TORTS CASE DIGESTS (PAGES 1 AND 2 OF SYLLABUS) 3A DIGEST POOL

E. TORT DISTINGUISHED FROM BREACH OF CONTRACT

1. JOSE CANGCO, Plaintiff-Appellant, vs. MANILA RAILROAD CO., Defendant-Appellee.

FACTS:

Jose Cangco, a clerk of Manila Railroad Company, with a monthly rate of P25 and lives in San Mateo, Rizal located along the line
of the defendant railroad. He was entitled of a pass that he uses for his transportation to the office free of charge. During the
incident, the plaintiff arose from his seat when the train drew near to his destination. 

When Cangco stepped off, one or both of his feet came in contact with a sack of watermelons, causing his feet to slip from
under him and causing him to fall violently on the platform. His body rolled from the platform and was drawn under the
moving car, where his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the train the
car moved forward possibly six meters before it came to a full stop. The accident occurred between 7-8pm and the station was
dimly lighted by a single light. Objects on the platform where the accident occurred were difficult to discern especially to a
person emerging from a lighted car.

The presence of a sack of melons on the platform is found in the fact that it was the customary season for harvesting these
melons. They were contained in numerous sacks which has been piled on the platform in a row one upon another and was so
placed of melons and the edge of platform; and it is clear that the fall of the plaintiff was due to the fact that his foot alighted
upon one of these melons at the moment he stepped upon the platform. 

Cangco then instituted a proceeding in the CFI of Manila to recover damages of the defendant company, founding his action
upon the negligence of the servants and employees of the defendant in placing the sacks of melons upon the platform and
leaving them so placed as to be a menace to the security of passenger alighting from the company's trains. At the hearing the
trial judge, found the facts substantially as above stated, and drew therefrom his conclusion to the effect that, although
negligence was attributable to the defendant by reason of the fact that the sacks of melons were so placed as to obstruct
passengers passing to and from the cars, nevertheless, the plaintiff himself had failed to use due caution in alighting from the
coach and was therefore precluded from recovering. Judgment was renderd in favor of the defendant company, and the
plaintiff appealed.

ISSUE/S: 

1.     W/N the defendant company was liable for the damages caused by their employees?

2.     Who has the burden of proof to show negligence?

3.     W/N plaintiff is contributory negligent to the incident?

RULING:

1. Yes. The SC ruled that it can not be doubted that the employees of the railroad company were guilty of negligence in piling
these sacks on the platform in the manner above stated; that their presence caused the plaintiff to fall as he alighted from the
train; and that they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. 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.

The foundation of the legal liability of the defendant is the contract of carriage, and that the obligation to respond for the
damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason of the failure of defendant to
exercise due care in its performance. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but
only to extra-contractual obligations — or to use the technical form of expression, that article relates only to culpa aquiliana
and not to culpa contractual.

In case of extra-contractual culpa based upon negligence, it is necessary that there shall have been some fault attributable to
the defendant personally, and that the last paragraph of article 1903 merely establishes a rebuttable presumption, is in
complete accord with the authoritative opinion of Manresa, who says that the liability created by article 1903 is imposed by
reason of the breach of the duties inherent in the special relations of authority or superiority existing between the person
called upon to repair the damage and the one who, by his act or omission, was the cause of it.

On the other hand, the liability of masters and employers for the negligent acts or omissions of their servants or agents, when
such acts or omissions cause damages which amount to the breach of a contact, is not based upon a mere presumption of the
master's negligence in their selection or control, and proof of exercise of the utmost diligence and care in this regard does not
relieve the master of his liability for the breach of his contract.

 2.  When the sources of the obligation upon which plaintiff's cause of action depends is a negligent act or omission, the burden
of proof rests upon plaintiff to prove the negligence — if he does not his action fails. But when the facts averred show a
contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to perform
the contract, it is not necessary for plaintiff to specify in his pleadings whether the breach of the contract is due to willful fault
or to negligence on the part of the defendant, or of his servants or agents. Proof of the contract and of its nonperformance is
sufficient prima facie to warrant a recovery.

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. That duty, being contractual, was direct and immediate, and its non-performance
could not be excused by proof that the fault was morally imputable to defendant's servants.

3. As to the issue of contributory negligence of the palintiff. In this particular instance, that the train was barely moving when
plaintiff alighted is shown conclusively by the fact that it came to stop within six meters from the place where he stepped from
it. Thousands of person alight from trains under these conditions every day of the year, and sustain no injury where the
company has kept its platform free from dangerous obstructions. There is no reason to believe that plaintiff would have
suffered any injury whatever in alighting as he did had it not been for defendant's negligent failure to perform its
duty to provide a safe alighting place.

The SC is of the opinion that the correct doctrine relating to this subject is that expressed in Thompson's work on Negligence
as follows: The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a
moving railway train, is that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent person, of
the age, sex and condition of the passenger, would have acted as the passenger acted under the circumstances disclosed by the
evidence. 

Or if the Court decides to adop the mode of exposition used in Picart vs. Smith, the test is whether there was anything in the
circumstances surrounding the plaintiff at the time he alighted from the train which would have admonished a person of
average prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff should have
desisted from alighting; and his failure so to desist was contributory negligence.

