
nearly kissed each other”. Considering the close
proximity, it was Ms. Lim’s intention to relay the request
only be heard by him. It was Mr. Reyes who made a scene
causing everybody to know what happened.
The trial court dismissed the complaint, giving more
credence to the testimony of Ms. Lim that she was discreet
in asking Mr. Reyes to leave the party. The trial court
likewise ruled that Mr. Reyes assumed the risk of being
thrown out of the party as he was uninvited. However, the
Court of Appeals reversed the ruling of the trial court as
it found more commanding of belief the testimony of Mr.
Reyes that Ms. Lim ordered him to leave in a loud voice
within hearing distance of several guests. CA held
petitioner liable for damages to Roberto Reyes aka
“AmangBisaya”, an entertainment artist. Hence, this
petition.
ISSUE:
Whether or not petitioners acted abusively in asking Mr.
Reyes to leave the party.
RULING:
No. Supreme Court held that petitioners did not act
abusively in asking Mr. Reyes to leave the party. Plaintiff
failed to establish any proof of ill-motive on the part of
Ms. Lim who did all the necessary precautions to ensure
that Mr. Reyes will not be humiliated in requesting him to
leave the party.
Art. 19. of the Civil Code states that: “Every person must,
in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and
observe honesty and good faith”. When a right is
exercised in a manner which does not conform with the
norms enshrined in Article and results in damage to
another, a legal wrong is thereby committed for which the
wrongdoer must be responsible. The object of this article,
therefore, is to set certain standards which must be
observed not only in the exercise of one’s rights but also
in the performance of one’s duties. These standards are
20
the following: act with justice, give everyone his due and
observe honesty and good faith. Its antithesis, necessarily,
is any act evincing bad faith or intent to injure. Its
elements are the following: (1) There is a legal right or
duty; (2) which is exercised in bad faith; (3) for the sole
intent of prejudicing or injuring another.
Art. 21. of the Civil Code also states that: “Any person
who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy
shall compensate the latter for the damage”.Article 2165
refers to acts contra bonus mores and has the following
elements: (1) There is an act which is legal; (2) but which
is contrary to morals, good custom, public order, or public
policy; and (3) it is done with intent to injure.
As applied to herein case Mr. Reyes has not shown that
Ms. Lim was driven by animosity against him. The
manner by which Ms. Lim asked Mr. Reyes to leave was
likewise acceptable and humane under the circumstances.
Ms. Lim having been in the hotel business for twenty
years wherein being polite and discreet are virtues to be
emulated, the testimony of Mr. Reyes that she acted to the
contrary does not inspire belief and is indeed incredible.
Thus, the lower court was correct. Considering the
closeness of defendant Lim to plaintiff when the request
for the latter to leave the party was made such that they
nearly kissed each other, the request was meant to be
heard by him only and there could have been no intention
on her part to cause embarrassment to him.
Ms. Lim, not having abused her right to ask Mr. Reyes to
leave the party to which he was not invited, cannot be
made liable to pay for damages under Articles 19 and 21
of the Civil Code. Necessarily, neither can her employer,
Hotel Nikko, be held liable as its liability springs from
that of its employees.

21
FACTORS TO BE CONSIDERED WHETHER A
CASE IS A NUISANCE OR HARASSMENT SUIT
ANG VS ANG
Facts: Sunrise Marketing (Bacolod), Inc. (SMBI) is a
duly registered corporation owned by the Ang family.4 Its
current stockholders and their respective stockholdings
are Juanito, Anecita, Jeannevieve, Roberto, and Rachel
 Roberto was elected President of SMBI, while Juanito
was elected as its Vice President. Rachel Lu-Ang (Rachel)
and Anecita are SMBI’s Corporate Secretary and
Treasurer, respectively.
 On 31 July 1995, Nancy Ang (Nancy), the sister of
Juanito and Roberto, and her husband, Theodore Ang
(Theodore), agreed to extend a loan to settle the
obligations of SMBI and other corporations owned by the
Ang family, specifically Bayshore Aqua Culture
Corporation, Oceanside Marine Resources and JR Aqua
Venture.6
 Nancy and Theodore issued a check in the amount of
$1,000,000.00 payable to "Juanito Ang and/or Anecita
Ang and/or Roberto Ang and/or Rachel Ang." Nancy was
a former stockholder of SMBI, but she no longer appears
in SMBI’s General Information Sheets as early as 1996.7
 There was no written loan agreement, in view of the
close relationship between the parties. Part of the loan was
also used to purchase real properties for SMBI, for
Juanito, and for Roberto.8
 On 22 December 2005, SMBI increased its authorized
capital stock to ₱10,000,000.00. The Certificate of
Increase of Capital Stock was signed by Juanito, Anecita,
Roberto, and Rachel as directors of SMBI.9
 Juanito claimed, however, that the increase of SMBI’s
capital stock was done in contravention of the
Corporation Code.10 According to Juanito, when he and
Anecita left for Canada:
 Sps. Roberto and Rachel Ang took over the
active management of [SMBI].
 Through the employment of sugar coated
words, they were able to successfully manipulate
the stocks sharings between themselves at 50-50
under the condition that the procedures mandated
by the Corporation Code on increase of capital
stock be strictly observed (valid Board Meeting).
 No such meeting of the Board to increase
capital stock materialized. It was more of an
accommodation to buy peace
 Juanito claimed that payments to Nancy and Theodore
(their creditors) ceased sometime after 2006.
 On 24 November 2008, Nancy and Theodore,
through their counsel here in the Philippines, sent
a demand letter to "Spouses Juanito L.
Ang/Anecita L. Ang and Spouses Roberto L.
Ang/Rachel L. Ang" for payment of the principal
amounting to $1,000,000.00 plus interest at ten
percent (10%) per annum, for a total of
$2,585,577.37 within ten days from receipt of the
letter. 12
 Roberto and Rachel then sent a letter to Nancy
and Theodore’s counsel on 5 January 2009,
saying that they are not complying with the
demand letter because they have not personally
contracted a loan from Nancy and Theodore.
 On 8 January 2009, Juanito and Anecita executed a
Deed of Acknowledgment and Settlement Agreement
(Settlement Agreement) and an Extra-Judicial Real Estate
Mortgage (Mortgage). Under the foregoing instruments,
Juanito and Anecita admitted that they, together with
Roberto and Rachel, obtained a loan from Nancy and
Theodore for $1,000,000.00 on 31 July 1995
 Robert and Rachel regused to pay their share of the loan
 Thereafter, Juanito filed a "Stockholder Derivative Suit
with prayer for an ex-parte Writ of
Attachment/Receivership" (Complaint) before the RTC
Bacolod on 29 January 2009. He alleged that "the
intentional and malicious refusal of defendant Sps.
Roberto and Rachel Ang to settle their 50% share x x x of
the total obligation x x x will definitely affect the financial
viability of plaintiff SMBI."14
 Juanito also claimed that he has been "illegally excluded
from the management and participation in the business of
[SMBI through] force, violence and intimidation" and
that Rachel and Roberto have seized and carted away
SMBI’s records from its office.
 Rachel also argued that the Complaint failed to allege
that Juanito "exerted all reasonable efforts to exhaust all
intra-corporate remedies available under the articles of
incorporation, by-laws, laws or rules governing the
22
corporation to obtain the relief he desires," as required by
the Interim Rules.
 During cross-examination, Juanito admitted
that there was no prior demand for accounting or
liquidation nor any written objection to SMBI’s
increase of capital stock.
ISSUES: Whether based on the allegations of the
complaint, the nature of the case is one of a derivative suit
or not.
RULING: Complaint is not a derivative suit.