As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following circumstances are
to be noted: The company's platform was constructed upon a level higher than that of the roadbed and the surrounding
ground. The distance from the steps of the car to the spot where the alighting passenger would place his feet on the platform
was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was of
cement material, also assured to the passenger a stable and even surface on which to alight. Furthermore, the plaintiff was
possessed of the vigor and agility of young manhood, and it was by no means so risky for him to get off while the train was yet
moving as the same act would have been in an aged or feeble person. In determining the question of contributory negligence in
performing such act — that is to say, whether the passenger acted prudently or recklessly — the age, sex, and physical
condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered.
Women, it has been observed, as a general rule are less capable than men of alighting with safety under such conditions, as the
nature of their wearing apparel obstructs the free movement of the limbs. Again, it may be noted that the place was
perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at this station. There could,
therefore, be no uncertainty in his mind with regard either to the length of the step which he was required to take or
the character of the platform where he was alighting. The court concludes that the conduct of the plaintiff in
undertaking to alight while the train was yet slightly under way was not characterized by imprudence and that
therefore he was not guilty of contributory negligence.

The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a copyist clerk, and that the
injuries he has suffered have permanently disabled him from continuing that employment. Defendant has not shown that any
other gainful occupation is open to plaintiff. His expectancy of life, according to the standard mortality tables, is approximately
thirty-three years. We are of the opinion that a fair compensation for the damage suffered by him for his permanent disability
is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum of P790.25 for medical attention,
hospital services, and other incidental expenditures connected with the treatment of his injuries.
  alit

2.  JAPAN AIRLINES, petitioner vs. JESUS SIMANGAN, respondent.

G.R. No. 170141
April 22, 2008
REYES R.T., J.

FACTS:

In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in UCLA School of
Medicine in Los Angeles, California, U.S.A. Respondent needed to go to the United States to complete his preliminary work-up
and donation surgery. Hence, to facilitate respondent's travel to the United States, UCLA wrote a letter to the American
Consulate in Manila to arrange for his visa. In due time, respondent was issued an emergency U.S. visa by the American
Embassy in Manila. Then, respondent purchased a round trip plane ticket from petitioner JAL for US$1,485.00 and was issued
the corresponding boarding pass.

On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport. He was allowed to check-in at
JAL's counter. His plane ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and
security routines. After passing through said immigration and security procedures, respondent was allowed by JAL to enter its
airplane. While inside the airplane, JAL's airline crew suspected respondent of carrying a falsified travel document and
imputed that he would only use the trip to the United States as a pretext to stay and work in Japan.

The stewardess asked respondent to show his travel documents. Shortly after, the stewardess along with a Japanese and a
Filipino haughtily ordered him to stand up and leave the plane. Respondent protested, explaining that he was issued a U.S. visa.
Just to allow him to board the plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in
Narita. His pleas were ignored. He was then constrained to go out of the plane.

Respondent went to JAL's ground office and waited there for three hours. Meanwhile, the plane took off and he was left behind.
Afterwards, he was informed that his travel documents were, indeed, in order. Respondent was refunded the cost of his plane
ticket less the sum of US$500.00 which was deducted by JAL. Subsequently, respondent's U.S. visa was cancelled.

Respondent filed an action for damages against JAL with the Regional Trial Court (RTC) in Valenzuela City. He claimed he was
not able to donate his kidney to Loreto; and that he suffered terrible embarrassment and mental anguish. He prayed that he be
awarded P3 million as moral damages, P1.5 million as exemplary damages and P500,000.00 as attorney's fees.

JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow respondent to fly on his
scheduled departure was due to "a need for his travel documents to be authenticated by the United States Embassy   because
no one from JAL's airport staff had encountered a parole visa before. It posited that the authentication required additional
time; that respondent was advised to take the flight the following day, July 30, 1992. JAL alleged that respondent agreed to be
rebooked on July 30, 1992.

On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of respondent (plaintiff)
ordering the defendant to pay the plaintiff the amount of P1,000,000.00 as moral damages, the amount of P500,000.00 as
exemplary damages and the amount of P250,000.00 as attorney's fees, plus the cost of suit.

In a Decision dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that it lowered the amount of
moral and exemplary damages and deleted the award of attorney's fees. Appellant JAPAN AIR LINES is ordered to pay appellee
JESUS SIMANGAN the reduced sums, as follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages, and Two
Hundred Fifty Thousand Pesos (P250,000.00) as exemplary damages.

ISSUES:

(1) whether or not JAL is guilty of contract of carriage;  (2) whether or not respondent is entitled to moral and exemplary
damages; and  (3) whether or not JAL is entitled to its counterclaim for damages.

RULING:
1.       JAL is guilty of breach of contract of carriage.
JAL justifies its action by arguing that there was "a need to verify the authenticity of respondent's travel document." It alleged
that no one from its airport staff had encountered a parole visa before. It further contended that respondent agreed to fly the
next day so that it could first verify his travel document, hence, there was novation. It maintained that it was not guilty of
breach of contract of carriage as respondent was not able to travel to the United States due to his own voluntary desistance.
We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need to first check the
authenticity of his travel documents with the U.S. Embassy.56 As admitted by JAL, "the flight could not wait for Mr. Simangan
because it was ready to depart."

Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left behind.
Damage had already been done when respondent was offered to fly the next day on July 30, 1992. Said offer did not
cure JAL's default. Considering that respondent was forced to get out of the plane and left behind against his will, he could not
have freely consented to be rebooked the next day. In short, he did not agree to the alleged novation.

Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal articles already passed the
rigid immigration and security routines, JAL, as a common carrier, ought to know the kind of valid travel documents
respondent carried. As provided in Article 1755 of the New Civil Code: "A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard
for all the circumstances." Thus, We find untenable JAL's defense of "verification of respondent's documents" in its breach of
contract of carriage. It bears repeating that the power to admit or not an alien into the country is a sovereign act which
cannot be interfered with even by JAL.

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 latter's failure to carry the passenger safely to his destination. Respondent has
complied with these twin requisites.
2.   Respondent is entitled to moral and exemplary damages and attorney's fees plus legal interest.

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one
of the items enumerated under Article 2219 of the Civil Code.64 As an exception, such damages are recoverable: (1) in cases in
which the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article 2206(3) of the Civil
Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Article 2220.

The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of carriage
with respondent in bad faith. JAL personnel summarily and insolently ordered respondent to disembark while the latter was
already settled in his assigned seat. He was ordered out of the plane under the alleged reason that the genuineness of his travel
documents should be verified.

Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on breach of
a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack
of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which
may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution
thereof, as well as in the enforcement of its terms, or any other kind of deceit.

JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts
against respondent. Exemplary damages, which are awarded by way of example or correction for the public good, may be
recovered in contractual obligations, as in this case, if defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.68

Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard
of extraordinary diligence, a standard which is, in fact, that of the highest possible degree of diligence, from common carriers
and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame
their reckless instincts and to force them to take adequate care of human beings and their property.

The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages in respondent's favor is, in
Our view, reasonable and realistic. This award is reasonably sufficient to indemnify him for the humiliation and
embarrassment he suffered. This also serves as an example to discourage the repetition of similar oppressive acts. With
respect to attorney's fees, they may be awarded when defendant's act or omission has compelled plaintiff to litigate with third
persons or to incur expenses to protect his interest.
The Court, in Construction Development Corporation of the Philippines v. Estrella, citing Traders Royal Bank Employees
Union-Independent v. National Labor Relations Commission, elucidated thus:

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

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing party in a
litigation. The basis of this is any of the cases provided by law where such award can be made, such as those authorized in Article
2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the
lawyer as additional compensation or as part thereof.74

It was therefore erroneous for the CA to delete the award of attorney's fees on the ground that the record is devoid of evidence
to show the cost of the services of respondent's counsel. The amount is actually discretionary upon the Court so long as it
passes the test of reasonableness. They may be recovered as actual or compensatory damages when exemplary damages are
awarded and whenever the court deems it just and equitable, as in this case. Considering the factual backdrop of this case,
attorney's fees in the amount of P200,000.00 is reasonably modest. , in addition to the said total amount of P800,000.00,
JAL is liable to pay respondent legal interest. Pursuant to the above ruling of the Court, the legal interest is 6% and it shall be
reckoned from September 21, 2000 when the RTC rendered its judgment. From the time this Decision becomes final and
executory, the interest rate shall be 12% until its satisfaction.
3.   JAL is not entitled to its counterclaim for damages.

This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch as the complaint
against it is obviously not malicious or unfounded.  We reiterate case law that if damages result from a party's exercise of a
right, it is damnum absque injuria.81 Lawful acts give rise to no injury.

During the trial, however, JAL presented a witness who testified that JAL suffered further damages. Allegedly, respondent
caused the publications of his subject complaint against JAL in the newspaper for which JAL suffered damages.

Nevertheless, JAL's counterclaim cannot be granted. JAL is a common carrier. JAL's business is mainly with the traveling
public. It invites people to avail themselves of the comforts and advantages it offers.84 Since JAL deals with the public, its
bumping off of respondent without a valid reason naturally drew public attention and generated a public issue. The
publications involved matters about which the public has the right to be informed because they relate to a public issue. This
public issue or concern is a legitimate topic of a public comment that may be validly published

-JV FERMIN
 
3.
 
RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). vs.COURT OF APPEALS and LORETO DIONELA,

G.R. No. L-44748 August 29, 1986, PARAS, J.:

FACTS:
The basis of the complaint against the defendant corporation is a telegram sent through its Manila Office to the offended party,
Loreto Dionela, 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

Plaintiff-respondent Loreto Dionela alleges that the defamatory words on the telegram sent to him not only wounded his
feelings but also caused him undue embarrassment and affected adversely his business as well because other people have
come to know of said defamatory words.
Defendant corporation as a defense, alleges that the additional words in Tagalog was a private joke between the sending and
receiving operators and 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 trial court in finding for the plaintiff ruled that the additional words in Tagalog are libelous. They clearly impute a vice or
defect of the plaintiff. Whether or not they were intended for the plaintiff, the effect on the plaintiff is the same. Any person
reading the additional words in Tagalog will naturally think that they refer to the addressee, the plaintiff. There is no
indication from the face of the telegram that the additional words in Tagalog were sent as a private joke between the operators
of the defendant.
The liability of the defendant is predicated not only on Article 33 of the Civil Code of the Philippines but on Articles 19 and 20.
CA affirmed the decision of the RTC
ISSUE: Whether or not CA erred in holding that the liability of petitioner-company-employer is predicated on Articles 19 and
20 of the Civil Code, Articles on Human Relations.
RULING: NO.
Petitioner's contentions do not merit our consideration. The action for damages was filed in the lower court directly against
respondent corporation not as an employer subsidiarily liable under the provisions of Article 1161 of the New Civil Code in
relation to Art. 103 of the Revised Penal Code. 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.
Petitioner is a domestic corporation engaged in the business of receiving and transmitting messages. Everytime a person
transmits a message through the facilities of the petitioner, a contract is entered into. Upon receipt of the rate or fee fixed, the
petitioner undertakes to transmit the message accurately. There is no question that in the case at bar, libelous matters were
included in the message transmitted, without the consent or knowledge of the sender. There is a clear case of breach of
contract by the petitioner in adding extraneous and libelous matters in the message sent to the private respondent. 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.
WHEREFORE, premises considered, the judgment of the appellate court is hereby AFFIRMED. SO ORDERED.
Ina

4. JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C. SYQUIA and ANTHONY C. SYQUIA, petitioners,
vs. THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL PARK CEMETERY, INC., respondents.

G.R. No. 98695 January 27, 1993, CAMPOS, JR., J.:

FACTS:

Juan Syquia, father of the deceased Vicente Syquia, entered in a contract of Deed of Sale and Interment Order with Manila
Memorial Park Cemetery Inc (MMPCI). In the contract, there contained a provision which stated that the coffin would be
placed in a sealed concrete vault to protect the remains of the deceased from the elements. During the preparation for the
transfer of Vicente’s remains in the newly bought lot in Manila Memorial, it was discovered that there was a hole
approximately 3 inches in diameter in the concrete vault which caused total flooding inside, damaged the coffin as well as the
body of the deceased and covered the same with filth.

Syquia filed a complaint for recovery of damages arising from breach of contract and/or quasi-delict against the MMPCI for
failure to deliver a defect-free concrete vault to protect the remains of the deceased. In its defense, MMPCI claimed that the
boring of the hole was necessary in order to prevent the vault from floating when water fills the grave. In dismissing the
complaint, the trial court held that 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 between the Syquias and defendant Manila Memorial Park Cemetery, Inc. The CA
affirmed the decision of the trial court. Hence, the present petition.

 ISSUE:

 Whether or not the private respondent is guilty of tort (NO)

 HELD:

 NO. Decision of the CA affirmed.

 We are more inclined to answer the foregoing questions in the negative. There is not enough ground, both in fact and in law,
to justify a reversal of the decision of the respondent Court and to uphold the pleas of the petitioners. Although a pre-existing
contractual relation between the parties does not preclude the existence of a culpa aquiliana, We find no reason to disregard
the respondent’s Court finding that there was no negligence.

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

In this case, it has been established that the 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 quasidelict 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.”

Prepared by: Mika Ituriaga

5.

Far East Bank and Trust Company vs The Honorable Court of Appeals, Luis A. Luna and Clarita S. Luna (1995)

Facts:
Some time in October 1986, private respondent Luis A. Luna applied for, and was accorded, a FAREASTCARD issued by
petitioner Far East Bank and Trust Company ("FEBTC") at its Pasig Branch. The bank also issued a supplemental card to
private respondent Clarita S. Luna.In August 1988, Clarita lost her credit card. FEBTC was forthwith informed. In order to
replace the lost card, Clarita submitted an affidavit of loss. In cases of this nature, the bank's internal security procedures and
policy would appear to be to meanwhile so record the lost card, along with the principal card, as a "Hot Card" or "Cancelled
Card" in its master file. Luis tendered lunch for a close friend, at Hotel Intercontinental Manila, Luis presented his
FAREASTCARD. Since the card was not honored, Luis was forced to pay in cash the bill amounting to P588.13. Naturally, Luis
felt embarrassed by this incident. In a letter, Luis Luna, through counsel, demanded from FEBTC the payment of damages.
Adrian V. Festejo, a vice-president of the bank, expressed the bank's apologies to Luis. On 05 December 1988, filed a complaint
for damages with the Regional Trial Court ("RTC") of Pasig against FEBTC.

Trial Court’s Ruling: On 30 March 1990, the RTC of Pasig, given the foregoing factual settings, rendered a decision ordering
FEBTC to pay private respondents (a) P300,000.00 moral damages; (b) P50,000.00 exemplary damages; and (c) P20,000.00
attorney's fees.

CA: The appellate court affirmed the decision of the trial court.

M .R.: Its motion for reconsideration having been denied by the appellate court, FEBTC has come to this Court with this
petition for review.

Issue: WON FEBTC can be held liable for moral damages. 

Decision: 
There is merit in this appeal. 

In culpa contractual, moral damages may be recovered where the defendant is shown to have acted in bad faith or
with malice in the breach of the contract.

 The Civil Code provides:

"Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.

Bad faith, in this context, includes gross, but not simple, negligence. Exceptionally, in a contract of carriage, moral damages are
also allowed in case of death of a passenger attributable to the fault (which is presumed) of the common carrier.
Concededly, the bank was remiss in indeed neglecting to personally inform Luis of his own card's cancellation. Nothing in the
findings of the trial court and the appellate court, however, can sufficiently indicate any deliberate intent on the part of FEBTC
to cause harm to private respondents. Neither could FEBTC's negligence in failing to give personal notice to Luis be considered
so gross as to amount to malice or bad faith.