 A derivative suit is an action brought by a stockholder
on behalf of the corporation to enforce corporate rights
against the corporation’s directors, officers or other
insiders.29 Under Sections 2330 and 3631 of the
Corporation Code, the directors or officers, as provided
under the bylaws,32 have the right to decide whether or
not a corporation should sue. Since these directors or
officers will never be willing to sue themselves, or
impugn their wrongful or fraudulent decisions,
stockholders are permitted by law to bring an action in the
name of the corporation to hold these directors and
officers accountable.33 In derivative suits, the real party
ininterest is the corporation, while the stockholder is a
mere nominal party
 However, it cannot prosper without first complying with
the legal requisites for its institution. Section 1, Rule 8 of
the Interim Rules imposes the following requirements for
derivative suits: 1. The person filing the suit must be a
stockholder or member at the time the acts or transactions
subject of the action occurred and the time the action was
filed; 2. He must have exerted all reasonable efforts, and
alleges the same with particularity in the complaint, to
exhaust all remedies available under the articles of
incorporation, by-laws, laws or rules governing the
corporation or partnership to obtain the relief he desires;
3. No appraisal rights are available for the act or acts
complained of; and 4. The suit is not a nuisance or
harassment suit.
 Applying the foregoing, we find that the Complaint is
not a derivative suit. The Complaint failed to show how
the acts of Rachel and Roberto resulted in any detriment
to SMBI.
 The CA-Cebu correctly concluded that the loan was not
a corporate obligation, but a personal debt of the Ang
brothers and their spouses.
 The check was issued to "Juanito Ang and/or Anecita
Ang and/or Roberto Ang and/or Rachel Ang" and not
SMBI. The proceeds of the loan were used for payment
of the obligations of the other corporations owned by the
Angs as well as the purchase of real properties for the Ang
brothers.
 SMBI was never a party to the Settlement Agreement or
the Mortgage. It was never named as a co-debtor or
guarantor of the loan. Both instruments were executed by
Juanito and Anecita in their personal capacity, and not in
their capacity as directors or officers of SMBI. Thus,
SMBI is under no legal obligation to satisfy the
obligation.
 Since damage to the corporation was not sufficiently
proven by Juanito, the Complaint cannot be considered a
bona fide derivative suit. A derivative suit is one that
seeks redress for injury to the corporation, and not the
stockholder. No such injury was proven in this case.
 The Complaint also failed to allege that all available
corporate remedies under the articles of incorporation, by-
laws, laws or rules governing the corporation were
exhausted, as required under the Interim Rules. o x x x No
written demand was ever made for the board of directors
to address private respondent Juanito Ang’s
concerns.1âwphi1
 The fact that [SMBI] is a family corporation does not
exempt private respondent Juanito Ang from complying
with the Interim Rules. In the x x x Yu case, the Supreme
Court held that a family corporation is not exempt from
complying with the clear requirements and formalities of
the rules for filing a derivative suit. There is nothing in
the pertinent laws or rules which state that there is a
distinction between x x x family corporations x x x and
other types of corporations in the institution by a
stockholder of a derivative suit.38
 The CA-Cebu correctly ruled that the Complaint should
be dismissed since it is a nuisance or harassment suit
under Section 1(b) of the Interim Rules.
Section 1(b) thereof provides: b) Prohibition
against nuisance and harassment suits. - Nuisance
and harassment suits are prohibited. In
determining whether a suit is a nuisance or
harassment suit, the court shall consider, among
others, the following:
(1) The extent of the shareholding or interest of
the initiating stockholder or member;
23
 (2) Subject matter of the suit;
(3) Legal and factual basis of the complaint;
(4) Availability of appraisal rights for the act or
acts complained of; and
(5) Prejudice or damage to the corporation,
partnership, or association in relation to the relief
sought.

 In case of nuisance or harassment suits, the court may,

motu proprio or upon motion, forthwith dismiss the case.

24
OTHER ILLUSTRATIVE CASES
ROQUE JR VS TORRES (full)
Before Us is a Petition for Review on Certiorari under Rule 45
of the Rules of Civil Procedure, assailing the Decision1 of the
Court of Appeals in CA-G.R. CV No. 55895, dated 21 March
2003, which reversed and set aside the Judgment2 of the
Regional Trial Court (RTC) of Quezon City, Branch 104, in
Civil Case No. Q-93-14408, dated 8 April 1997, ordering
respondent to pay petitioner damages in the total amount
of P1,600,000.00 and attorney’s fees.
The instant case sprang from an action for damages filed by the
original petitioner, the late Jose Roque, Jr., against respondent,
the recently deceased Jaime Torres, for injuries sustained by
petitioner on 27 August 1989, allegedly inflicted by the security
guards employed by respondent.
In this petition, the deceased petitioner Jose Roque, Jr. is
substituted by his wife Norma Roque while respondent Jaime
T. Torres, per agreement of all his heirs, is herein represented
by his son James Kenley M. Torres.
Petitioner was the administrator of certain parcels of land in
Upper Boso-Boso, Antipolo, Rizal, particularly Lots No. 13259
and 13260 covered by Original Certificates of Titles (OCTs)
No. NP-419 and NP-422, both registered in the name of his son
Rafael Roque. Sometime before the incident, respondent,
claiming to be the owner of said property, hired security guards
from Anchor Security and Detective Agency, namely Cesar
Aquino, Alfredo Negro, and Mariano Cabos, who allegedly
barred petitioner from entering the property and threatened him
with physical harm should he attempt to tend the said land. As
a result, petitioner filed a case for grave threats against said
security guards before the Municipal Trial Court (MTC) of
Rizal.
Prior to the incident, or on 9 September 1988, respondent
instituted an Action3 for cancellation of OCTs No. NP-419 and
NP-422 in the name of petitioner’s son Rafael Roque before the
RTC of Antipolo which was dismissed by the trial court in an
Order4 dated 26 June 1989. According to the court a quo,
therein petitioner Torres’ action was premature for failure to
exhaust administrative remedies in the Bureau of Lands,
consistent with the established doctrine that where a party seeks
for the cancellation of a Free Patent, he must pursue his action
in the proper agency and a review by the court will not be
permitted unless administrative remedies have been exhausted.
The trial court also declared that the said action was in effect an
action for reversion under Section 101 of the Public Land Act,
thus, the action should be in the name of the government and
not the private complainants. Respondent appealed the
dismissal before the Court of Appeals, which later affirmed the
decision of the lower court in a Decision5 dated 11 June 1990.
Respondent’s appeal to this Court was also dismissed in a
Resolution dated 11 February 1991.
Petitioner maintained that at around four o’clock in the
afternoon of 27 August 1989, he, together with his housemaid
Leilyn Saplot Kandt, Magno Imperial, Jose Imperial, and Eliseo
Pesito, visited the said property and was surprised to see seven
security guards, including the above-mentioned security
guards, guarding the property upon orders of respondent.
Aquino, Negro, and Cabos approached petitioner and
asked: "Bakit wala ka noong arraignment sa Antipolo noong
August 16, 1989?"6 to which he replied that his presence was
not necessary since he was not the accused. Thereafter, the said
security guards asked him to leave the property and
uttered: "Bakit mo kami kinakalaban? Utos ni Torres na ito’y
bantayan pagkat ito’y kanyang property raw!." Petitioner
showed his son’s titles to the property but the security guards
merely answered: "Fake ‘yan at hindi kayo maaaring pumasok
dito. Kayo ay dapat paalisin." A security guard then cocked his
shotgun and warned petitioner to leave the place. Petitioner
offered to settle the dispute in the office of Anchor Security
Agency, through its manager, Mrs. Nassam, but the security
guards merely replied: "Wala kaming pakialam kay Nassam.
Lahat ginagawa dito, lahat ay utos ni Torres. At ‘yan ay
sinusunod naming dahil si Torres ang bumubuhay sa amin."
When petitioner refused to leave the premises, Cabos
threatened petitioner that should he stay inside, Cabos would
shoot him, so petitioner immediately left the place. However,
Cabos still fired at him but missed. Petitioner ran fast to his
makeshift hut where Cabos followed him. Petitioner ran to the
back of his makeshift hut and was shot again by Cabos, hitting
petitioner on the back. When petitioner fell, he turned and saw
Cabos and Negro shooting at him. At the same time, Aquino
was also firing at the makeshift hut. After a while, the other
security guards, namely Sulla, Betasulo, and Romy Mendoza,
came, and together with Cabos and Negro, mauled and kicked
petitioner all over his body until he lost consciousness.