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. This doctrine, unfortunately, cannot improve private respondents' 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, private
respondents' 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. 

Nevertheless, the bank's failure, even perhaps inadvertent, to honor its credit card issued to private respondent Luis should
entitle him to recover a measure of damages sanctioned under Article 2221 (Nominal Damages) of the Civil Code.

The appealed decision is MODIFIED by deleting the award of moral and exemplary damages to private respondents; in its
stead, petitioner is ordered to pay private respondent Luis A. Luna an amount of P5,000.00 by way of nominal damages.

Edited by Zarina

F. TORT DISTINGUISHED FROM CIVIL LIABILITY ARISING FROM CRIME

7. The People of the Philippines vs Rogelio Ligon y Trias and Fernando Gabat y Almera and Fernando Gabat y Almera
(1987) 

Facts:

On October 23, 1983, the accused, Fernando Gabat (Gabat), was riding in a 1978 Volkswagen Kombi owned by his father,
Antonio Gabat, and driven by the other accused, Rogelio Ligon (Ligon). The Kombi was coming from Espana Street going
towards the direction of Quiapo. Fernando Gabat was seated beside the driver, in the front seat by the window on the right
side of the Kombi. At the intersection of Quezon Boulevard and Lerma Street before turning left towards the underpass at C.M.
Recto Avenue, the Kombi had to stop as the traffic light was red. While waiting for the traffic light to change, Fernando Gabat
beckoned a cigarette vendor, Jose Rosales y Ortiz (Rosales), the victim, to buy some cigarettes from him. Rosales approached
the Kombi and handed Gabat two sticks of cigarettes. While this transaction was occurring, the traffic light changed to green,
and the Kombi driven by Rogelio Ligon suddenly moved forward. Rosales clung to the window of the Kombi but apparently
lost his grip and fell down on the pavement. Rosales was rushed by some bystanders to the Philippine General Hospital, where
he was treated for multiple physical injuries and was confined thereat until his death on October 30, 1983. In an autopsy, it
was stated that the cause of death of Rosales was "pneumonia hypostatic, bilateral, secondary to traumatic injuries of the
head."

The prosecution claimed that Gabat grabbed the box of cigarettes from Rosales and moved loose the latter's hand from the
window of the Kombi, resulting in the latter falling down and hitting the pavement. The defense, however, claims that as the
vehicle sped onward, the cigarette box which was squeezed between the right arm of Gabat and the window frame fell inside
the Kombi. Rosales then
ran beside the vehicle and clung to the windowsill of the moving vehicle. Gabat testified that when he saw the cigarette vendor
clinging on the side of the front door, he told Ligon to veer to the right in order that Rosales could get off at the sidewalk.
However, Gabat declared, that Ligon said that it could not be done because of the moving vehicular traffic. Then, while the
vehicle slowed down and Ligon was maneuvering to the right in an attempt to go toward the sidewalk, Rosales lost his grip on
the window frame and fell to the pavement of Quezon Boulevard. Gabat allegedly shouted at Ligon to stop but Ligon replied
that they should go on to Las Pinas and report the incident to the parents of Gabat, and later they would come back to the
scene of the incident. However, while the Kombi was speeding along Dewey Boulevard, it was blocked by the taxi of Prudencio
Castillo and a jeep driven by policemen. Gabat and Ligon were brought to police headquarters, but neither of them executed
any written statement.

Issue: WON the accused who was acquitted from any criminal liability is free from any civil liability.

Decision: It does not follow that a person who is not criminally liable is also free from civil liability.

While the guilt of the accused in a criminal prosecution must be established beyond reasonable doubt, only a preponderance of
evidence is required in a civil action for damages. The judgment of acquittal extinguishes the civil liability of the accused only
when it includes a declaration that the facts from which the civil liability might arise did not exist.

The reason for the provisions of Article 29 of the Civil Code, which provides that the acquittal of the accused on the ground
that his guilt has not been proved beyond reasonable doubt does not necessarily exempt him from civil liability for the same
act or omission, has been explained by the Code Commission as follows:

The old rule that the acquittal of the accused in a criminal case also releases him from civil liability is one of the most serious
flaws in the Philippine legal system. It has given rise to numberless instances of miscarriage of justice, where the acquittal was
due to a reasonable doubt in the mind of the court as to the guilt of the accused. The reasoning followed is that inasmuch as the
civil responsibility is derived from the criminal offense, when the latter is not proved, civil liability cannot be demanded.

This is one of those cases where confused thinking leads to unfortunate and deplorable consequences. Such reasoning fails to
draw a clear line of demarcation between criminal liability and civil responsibility, and to determine the logical result of the
distinction.  The two liabilities are separate and distinct from each other. One affects the social order and the other, private
rights. One is for the punishment or correction of the offender while the other is for reparation of damages suffered by the
aggrieved party. The two responsibilities are so different from each other that Article 1813 of the present (Spanish) Civil Code
reads thus: "There may be a compromise upon the civil action arising from a crime; but the public action for the imposition of
the legal penalty shall not thereby be extinguished." It is just and proper that, for the purposes of the imprisonment of or fine
upon the accused, the offense should be proved beyond reasonable doubt. But for the purpose of indemnifying the
complaining party, why should the offense also be proved beyond reasonable doubt? Is not the invasion or violation of every
private right to be proved only by a preponderance of evidence? Is the right of the aggrieved person any less private because
the wrongful act is also punishable by the criminal law?

For these reasons, the Commission recommends the adoption of the reform under discussion. It will correct a serious defect in
our law. It will close up an inexhaustible source of injustice a cause for disillusionment on the part of the innumerable persons
injured or wronged.

In the instant case, we find that a preponderance of evidence exists sufficient to establish the facts from which the civil liability
of Gabat arises. On the basis of the trial court's evaluation of the testimonies of both prosecution and defense witnesses at the
trial and applying the quantum of proof required in civil cases, we find that a preponderance of evidence establishes that Gabat
by his act and omission with fault and negligence caused damage to Rosales and should answer civilly for the damage done.
Gabat's wilfull act of calling Rosales, the cigarette vendor, to the middle of a busy street to buy two sticks of cigarettes set the
chain of events which led to the death of Rosales. Through fault and negligence, Gabat (1) failed to prevent the driver from
moving forward while the purchase was completed; (2) failed to help Rosales while the latter clung precariously to the moving
vehicle, and (3) did not enforce his order to the driver to stop. Finally, Gabat acquiesced in the driver's act of speeding away,
instead of stopping and picking up the injured victim. These proven facts taken together are firm bases for finding Gabat civilly
liable under the Civil Code for the damage done to Rosales.

8. Rufo Mauricio Construction and/or Rufo Mauricio vs Hon. Intermediate Appellate Court and People of the
Philippines (1987)                              

Extinction of criminal liability and the corresponding civil liability arising from crime (ex delicto) does not preclude recovery of
civil liability from the ER.
Facts:

On September 20, 1979, Illustre Cabiliza, driver of Isuzu dump truck owned by RUFO MAURICIO CONSTRUCTIONS, was
charged before the RTC of Legazpi City with homicide and damage to property through reckless imprudence. The dump truck
that he was driving sideswipe and hit a Colt Gallant driven and owned by the late Judge Arsenio Solidum, thereby inflicting
injuries upon him which directly caused his untimely death and further causing damage to the said vehicle and likewise
causing damage to the house owned by Pablo Navarro.

Cabiliza filed a Notice of Appeal but he died and did not live to pursue his appeal. Hence, the lower court issued an Order
requiring the heirs of Cabiliza to appear and to substitute him with respect to the civil aspect of the case. However, Cabiliza
was found insolvent evidenced by a certificate of insolvency. The victim’s widow Mrs. Aurora Solidum filed a motion for
issuance of a subsidiary writ of execution to be enforced against the employer, Rufo Mauricio, which was granted.

Petitioner filed MR but it was denied for lack of merit.

Petitioner contends that ---

1. The dismissal of the criminal case against the accused-employee wipes out not only the employee’s primary civil liability,
but also the employer’s subsidiary liability because:
a. The criminal case is based on Article 100 of RPC wherein criminal liability and exemption of criminal liability
implies exemption from civil liability arising from crime.
b. The civil liability of the employer is based, if any, on quasidelict, since the accused was exempted from criminal
liability.

2. Exemplary damages cannot be imposed upon employer who at the time of the alleged incident was not present nor inside
the vehicle.

3. The petitioner-employer cannot be condemned to pay an exorbitant amount of damages without giving him opportunity to
cross examine the witness and opportunity to adduce evidence to resist the claim.

4. The IAC misapplied the facts contrary to the physical evidence relied on conjectures that depicted a different picture of the
accident when the evidence shows that it was the victim who was negligent at the time of the accident. (by invading the proper
lane of the dump truck)

Issue: WON Rufo Mauricio Construction is subsidiarily liable

Decision:

The first contention of petitioner that the death of the accused-employee wipes out not only the employee's primary civil
liability but also his employer's subsidiary liability is without merit. The death of the accused during the pendency of his
appeal or before the judgment of conviction (rendered against him by the lower court) became final and executory
extinguished his criminal liability meaning his obligation 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, that is, 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.

PREMISES CONSIDERED, the assailed decision of the appellate court is hereby SET ASIDE, and this case is REMANDED to the
trial court for the hearing adverted to in the next preceding paragraph.

 
9.  MARIA BENITA A. DULAY, in her own behalf and in behalf of the minor children KRIZTEEN ELIZABETH, BEVERLY
MARIE and NAPOLEON II, all surnamed DULAY, petitioners, 
vs.
THE COURT OF APPEALS, Former Eighth Division, HON. TEODORO P. REGINO, in his capacity as Presiding Judge of the
Regional Trial Court National Capital Region, Quezon City, Br. 84, SAFEGUARD INVESTIGATION AND SECURITY CO.,
INC., and SUPERGUARD SECURITY CORPORATION, respondents.
G.R. No. 108017 April 3, 1995 BIDIN, J.:

FACTS: An altercation between Benigno Torzuela and Atty. Napoleon Dulay occurred at the "Big Bang Sa Alabang," as a result
of which Benigno Torzuela, the security guard on duty at the said carnival, shot and killed Atty. Napoleon Dulay.
Herein petitioner 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 and herein private respondents Safeguard Investigation and
Security Co., Inc., ("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"), alleged employers of defendant
Torzuela. 