As a result of the incident, petitioner was hospitalized and
placed under continuous treatment and medication. Due to the
multiple gunshot wounds, hematoma, and contusions sustained
by petitioner, his left eye became 90 to 95% blind and his body
was paralyzed from the bustline down. Consequently, petitioner
filed a criminal case7 for frustrated murder before the RTC of
Antipolo against the security guards. Eventually, after suffering
for more than nine years, petitioner died.
On his part, respondent admits the existence of the titles in the
name of Rafael Roque but denies the latter’s ownership over the
property. He further admits the dismissal of his case for
cancellation of Roque’s titles based on a technical ground.
Respondent likewise admits to the posting of the security
guards on the property to guard the same from any intruder but
denies that they were his personal security guards, and
moreover claimed that they were security guards of the
Antipolo Landowners and Farmers Association, Inc. (ALFAI),
of which he was president. Respondent further asserts that
being the President of ALFAI, his instruction to the security
25
guards was to prevent squatters or intruders from entering the
property and to make use of reasonable force to repel aggression
in the event of any untoward incident.
After trial, the lower court, on 8 April 1997, rendered judgment
in favor of petitioner. According to the court a quo:
After a thorough examination of the evidence presented by both
parties, the Court is faced with the issue of: "Whether or not
defendant Torres can be held liable for damages to herein
plaintiff as a result of the injuries inflicted by the security
guards deployed in the property in question on August 28, 1989
[sic].
There is no question that the security guards involved in the
shooting incident on August 28, 1989 [sic] were employed of
[sic] Anchor Security and Detective Agency. There is also no
question that the same security guards were hired by defendant
Torres to man and guard the property in question in Boso-Boso,
Antipolo, Rizal. In this simple scenario and in the event that
said security guards caused wrong to others while in their
tour of duty, the law provides that the liability falls on the
employer being the principal. On the contrary, for illegal or
harmful acts committed by the security guards as [sic] per
order of the client or the one who hired them, liability
attaches to the latter. In the instant case, the unlawful act
committed by the security guards against the plaintiff is
within the strict compliance of the instruction of the
defendant. This is because of the fact that defendant Torres
exercised direct supervision of the said security guards. As a
matter of fact, he provided the guards with his school bus to
perform their duties effectively. Hence, defendant Torres is
liable for the unlawful acts committed by the said security
guards against herein plaintiff. Such unlawful acts would not
have been accomplished had defendant Torres being their
"employer" at that time, not instructed them so. What resulted
to the shooting of the plaintiff by the security guards cannot be
given justice except by indemnifying him. And considering that
plaintiff suffered paralization of his body and blindness in his
left eye, notwithstanding the fact of incurring the amount
of P300,000.00 as hospitalization and medical expenses plus
the continuous medication up to the present, the Court believes
that the plaintiff should be compensated. (Emphasis ours.)
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff as against defendant Torres and the latter is ordered to
pay the plaintiff the following:
a) the amount of P300,000.00 as actual damages;
b) the amount of P1,000,000.00 as moral damages;
c) the amount of P300,000.00 as exemplary damages; and
d) the amount of P50,000.00 as attorney’s fee.8
Aggrieved by the above judgment, respondent lodged an appeal
before the Court of Appeals. According to respondent, he did
not know that the security guards would commit the alleged
aggressive acts until the commission thereof, and that said
security guards acted upon their own judgment. Respondent
claimed that petitioner was an intruder and squatter on the
property who entered it without permission from members of
the ALFAI, the real owners of the said property. Thus,
respondent argued that petitioner forcibly entered the property
and that the security guards merely repelled the unlawful
aggression.
Subsequently, the appellate court reversed the RTC judgment
and rendered a Decision, the pertinent portions of which read:
It is appellee’s contention that appellant as employer of the said
security guards is liable for the injuries inflicted by the latter
who acted under his instructions to guard the subject premises.
Verily, the obligation imposed under Article 2176 of the Civil
Code is demandable not only for one’s own acts or omissions
but also for those persons for whom, one is responsible. The
owners and managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in
exercise of their duties and/or functions.
Relevantly, Article 2180 of the Civil Code provides that:
Art. 2180. The obligation imposed by article 2176 is not
demandable not only for one’s own acts or omissions, but also
for those persons for whom one is responsible.
xxxx
The owners and managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in
the service of the branches in which the latter are employed or
on occasion of their functions.
Under the facts obtaining, the above provision of law does not
apply. The court a quo succinctly declared:
"There is no question that the security guards involved in the
shooting incident on August 28, 1989 were employed (sic) of
Anchor Security Detective Agency. There is also no question
that the same security guards were hired by defendant Torres to
man and guard the property in question in Boso-Boso, Antipolo,
Rizal.
xxxx
There is no question therefore that the said security guards who
inflicted the injuries sustained by the appellee were not
employees of herein appellant. This being so, the ruling in the
case of Soliman, Jr. vs. Tuazon applies, viz:
It is settled that where the security agency, as here recruits, hires
and assigns the work of its watchmen or security guards, the
agency is the employer of such security guards or watchmen.
Liability for illegal or harmful acts committed by the security
guards attaches to the employer agency, and not to the clients
or customers of such agency.
26
At any rate, the appellant cannot be held liable under Art. 33 of
the Civil Code as no evidence whatsoever, was adduced to show
his participation in the commission of the acts complained of.
Neither was appellee able to prove that appellant can be held
liable in the alternative under Article 2176 in relation to Article
2180 of the Civil Code.
xxxx
WHEREFORE, the assailed decision is hereby REVERSED
and SET ASIDE and the complaint as well as the counterclaim
filed before the court a quo is DISMISSED.9
With the reversal of the trial court judgment, petitioner filed the
instant appeal, raising the following issues:
I. Whether or not the Court of Appeals committed grave and
reversible error in ruling that petitioner failed to prove by mere
preponderance of evidence that respondent Torres was involved
in any malevolent designs on petitioner;
II. Whether or not the Court of Appeals committed grave and
reversible error in ruling that Article 2180 in relation to Article
2176 of the Civil Code is not applicable to the case at bar; and
III. Whether or not the Court of Appeals committed grave and
reversible error in applying the case of Soliman, Jr. v. Tuazon
to the case at bar.
We agree with the Court of Appeals’ finding that respondent
cannot be held liable under Article 2180 of the Civil Code for
the damages suffered by petitioner because respondent is not
the employer of the security guards who inflicted the injuries
upon the person of the petitioner. As reiterated in the recent case
of Mercury Drug Corporation v. Libunao:[10]
In Soliman, Jr. v. Tuazon, we held that where the security
agency recruits, hires and assigns the works of its watchmen or
security guards to a client, the employer of such guards or
watchmen is such agency, and not the client, since the latter has
no hand in selecting the security guards. Thus, the duty to
observe the diligence of a good father of a family cannot be
demanded from the said client:
x x x [I]t is settled in our jurisdiction that where the security
agency, as here, recruits, hires and assigns the work of its
watchmen or security guards, the agency is the employer of
such guards or watchmen. Liability for illegal or harmful acts
committed by the security guards attaches to the employer
agency, and not to the clients or customers of such agency. As
a general rule, a client or customer of a security agency has no
hand in selecting who among the pool of security guards or
watchmen employed by the agency shall be assigned to it; the
duty to observe the diligence of a good father of a family in the
selection of the guards cannot, in the ordinary course of events,
be demanded from the client whose premises or property are
protected by the security guards.
x x x [T]he fact that a client company may give instructions or
directions to the security guards assigned to it, does not, by
itself, render the client responsible as an employer of the
security guards concerned and liable for their wrongful acts or
omissions.11
This conclusion, however, does not necessarily preclude this
Court from holding respondent liable under the law for damages
resulting from the injuries inflicted on petitioner by the
unlawful acts of the security guards. As stressed by petitioner
in his Memorandum:
Assuming arguendo that the security guards are not
respondent’s employees, the same does not constitute a valid
defense at all. Article 2176 of the Civil Code provides that a
person who, by act or omission, causes damage to another
through fault or negligence may be held liable in damages. By
making it appear that he owns the disputed properties,
putting security guards thereat to inti[mi]date, harass or
cause the rightful owner and his representatives and by
providing the escape vehicle, more than sufficient evidence
was established on the civil liability of private respondent
under Article 2176 of the Civil Code of the Philippines.