Petitioners prayed for actual, compensatory, moral and exemplary damages, and attorney's fees. Consequently, private
respondent SUPERGUARD filed a Motion to Dismiss on the ground that the complaint does not state a valid cause of action.
SUPERGUARD claimed that Torzuela's act of shooting Dulay was beyond the scope of his duties, and that since the alleged act
of shooting 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.

Respondent SUPERGUARD further alleged that a complaint for damages based on negligence under Article 2176 of the New
Civil Code, such as the one filed by petitioners, cannot lie, since the civil liability under Article 2176 applies only to quasi-
offenses under Article 365 of the Revised Penal Code. In addition, the private respondent argued that petitioners' filing of the
complaint is premature considering that the conviction of Torzuela in a criminal case is a condition sine qua non for the
employer's subsidiary liability.

Petitioners opposed both motions, stating that their cause of action against the private respondents is based on their liability
under Article 2180 of the New Civil Code, which provides:

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in any business or an industry.

Meanwhile, an Information charging Benigno Torzuela with homicide was filed before the Regional Trial Court. Respondent
Judge Regino issued an order granting SUPERGUARD'S motion to dismiss and SAFEGUARD'S motion for exclusion as
defendant. The above order was affirmed by the respondent court and petitioners' motion for reconsideration thereof was
denied.

Petitioners take exception to the assailed decision and insist that quasi-delicts are not limited to acts of negligence but also
cover acts that are intentional and voluntary. They further contend that under Article 2180 of the New Civil Code, private
respondents are primarily liable for their negligence either in the selection or supervision of their employees. This liability is
independent of the employee's own liability for fault or negligence and is distinct from the subsidiary civil liability under
Article 103 of the Revised Penal Code. Moreover, petitioners argue that Torzuela's act of shooting Dulay is also actionable
under Article 33 of the New Civil Code, to wit:
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct
from the criminal action, may be brought by the injured party. Such civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence. (Emphasis supplied)

ISSUES: 
(1)    Whether or not the action for damages will prosper. (YES)
(2)    Whether the complaint at hand states a sufficient cause of action. (YES. Not related).

RULING: 
1.      YES.  The Supreme Court finds for petitioners.
Article 2176 of the New Civil Code provides: 

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

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. In the absence of more substantial reasons, this Court will
not disturb the above doctrine on the coverage of Article 2176.

Private respondents further aver that Article 33 of the New Civil Code applies only to injuries intentionally committed
pursuant to the ruling in Marcia v. CA (120 SCRA 193 [1983]), and that the actions for damages allowed thereunder are ex-
delicto. However, the term "physical injuries" in Article 33 has already been construed to include bodily injuries causing death.
It is not the crime of physical injuries defined in the Revised Penal Code. It includes not only physical injuries but also
consummated, frustrated, and attempted homicide. Although in the Marcia case (supra), it was held that no independent civil
action may be filed under Article 33 where the crime is the result of criminal negligence, it must be noted however, that
Torzuela, the accused in the case at bar, is charged with homicide, not with reckless imprudence, whereas the
defendant in Marcia was charged with reckless imprudence. Therefore, in this case, a civil action based on Article 33
lies.

It having been established that the instant action is not ex-delicto, petitioners may proceed directly against Torzuela
and the private respondents. Under Article 2180 of the New Civil Code as aforequoted, when an injury is caused by the
negligence of the employee, there instantly arises a presumption of law that there was negligence on the part of the master or
employer either in the selection of the servant or employee, or in supervision over him after selection or both. The liability of
the employer under Article 2180 is direct and immediate; it is not conditioned upon prior recourse against the negligent
employee and a prior showing of the insolvency of such employee. Therefore, it is incumbent upon the private respondents to
prove that they exercised the diligence of a good father of a family in the selection and supervision of their employee. 
Since Article 2176 covers not only acts of negligence but also acts which are intentional and voluntary, it was therefore
erroneous on the part of the trial court to dismiss petitioner's complaint simply because it failed to make allegations of
attendant negligence attributable to private respondents. 

2.      YES.

The general rule is that the allegations in a complaint are sufficient to constitute a cause of action against the defendants if,
admitting the facts alleged, the court can render a valid judgment upon the same in accordance with the prayer therein. A
cause of action exist if the following elements are present, namely: (1) a right in favor of the plaintiff by whatever means and
under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages.

This Court finds, under the foregoing premises, that the complaint sufficiently alleged an actionable breach on the part of the
defendant Torzuela and respondents SUPERGUARD and/or SAFEGUARD. 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. This does not operate
however, to establish that the defendants below are liable. Whether or not the shooting was actually reckless and wanton or
attended by negligence and whether it was actually done within the scope of Torzuela's duties; whether the private
respondents SUPERGUARD and/or SAFEGUARD failed to exercise the diligence of a good father of a family; and whether the
defendants are actually liable, are questions which can be better resolved after trial on the merits where each party can
present evidence to prove their respective allegations and defenses. In determining whether the allegations of a complaint are
sufficient to support a cause of action, it must be borne in mind that the complaint does not have to establish or allege the facts
proving the existence of a cause of action at the outset; this will have to be done at the trial on the merits of the case. If the
allegations in a complaint can furnish a sufficient basis by which the complaint can be maintained, the same should not be
dismissed regardless of the defenses that may be assessed by the defendants. To sustain a motion to dismiss for lack of cause
of action, the complaint must show that the claim for relief does not exist rather than that a claim has been defectively stated,
is ambiguous, indefinite or uncertain. Since the petitioners clearly sustained an injury to their rights under the law, it would be
more just to allow them to present evidence of such injury. 