It must be emphasized that private respondent committed all
these overt acts despite an earlier Decision by the Regional Trial
Court of Antipolo, Branch 71, affirming Rafael Roque’s
ownership of the properties and dismissing the case he (private
respondent) filed for the cancellation of NP-419 and NP-422 in
Rafael Roque’s name. Had he not misrepresented to the
security guards that he owns the properties and had he not
hired these security guards/common thugs to secure the
premises which he does not own, then the untoward incident
would not have happened. To allow private respondent to
escape liability, despite his misdeeds, will not only result in
grave injustice to Jose Roque, Jr. who eventually died after
having been paralyzed for several years as a result of [the]
incident but will likewise result in the implied tolerance by this
Honorable Court of private respondent’s disobedience or
disrespect of a lawful order/decision of the trial court (RTC
Branch 71, Antipolo) which he failed or refused to
honor.12 (Emphasis ours.)
Article 2176 of the Civil Code states that "whoever by act or
omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done." In the case
at bar, respondent cannot feign ignorance of the fact that at the
time of the shooting incident, the titles to the disputed property
were already registered in the name of petitioner’s son, the
cancellation for title case filed by respondent having been
dismissed. In fact, during trial, the offer for stipulation of
petitioner’s counsel that at the time of the shooting incident,
there is a valid and existing title in the name of petitioner’s son
which was never cancelled by the court, was accepted by the
respondent. Therefore, by hiring the security guards to prevent
entry, possibly even by the registered owner, to the subject
property, titles to which he fully knew he did not possess,
27
respondent blatantly acted in bad faith. Respondent’s
unwarranted act of posting security guards within the property,
which he clearly knew is registered in the name of another,
unduly placed petitioner at harm and deprived him of his right
to fully exercise his privileges and duties as administrator of
said property. Respondent, by his grossly faulty acts, paved the
way to the infliction of injuries by the security guards on
petitioner.
Furthermore, respondent’s palpable display of bad faith in
claiming a superior right to the property over petitioner’s son
entitles petitioner to damages resulting therefrom. In order that
a plaintiff may maintain an action for the injuries which he
sustained, he must establish that such injuries resulted from a
breach of duty which the defendant owed to the plaintiff – a
concurrence of injury to the plaintiff and legal responsibility by
the person causing it.13 In other words, in order that the law will
give redress for an act causing damage, the act must be not only
hurtful, but wrongful.14
In the case at bar, it is clear that respondent violated the
principle embodied in Article 19 of the Civil Code which
mandates that "every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith." When
a right is exercised in a manner which discards these norms
resulting in damage to another, a legal wrong is committed for
which the actor can be held accountable.15 As we have stated in
a previous case, if mere fault or negligence in one’s acts can
make him liable for damages for injury caused thereby, with
more reason should abuse or bad faith make him liable. 16
With respect to the award of damages, we sustain the ruling of
the trial court. It is essential in the award of damages that the
claimant must have satisfactorily proven during the trial the
existence of the factual basis of the damages and its causal
connection to defendant’s acts.17 During trial, petitioner,
through his own testimony and that of his wife, was able to
establish that they have incurred actual damages in the amount
of P300,000.00 for the hospitalization of petitioner as a result
of the shooting and the mauling incident, thus, the award of
actual damages in said amount is proper.
As regards the award of moral damages, we have ruled that
there is no hard and fast rule in the determination of what would
be a fair amount of moral damages, since each case must be
governed by its own peculiar circumstances.18 As reflected in
the records of the instant case, there is no gainsaying the fact
that petitioner, together with his family, had suffered physical
suffering, mental anguish, fright, serious anxiety and moral
shock resulting from respondent’s acts which caused petitioner
grave physical injuries eventually leading to his death. The
several years of torment and agonizing on the part of the
deceased petitioner and his family more than justifiy the award
of moral damages. It must be emphasized that moral damages
are not intended to enrich the complainant at the expense of a
defendant.19 They are awarded only to enable the injured parties
to obtain means, diversions or amusements that will serve to
alleviate the moral sufferings the injured parties have
undergone by reason of defendant’s culpable action.20 In other
words, the award of moral damages is aimed at a restoration
within the limits of the possible, of the spiritual status quo ante;
and therefore it must be proportionate to the suffering
inflicted.21Therefore, in light of the sufferings sustained by
petitioner and his family, we are inclined to sustain the award
of P1,000,000.00 as moral damages.
As to exemplary damages, Article 2229 of the Civil Code
provides that such damages may be imposed by way of example
or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages. While
exemplary damages cannot be recovered as a matter of right,
they need not be proved, although plaintiff must show that he is
entitled to moral, temperate or compensatory damages before
the court may consider the question of whether or not
exemplary damages should be awarded.22 In the case at bar,
having determined that petitioner is entitled to the award of
actual and moral damages as a result of the wanton act of
respondent in stationing security guards in the property, the title
of which is under the name of petitioner’s son, said act
ultimately resulting in the paralysis and blindness of petitioner,
we find the award of exemplary damages to be proper by way
of correction for the public good of respondent’s flagrant
display of bad faith.
WHEREFORE, premises considered, the Petition for Review
is hereby GRANTED. The Decision of the Court of Appeals in
CA-G.R. CV No. 55895 is hereby REVERSED and SET
ASIDE. The Judgment of the Regional Trial Court of Quezon
City, Branch 104, in Civil Case No. Q-93-14408 ordering
respondent Torres to pay petitioner Roque the amount
of P300,000.00 as actual damages; the amount
of P1,000,000.00 as moral damages; the amount
of P300,000.00 as exemplary damages; and the amount
of P50,000.00 as attorney’s fee is hereby REINSTATED.
UNIVERSITY OF THE EAST VS JADER
FACTS:
Plaintiff was enrolled in the defendants’ College of Law
from 1984 up to 1988. In the first semester of his last year
(School year 1987-1988), he failed to take the regular
final examination in Practice Court I for which he was
given an incomplete grade . He enrolled for the second
semester as fourth year law student and on February 1,
1988 he filed an application for the removal of the
incomplete grade given him by Professor Carlos Ortega
which was approved by Dean Celedonio Tiongson after
payment of the required fee. He took the examination on
28
March 28, 1988. On May 30, 1988, Professor Carlos
Ortega submitted his grade. It was a grade of five (5).
The 35th Investitures & Commencement Ceremonies for
the candidates of Bachelor of Laws was scheduled on the
16th of April 1988, and in the invitation for that occasion
the name of the plaintiff appeared as one of the
candidates. At the foot of the list of the names of the
candidates there is an annotation stating that the same is a
tentative list.
The plaintiff attended the investiture ceremonies and he
was thereafter handed by Dean Celedonio a rolled white
sheet of paper symbolical of the Law Diploma. He
tendered a blow-out that evening which was attended by
neighbors, friends and relatives who wished him good
luck in the forthcoming bar examination. He thereafter
prepared himself for the bar examination. He took a leave
of absencewithout pay from his job from April 20, 1988
to September 30, 1988 and enrolled at the pre-bar review
class in Far Eastern University . Having learned of the
deficiency he dropped his review class and was not able
to take the bar examination.
Consequently, respondent sued petitioner for damages
alleging that he suffered moral shock, mental anguish,
serious anxiety, besmirched reputation, wounded feelings
and sleepless nights when he was not able to take the 1988
bar examinations arising from the latter’s negligence. He
prayed for an award of moral and exemplary damages,
unrealized income, attorney’s fees, and costs of suit.
RTC’s Decision:
WHEREFORE, in view of the foregoing judgment is
hereby rendered in favor of the plaintiff and against the
defendant ordering the latter to pay plaintiff the sum of
THIRTY FIVE THOUSAND FOUR HUNDRED
SEVENTY PESOS (P35,470.00) with legal rate of
interest from the filing of the complaint until fully paid,
the amount of FIVE THOUSAND PESOS (P5,000.00) as
attorney’s fees and the cost of suit.
CA’s Decision:
WHEREFORE, in the light of the foregoing, the lower
Court’s Decision is hereby AFFIRMED with the
MODIFICATION that defendant-appellee, in addition to
the sum adjudged by the lower court in favor of plaintiff-
appellant, is also ORDERED to pay plaintiff-appellant the
amount of FIFTY THOUSAND (P50,000.00) PESOS for
moral damages. Costs against defendant-appellee.
ISSUE: Whether or not UE has liability to Romeo Jader,
considering that the proximate and immediate cause of the
alleged damages incurred by the latter arose out of his
own negligence in not verifying from the professor
concerned the result of his removal exam.
RULING:
Petitioner, in belatedly informing respondent of the result
of the removal examination, particularly at a time when
he had already commenced preparing for the bar exams,
cannot be said to have acted in good faith.
Article 19 was intended to expand the concept of torts by
granting adequate legal remedy for the untold number of
moral wrongs which is impossible for human foresight to
provide specifically in statutory law. Schools and
professors cannot just take students for granted and be
indifferent to them, for without the latter, the former are
useless.
Petitioner’s liability arose from its failure to promptly
inform respondent of the result of an examination and in
misleading the latter into believing that he had satisfied
all requirements for the course.
“It is apparent from the testimony of Dean Tiongson that
defendant-appellee University had been informed during
the deliberation that the professor in Practice Court I gave
plaintiff-appellant a failing grade. Yet, defendant-
appellee still did not inform plaintiff-appellant of his
failure to complete the requirements for the degree nor
did they remove his name from the tentative list of
candidates for graduation. Worse, defendant-appellee
university, despite the knowledge that plaintiff-appellant
failed in Practice Court I, again included plaintiff-
appellant’s name in the “tentative” list of candidates for
graduation which was prepared after the deliberation and
which became the basis for the commencement rites
program. Dean Tiongson reasons out that plaintiff-
appellant’s name was allowed to remain in the tentative
list of candidates for graduation in the hope that the latter
would still be able to remedy the situation in the
remaining few days before graduation day. Dean
Tiongson, however, did not explain how plaintiff-
appellant Jader could have done something to complete
his deficiency if defendant-appellee university did not
exert any effort to inform plaintiff-appellant of his failing
grade in Practice Court I.
However, while petitioner was guilty of negligence and
thus liable to respondent for the latter’s actual damages,
we hold that respondent should not have
29
been awardedmoral damages. We do not agree with the
Court of Appeals’ findings that respondent suffered
shock, trauma and pain when he was informed that he
could not graduate and will not be allowed to take the bar
examinations. At the very least, it behooved on
respondent to verify for himself whether he has completed
all necessary requirements to be eligible for the bar
examinations. As a senior law student, respondent should
have been responsible enough to ensure that all his affairs,
specifically those pertaining to
his academic achievement, are in order. Given these
considerations, we fail to see how respondent could have
suffered untold embarrassment in attending the
graduation rites, enrolling in the bar review classes and
not being able to take the bar exams. If respondent was
indeed humiliated by his failure to take the bar, he brought
this upon himself by not verifying if he has satisfied all
the requirements including his school records, before
preparing himself for the bar examination. Certainly,
taking the bar examinations does not only entail a mental
preparation on the subjects thereof; there are also
prerequisites of documentation and submission
of requirements which the prospective examinee must
meet.
WHEREFORE, the assailed decision of the Court
of Appeals is AFFIRMED with MODIFICATION.
Petitioner is ORDERED to PAY respondent the sum of
Thirty-five Thousand Four Hundred Seventy Pesos
(P35,470.00), with legal interest of 6% per annum
computed from the date of filing of the complaint until
fully paid; the amount of Five Thousand Pesos
(P5,000.00) as attorney’s fees; and the costs of the suit.
The award of moral damages is DELETED.
UNIVERSITY OF SANTO TOMAS VS SANCHEZ
FACTS: A Complaint for Damages filed by
respondent Danes B. Sanchez (respondent) against the
University of Santo Tomas (UST) and its Board of
Directors, the Dean and the Assistant Dean of the UST
College of Nursing, and the University Registrar for their
alleged unjustified refusal to release the respondents
Transcript of Records (ToR).
In his Complaint, respondent alleged that he graduated
from UST on April 2, 2002 with a Bachelors Degree of
Science in Nursing. He was included in the list of
candidates for graduation and attended graduation
ceremonies. Respondent sought to secure a copy of his
ToR with the UST Registrars Office, paid the required
fees, but was only given a Certificate of Graduation by the
Registrar. Despite repeated attempts by the respondent to
secure a copy of his ToR, and submission of his class
cards as proof of his enrolment, UST refused to release
his records, making it impossible for him to take the
nursing board examinations, and depriving him of the
opportunity to make a living. The respondent prayed that
the RTC order UST to release his ToR and hold UST
liable for actual, moral, and exemplary damages,
attorneys fees, and the costs of suit.
Petitioners filed a Motion to Dismiss where they claimed
that they refused to release respondents ToR because he
was not a registered student, since he had not been
enrolled in the university for the last three
semesters. They claimed that the respondents graduation,
attendance in classes, and taking/passing of examinations
were immaterial because he ceased to be a student when
he failed to enroll during the second semester of school
year 2000-2001.
Petitioners then filed a Supplement to their Motion to
Dismiss, alleging that respondent sought administrative
recourse before the Commission on Higher Education
(CHED) through a letter-complaint. Petitioners claimed
that the CHED had primary jurisdiction to resolve matters
pertaining to school controversies.
Issues:
1) The CHED exercises quasi-judicial power over
controversies involving school matters and has primary
jurisdiction over respondents demand for the release of
his ToR. Thus, respondent failed to exhaust
administrative remedies;
2) Since respondent sought recourse with both the
CHED and the RTC, respondent violated the rule against
forum-shopping; and
3) The Complaint failed to state a cause of action,
since respondent admitted that he was not enrolled in UST
in the last three semesters prior to graduation.
Held:
1. 1. The doctrine of exhaustion of administrative
remedies requires that where a remedy before an
administrative agency is provided, the administrative
30
agency concerned must be given the opportunity to decide
a matter within its jurisdiction before an action is brought
before the courts. Failure to exhaust administrative
remedies is a ground for dismissal of the action.
In this case, the doctrine does not apply because
petitioners failed to demonstrate that recourse to the
CHED is mandatory or even possible in an action such as
that brought by the respondent, which is essentially one
for mandamus and damages. The doctrine of exhaustion
of administrative remedies admits of numerous
exceptions, one of which is where the issues are purely
legal and well within the jurisdiction of the trial court, as
in the present case. Petitioners liability if any for damages
will have to be decided by the courts, since any judgment
inevitably calls for the application and the interpretation
of the Civil Code. As such, exhaustion of administrative
remedies may be dispensed with. The Supreme Court
held in Regino v. Pangasinan Colleges of Science and
Technology
x x x exhaustion of administrative remedies is applicable
when there is competence on the part of the administrative
body to act upon the matter complained of
.Administrative agencies are not courts; x x x neither [are
they] part of the judicial system, [or] deemed judicial
tribunals. Specifically, the CHED does not have the
power to award damages. Hence, petitioner could not
have commenced her case before the Commission.
In addition, the rule on primary jurisdiction applies only
where the administrative agency exercises quasi-judicial
or adjudicatory functions. Thus, an essential requisite for
this doctrine to apply is the actual existence of quasi-
judicial power. However, petitioners have not shown that
the CHED possesses any such power to investigate facts
or ascertain the existence of facts, hold hearings, weigh
evidence, and draw conclusions. Indeed, Section 8 of
Republic Act No. 7722 otherwise known as the Higher
Education Act of 1994, certainly does not contain any
express grant to the CHED of judicial or quasi-judicial
power.
2. 2. Forum shopping exists when, as a result of an ad
verse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another, or
when he institutes two or more actions or proceedings
grounded on the same cause, on the gamble that one or
the other court would make a favorable disposition. Here,
there can be no forum shopping precisely because the
CHED is without quasi-judicial power, and cannot make
any disposition of the case whether favorable or
otherwise.
3.3. Under Rule 16, Section 1(g) of the Rules of Court,
a motion to dismiss may be made on the ground that the
pleading asserting the claim states no cause of action. To
clarify the essential test required to sustain dismissal on
this ground, we have explained that the test of the
sufficiency of the facts found in a petition, to constitute a
cause of action, is whether admitting the facts alleged, the
court could render a valid judgment upon the same in
accordance with the prayer of the petition. Stated
otherwise, a complaint is said to assert a sufficient cause
of action if, admitting what appears solely on its face to
be correct, the plaintiff would be entitled to the relief
prayed for.
The Complaint makes the following essential allegations:
that petitioners unjustifiably refused to release
respondents ToR despite his having obtained a degree
from UST; that petitioners claim that respondent was not
officially enrolled is untrue; that as a result of petitioners
unlawful actions, respondent has not been able to take the
nursing board exams since 2002; that petitioners actions
violated Articles 19-21 of the Civil Code; and that
petitioners should be ordered to release respondents ToR
and held liable for P400,000.00 as moral
damages,P50,000.00 as exemplary damages, P50,000.00
as attorneys fees and costs of suit, and P15,000.00 as
actual damages. Clearly, assuming that the facts alleged
in the Complaint are true, the RTC would be able to
render a valid judgment in accordance with the prayer in
the Complaint.
VILLANUEVA VS ROSQUETA
FACTS:
Respondent Emma M. Rosqueta (Rosqueta), formerly
Deputy Commissioner of the Revenue Collection and
Monitoring Group of the Bureau of Customs (the
Bureau), tendered her courtesy resignation from that post
on January 23, 2001, shortly after President Gloria
Macapagal-Arroyo assumed office. But five months later
on June 5, 2001, she withdrew her resignation, claiming
that she enjoyed security of tenure and that she had
resigned against her will on orders of her superior.
Meantime, on July 13, 2001 President
Arroyo appointed Gil Valera (Valera) to respondent
Rosqueta’s position. Challenging such appointment,
31
Rosqueta filed a petition for prohibition, quo warranto,
and injunction against petitioner Titus B. Villanueva
(Villanueva), then Commissioner of Customs, the
Secretary of Finance, and Valera with the Regional Trial
Court (RTC) of Manila in Civil Case 01-101539. On
August 27, 2001 the RTC issued a temporary restraining
order (TRO), enjoining Villanueva and the Finance
Secretary from implementing Valera’s appointment. On
August 28, 2001 the trial court superseded the TRO with
a writ of preliminary injunction.
On November 22, 2001 while the preliminary injunction
in the quo warranto case was again in force, petitioner
Villanueva issued Customs Memorandum Order 40-2001,
authorizing Valera to exercise the powers and functions
of the Deputy Commissioner.
During the Bureau’s celebration of
its centennial anniversary in February 2002, its special
Panorama magazine edition featured all the customs
deputy commissioners, except respondent Rosqueta. The
souvenir program, authorized by the Bureau’s Steering
Committee headed by petitioner Villanueva to be issued
on the occasion, had a space where Rosqueta’s picture
was supposed to be but it instead stated that her position
was “under litigation.” Meanwhile,
the commemorative billboarddisplayed at the Bureau’s
main gate included Valera’s picture but not Rosqueta’s.
On February 28, 2002 respondent Rosqueta filed
a complaint for damages before the RTC of Quezon City
against petitioner Villanueva in Civil Case Q-02-46256,
alleging that the latter maliciously excluded her from
the centennial anniversary memorabilia. Further, she
claimed that he prevented her from performing her duties
as Deputy Commissioner, withheld her salaries, and
refused to act on her leave applications. Thus, she asked
the RTC to award her P1,000,000.00 in moral damages,
P500,000.00 in exemplary damages, and P300,000.00 in
attorney’s fees and costs of suit.
RTC dismissed the case. CA reversed granting Villanueva
to pay P500,000.00 in moral damages, P200,000.00 in
exemplary damages and P100,000.00 in attorney’s fees
and litigation expenses.
ISSUE:
Whether or not the CA erred in holding petitioner
Villanueva liable in damages to respondent Rosqueta for
ignoring the preliminary injunction order that the RTC
issued in the quo warranto case, thus denying her of the
right to do her job as Deputy Commissioner of the Bureau
and to be officially recognized as such public officer.
RULING:
Petitioner Villanueva cannot seek shelter in the
alleged advice that the OSG gave him. Surely, a
government official of his rank must know that a
preliminary injunction order issued by a court of law had
to be obeyed, especially since the question of Valera’s
right to replace respondent Rosqueta had not yet been
properly resolved.
That petitioner Villanueva ignored the injunction shows
bad faith and intent to spite Rosqueta who remained in the
eyes of the law the Deputy Commissioner. His exclusion
of her from the centennial anniversary memorabilia was
not an honest mistake by any reckoning. Indeed, he
withheld her salary and prevented her from assuming the
duties of the position.
The CA correctly awarded moral damages to respondent
Rosqueta.
Here, respondent Rosqueta’s colleagues and friends
testified that she suffered severe anxiety on account of the
speculation over her employment status. She had to
endure being referred to as a “squatter” in her workplace.
She had to face inquiries from family and friends about
her exclusion from the Bureau’s centennialanniversary
memorabilia. She did not have to endure all these affronts
and the angstand depression they produced had
Villanueva abided in good faith by the court’s order in her
favor. Clearly, she is entitled to moral damages.
The Court, however, finds the award of P500,000.00
excessive. As it held in Philippine Commercial
International Bank v. Alejandro,[18] moral damages are
not a bonanza. They are given to ease the defendant’s
grief and suffering. Moral damages should
reasonably approximate the extent of hurt caused and the
gravity of the wrong done. Here, that would be
P200,000.00.
The Court affirms the grant of exemplary damages by way
of example or correctionfor the public good but, in line
with the same reasoning, reduces it to P50,000.00.
Finally, the Court affirms the award of attorney’s fees and
litigation expenses but reduces it to P50,000.00.
32
MWSS VS ACT THEATER INC
FACTS
On September 28, 1988, four employees of ACT were
apprehended by the Quezon City police for allegedly
tamperng a water meter in violation of P.D. No 401, as
amended by B.P. Blg 876, and were subsequently
criminally charged before the Regional Trial Court of
Quezon City, Branch 77.
At mignight of the day following the said apprehension,
the MWSS disconnected ACT's water supply on account
of the meter tampering incident. ACT subsequently filed
a civil case against MWSS before the same court on the
ground that the water supply provider acted “arbitrarily,
whimsically and capricuously” in cutting off the
respondent's water service connection without prior
notice, adversely affecting the health and sanitation of the
theater company's patrons and in surrounding premises.
The two cases were jointly tried in the same RTC. After
due trial, the four employees were acquitted in the
criminal case for failure of the prosecution to prove guilt
of the accused beyond reasonable doubt. In the civil case,
the RTC again ruled in favor of ACT, ordering MWSS to
pay the theater company P25,000 for compensatory
damages and to return P200,000 earlier deposited by ACT
for the restoration of its water services following its
disconnection. The RTC also ordered MWSS to pay costs
of suit and to pay ACT P5,000 as attorney's fees.
Aggrieved, MWSS appealed the civil aspect of the
aforementioned decision to the Court of Appeals. In
justifying its act of disconnecting the water supply,
MWSS relied upon Article 429 of the Civil Code, which
provides that “(t)he owner or lawful possessor of a thing
has the right to exclude any person from the enjoyment
and disposal thereof. For this purpose, he may use such
force as may be reasonable to repel or prevent an actual
or threatened unlawful physical invasion or usurpation of
his property.”
The appelate court, however, dismissed the appeal,
justifying the award of damages, citing Article 19 of the
Civil Code which states that “(e)very person must, in the
exercise of his rights x x x act with justice, give everyone
his due, and observe honesty and good faith.'' In quoting
the decretal portion of the RTC decision, the appelate
court, however, erroneously typed P500,000 as attorney's
fees when the same should only be P5,000.
Thus, MWSS elevated the case to the Supreme Court by
filing a petition for review on certiorari seeking to reverse
the CA decision affiriming the civil aspect of the RTC
ruling.
ISSUES:
(1) Whether or not the Court of Appeals validly affirmed
the RTC decision
(2) Whether or not the Court of Appeals validly upheld
the award of attorney's fees
(3) Whether or not the Court of Appeals correctly applied
the provision of Article 19 of the New Civil Court
without considering the applicable provision of
Article 429 of the same code
HELD
(1) There is no reason to deviate from the uniform
findings of the RTC and the appellate court and that
the petitioner's act of disconnecting the water supply
was arbitrary, injurious and prejudicial to the
respondent pursuant to Article 19 of the Civil Code
(2) The amount of P500,000 as attorney's fees in the
assailed CA decision was obviously a typographical
error but it is nevertheless reasonable and warranted
as attorney's fees may be awarded when a party is
compelled to litigate or incur expenses to protect his
interest by reason of an unjustified act of the other
party
(3) Concededly, MWSS, as the owner of the utility
providing water supply to certain consumers,
including the respondent, had the right to exclude any
person from the enjoyment and disposal thereof.
However, the exercise of rights is not without
limitations. Article 19 sets the norms for the exercise
of one's rights. When a right such as that provided in
Article 429 is exercised in a manner which discards
the norms mentioned in Article 19 resulting in
damage to another, a legal wrong is committed. In this
case, MWSS failed to act with justice and give the
respondent what is due to it when the petitioner
unceremoniously cut off the respondent's water
supply connection.
The petition is denied.
33
MANALOTO VS VELOSO III
Facts:
This case stems from an unlawful detainer case filed by
Ermelinda Manaloto et al., who are the lessors to of
residential house, which was leased to respondent Ismael
Veloso III at the rate of Php17,000 per month. The action
for unlawful detainer was instituted because of Veloso’s
failure to pay the monthly rent from May 23, 1997 to
December 22, 1998 despite the petitioner’s repeated
demands. Veloso, however, denied the nonpayment of
rentals, alleging that he made advance payments when he
spent Php825,000 for the repairs done on the leased
property.

While the case was still on appeal, the petitioner lessors

published the decision of the Metropolitan Trial Court,
who ruled in favor of the lessors. Copies of the decision
were distributed to the homeowners of Horseshoe Village,
which caused Veloso to be the talk of the town and his
good name to be greatly damaged.
Issue:
Were the petitioners correct in publishing the MeTC’s
decision while the case was still on appeal?
Ruling:
No. The petitioners are obliged to respect the
respondent’s good name even though they are opposing
parties in a detainer case. Article 19 of the Civil Code
provides that every person must, in the exercise of his
rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and
good faith. A violation of such principle constitutes an
abuse of rights, a tortuous conduct. Petitioners are also
expected to respect Veloso’s dignity, personality, privacy,
and peace of mind under Article 26 of the Civil Code.

34
REQUISITES AND CONDITIONS Petitioner was in delay and in breach of contract. Clearly,
the obligor is liable for damages that are the natural and
H.L. CARLOS CONSTRUCTION INC VS MARINA probable consequences of its breach of obligation. In
PROPERTIES order to finish the project, the latter had to contract the
FACTS services of a second construction firm for P11,750,000.
Hence, MPC suffered actual damages in the amount of
MARINA PROPERTIES CORPORATION (MPC for P4,604,579 for the completion of the project.
brevity) is engaged in the business of real estate
development. It entered into a contract with H.I. Petitioner is also liable for liquidated damages as
CARLOS CONSTRUCTION, INC. (HLC) to construct provided in the Contract.
Phase III of a condominium complex called MARINA
Liquidated damages are those that the parties agree to be
BAYHOMES CONDOMINIUM PROJECT, consisting
paid in case of a breach. As worded, the amount agreed
of townhouses and villas, totaling 31 housing units, for a
upon answers for damages suffered by the owner due to
total consideration of P38,580,609.00, within a period of
delays in the completion of the project. Under Philippine
365 days from receipt of ‘Notice to Proceed’. The original
laws, these damages take the nature of penalties. A penal
completion date of the project was May 16, 1989, but it
clause is an accessory undertaking to assume greater
was extended to October 31, 1989 with a grace period
liability in case of a breach. It is attached to an obligation
until November 30, 1989.
in order to ensure performance.
“The contract was signed by Jovencio F. Cinco, president
of MPC, and Honorio L. Carlos, president of HLC.
CHUA VS UNITED COCONUT PLANTERS BANK
“On December 15, 1989, HLC instituted this case for sum
of money against not only MPC but also against the -see full text
latter’s alleged president, [Respondent] Jesus K. Typoco,
Sr. (Typoco) and [Respondent] Tan Yu (Tan), seeking the
payment of various sums with an aggregate amount of
P14 million pesos, broken down as follows: a.
P7,065,885.03 for costs of labor escalation, change orders
and material price escalation;
ISSUES & ARGUMENTS
W/N H.L. is liable for actual and liquidated damages for
failing to finish the construction it undertook to complete
( Which party was in delay)
HOLDING & RATIO DECIDENDI
Yes. petitioner did not fulfill its contractual obligations. It
could not totally pass the blame to MPC for hiring a
second contractor, because the latter was allowed to
terminate the services of the contractor.
Either party shall have the right to terminate this Contract
for reason of violation or non-compliance by the other
party of the terms and conditions herein agreed upon.”
As of November 1989, petitioner accomplished only
approximately 80 percent of the project. In other words, it
was already in delay at the time. In addition, Engineer
Miranda testified that it would lose money even if it
finished the project; thus, respondents already suspected
that it had no intention of finishing the project at all.
35
MANIFESTATION OF UNJUST ENRICHMENT ISSUE:
ALMARIO VS PHIL AIRLINES
o Unjust enrichment: Article 22, CC recognizes the
o Whether or not Almario is obliged to reimburse
principle that one may not enrich himself at the
the costs incurred by PAL for his training
expense of another.
o Form of "enrichment:" Enrichment of the
HELD:
defendant consists in every patrimonial, physical,
or moral advantage, so long as it is appreciable in
The petition fails.
money
The rationale of the three-year period is the prohibitive
FACTS:
training costs. At an earlier time, when the CBA between
PAL and its employees were still negotiated, the
This is a complaint for reimbursement of training costs
Secretary of Labor basically ruled that PAL should be
filed by PAL against its pilot, Almario.
allowed a return on investment for their pilots’ training
Almario was initially hired as a Boeing 747 Systems expenses. Thus, the provisions that pilots 57 years of age
Engineer. Later on, he successfully bid for the higher shall be frozen and pilots less than 57, provided they have
position of Airbus 300 First Officer, for which he was previously qualified in any company’s turbo-jet aircraft,
given additional training at PAL’s expense. After shall be permitted to occupy any position in the
completing the course, Almario served as A-300 First company’s turbo-jet fleet, were incorporated in later
Officer of PAL but after eight months of service, he incarnations of the CBA.
tendered his resignation for “personal reasons.”
When Almario took the training course, he was about 39
yrs old, 21 yrs away from the retirement age of 60. Hence,
PAL then wrote him a letter, stating that they invested
with the maturity, expertise and experience he gained
heavily on his professional training on the basis that he
from the training course, he was expected to serve PAL
continue to serve the Company for a definite period of
for at least three yrs to offset “the prohibitive costs”
time which is approximately 3 yrs. In short, PAL wanted
thereof.
Almario to reconsider his resignation, otherwise they
would be compelled to ask reimbursement for the training
Article 22 of the Civil Code applies.
costs from him. Despite this, Almario pushed through
with his resignation. Hence, a reimbursement case was
This provision on unjust enrichment recognizes the
filed.
principle that one may not enrich himself at the expense
of another.
In the lower court, PAL invoked the existence of an
innominate contract of do ut facias (I give that you may Enrichment of the defendant consists in every
do) with Almario in that by spending for his training, he patrimonial, physical, or moral advantage, so long as it is
would render service to it until the costs of training were appreciable in money. It may consist of some positive
recovered in at least 3 yrs. They based the period of “3 pecuniary value incorporated into the patrimony of the
yrs” to a decision of the Secretary of Labor concerning defendant, such as: (1) the enjoyment of a thing belonging
PAL’s CBA with its employee-union. to the plaintiff; (2) the benefits from service rendered by
the plaintiff to the defendant; (3) the acquisition of a right,
For his part, Almario denied the existence of any
whether real or personal; (4) the increase of value of
agreement with PAL that he would render service to it for
property of the defendant; (5) the improvement of a right
three years after his training, failing which he would
of the defendant, such as the acquisition of a right of
reimburse the training costs. The lower court ruled in
preference; (6) the recognition of the existence of a right
favor of Almario. On appeal, CA found Almario liable
in the defendant; and (7) the improvement of the
under the CBA and under Article 22 of the Civil Code.
conditions of life of the defendant.
Hence this appeal.
The enrichment of the defendant must have a correlative
prejudice, disadvantage, or injury to the plaintiff. This
36
prejudice may consist, not only of the loss of property or
the deprivation of its enjoyment, but also of non-payment
of compensation for a prestation or service rendered to the
defendant without intent to donate on the part of the
plaintiff, or the failure to acquire something which the
latter would have obtained. The injury to the plaintiff,
however, need not be the cause of the enrichment of the
defendant. It is enough that there be some relation
between them, that the enrichment of the defendant would
not have been produced had it not been for the fact from
which the injury to the plaintiff is derived.

In the present case, PAL invested for the training of

Almario on the expectation that they may recover by
availing of Almario’s services for at least three years. This
expectation was not fully realized, however, due to
Almario’s resignation after only eight months of service
following the completion of his training course. He
cannot, therefore, refuse to reimburse the costs of training
without violating the principle of unjust enrichment.

37
WHERE IS THERE NO UNJUST ENRICHMENT
BENGUET CORPORATION VS DENR MINES
ADJUDICATION BOARD
FACTS:
On June 1, 1987, Benguet and J.G. Realty entered into a
RAWOP, wherein J.G. Realty was acknowledged as the
owner of four mining claims respectively named as
Bonito-I, Bonito-II, Bonito-III, and Bonito-IV, with a
total area of 288.8656 hectares, situated in Barangay
Luklukam, Sitio Bagong Bayan, Municipality of Jose
Panganiban, Camarines Norte.
Thus, on August 9, 1989, the Executive Vice-President of
Benguet, Antonio N. Tachuling, issued a letter informing
J.G. Realty of its intention to develop the mining claims.
However, on February 9, 1999, J.G. Realty, through its
President, Johnny L. Tan, then sent a letter to the
President of Benguet informing the latter that it was
terminating the RAWOP on the following grounds:
a. The fact that your company has failed to perform the
obligations set forth in the RAWOP, i.e., to
undertake development works within 2 years from the
execution of the Agreement;
b. Violation of the Contract by allowing high graders
to operate on our claim.
c. No stipulation was provided with respect to the term
limit of the RAWOP.
d. Non-payment of the royalties thereon as provided in
the RAWOP.
On June 7, 2000, J.G. Realty filed a Petition for
Declaration of Nullity/Cancellation of the RAWOP with
the Legaspi City POA, Region V, docketed as DENR
Case No. 2000-01 and entitled J.G. Realty v. Benguet.
DECISION OF LOWER COURTS: *POA: declared the
RAWOP cancelled. *MAB: affirmed POA.
ISSUES:
(1) Should the controversy have first been submitted to
arbitration before the POA took cognizance of the case?;
(2) Was the cancellation of the RAWOP supported by
evidence?; and
(3) Did the cancellation of the RAWOP amount to unjust
enrichment of J.G. Realty at the expense of Benguet?
HELD: On correctness of appeal: Petitioner having
failed to properly appeal to the CA under Rule 43, the
decision of the MAB has become final and executory. On
this ground alone, the instant petition must be denied.
(1) YES, the case should have first been brought to
voluntary arbitration before the POA.
Secs. 11.01 and 11.02 of the RAWOP pertinently
provide:
11.01 Arbitration
Any disputes, differences or disagreements between
BENGUET and the OWNER with reference to anything
whatsoever pertaining to this Agreement that cannot be
amicably settled by them shall not be cause of any action
of any kind whatsoever in any court or administrative
agency but shall, upon notice of one party to the other, be
referred to a Board of Arbitrators consisting of three (3)
members, one to be selected by BENGUET, another to be
selected by the OWNER and the third to be selected by
the aforementioned two arbitrators so appointed.
xxxx
11.02 Court Action
No action shall be instituted in court as to any matter in
dispute as hereinabove stated, except to enforce the
decision of the majority of the Arbitrators
A contractual stipulation that requires prior resort to
voluntary arbitration before the parties can go directly to
court is not illegal and is in fact promoted by the State.
To reiterate, availment of voluntary arbitration before
resort is made to the courts or quasi-judicial agencies of
the government is a valid contractual stipulation that must
be adhered to by the parties.
In other words, in the event a case that should properly be
the subject of voluntary arbitration is erroneously filed
with the courts or quasi-judicial agencies, on motion of
the defendant, the court or quasi-judicial agency shall
determine whether such contractual provision for
arbitration is sufficient and effective. If in affirmative, the
court or quasi-judicial agency shall then order the
enforcement of said provision.
38
In sum, on the issue of whether POA should have referred governmental unit or labor department's personnel, said
the case to voluntary arbitration, we find that, indeed, arbitrator renders arbitration services provided for under
POA has no jurisdiction over the dispute which is labor laws.
governed by RA 876, the arbitration law.
There is a clear distinction between compulsory and
HOWEVER, ESTOPPEL APPLIES. the Court rules that voluntary arbitration. The arbitration provided by the
the jurisdiction of POA and that of MAB can no longer be POA is compulsory, while the nature of the arbitration
questioned by Benguet at this late hour. What Benguet provision in the RAWOP is voluntary, not involving any
should have done was to immediately challenge the government agency.
POA's jurisdiction by a special civil action for certiorari
when POA ruled that it has jurisdiction over the
dispute. To redo the proceedings fully participated in by
the parties after the lapse of seven years from date of
institution of the original action with the POA would be
anathema to the speedy and efficient administration of
justice.
LAWS AND CASES
ADVANCED FOUNDATION SYSTEMS CORP VS
(2) The cancellation of the RAWOP was supported by NEW WORLD PROPERTIES AND VENTURES
evidence. INC
See full text
(3) There is no unjust enrichment in the instant case.
There is no unjust enrichment when the person who will
benefit has a valid claim to such benefit.
The principle of unjust enrichment under Article 22
requires two conditions: (1) that a person is benefited
without a valid basis or justification, and (2) that such
benefit is derived at another's expense or damage.
Clearly, there is no unjust enrichment in the instant case
as the cancellation of the RAWOP, which left Benguet
without any legal right to participate in further developing
the mining claims, was brought about by its violation of
the RAWOP. Hence, Benguet has no one to blame but
itself for its predicament.

OBITER DICTA:
(1) Difference between compulsory & voluntary
arbitration --
In Reformist Union of R.B. Liner, Inc. vs. NLRC,
compulsory arbitration has been defined both as “the
process of settlement of labor disputes by a government
agency which has the authority to investigate and to make
an award which is binding on all the parties, and as a mode
of arbitration where the parties are compelled to accept
the resolution of their dispute through arbitration by a
third party.” While a voluntary arbitrator is not part of the
39