PREPARED BY:
NICOLE ANN CRYSRA M. ROMERO
 10. FRANCIS CHUA, petitioner, vs. HON. COURT OF APPEALS and LYDIA C. HAO, respondents.

FACTS:

Private respondent 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 in relation to Article 171 of the Revised Penal Code. The City Prosecutor filed the Information for falsification of public
document before the MeTC of Manila against Francis Chua but dismissed the accusation against Elsa.

During the trial, private prosecutors Atty. Sua-Kho and Atty. Rivera appeared as private prosecutors and presented Hao as
their first witness. Chua moved to exclude complainant's counsels as private prosecutors in the case on the ground that Hao
failed to allege and prove any civil liability in the case.

The MeTC granted Chua's motion and ordered the complainant's counsels to be excluded from actively prosecuting the
criminal case. Hao filed a petition for certiorari with the RTC of Manila (SCA No. 99-94846). The RTC granted the petition and
reversed the MeTC order.

Chua filed a petition for certiorari before the Court of Appeals. Petitioner argued before the CA that respondent had no
authority to bring a suit in behalf of the Corporation since there was no Board Resolution authorizing her to file the suit. For
her part, respondent Hao claimed that the suit was brought under the concept of a derivative suit. She maintained that when
the directors or trustees refused to file a suit even when there was a demand from stockholders, a derivative suit was allowed.

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 the petitioner 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 private respondent 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.

ISSUES:

1)        Is the criminal complaint in the nature of a derivative suit? (NO)

2)        Is Siena Realty a proper petitioner in the petition for certiorari filed by Hao? (YES)

3)        Should private prosecutors be allowed to actively participate in the trial of the criminal case? (YES)

RULING:

1)

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.
In the criminal case, the complaint was instituted by respondent against petitioner 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 petitioner.
Private respondent was the one who instituted the action. Private respondent asserts that she filed a derivative suit in behalf
of the corporation. This assertion is inaccurate. 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. In the criminal complaint filed by herein respondent, 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.

2)

In a string of cases, we consistently ruled that only a party-in-interest or those aggrieved may file certiorari cases. It is settled
that the offended parties in criminal cases have sufficient interest and personality as "person(s) aggrieved" to file special civil
action of prohibition and certiorari.

The recourse of the complainant to the respondent Court of Appeals was proper. The petition was brought in her own name
and in behalf of the Corporation. Although, the corporation was not a complainant in the criminal action, the subject of the
falsification was the corporation's project and the falsified documents were corporate documents. Therefore, the corporation
is a proper party in the petition for certiorari because the proceedings in the criminal case directly and adversely affected the
corporation.

3)

Generally, 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 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.

Rule 111(a) of the Rules of Criminal Procedure provides that, "[w]hen a criminal action is instituted, the civil action 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."

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.

When the civil action is instituted with the criminal action, evidence should be taken of the damages claimed and the court
should determine who are the persons entitled to such indemnity. The civil liability arising from the crime may be determined
in the criminal proceedings if the offended party does not waive to have it adjudged or does not reserve the right to institute a
separate civil action against the defendant. Accordingly, if there is no waiver or reservation of civil liability, evidence should be
allowed to establish the extent of injuries suffered.

In the case before us, there was neither a waiver nor a reservation made; nor did the offended party institute a separate civil
action. It follows that evidence should be allowed in the criminal proceedings to establish the civil liability arising from the
offense committed, and the private offended party has the right to intervene through the private prosecutors.

11. DR. ENCARNACION C. LUMANTAS, M.D. vs. HANZ CALAPIZ, REPRESENTED BY HIS PARENTS, HILARIO CALAPIZ, JR.
AND HERLITA CALAPIZ
G.R. NO. 163753. January 15, 2014 J. Bersamin
FACTS: Spouses Hilario Calapiz, Jr. and Herlita Calapiz brought a criminal charge against the petitioner for reckless
imprudence resulting to serious physical injuries when their son, Hanz, had a damaged urethra that could not be fully repaired
and reconstructed due to a trauma believed to be caused by the medical procedures he underwent that were conducted by the
petitioner. 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. On
appeal, the CA affirmed the RTC decision. It opined that even if the petitioner had been acquitted of the crime charged, the
acquittal did not necessarily mean that he had not incurred civil liability considering that the Prosecution had preponderantly
established the sufferings of Hanz as the result of the circumcision.
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
RULING: It is axiomatic that every person criminally liable for a felony is also civilly liable. Nevertheless, the acquittal of an
accused of the crime charged does not necessarily extinguish his civil liability. In Manantan v. Court of Appeals, the Court
elucidates on the two kinds of acquittal recognized by our law as well as on the different effects of acquittal on the civil liability
of the accused, viz:

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 complained of. This instance closes the door to civil
liability, for a person who has been found to be not the perpetrator of any act or omission cannot and can never be held
liable for such act or omission. There being no delict, civil liability ex delicto is out of the question, and the civil action, if
any, which may be instituted must be based on grounds other than the delict complained of. This is the situation
contemplated in Rule 111 of the Rules of Court. The second instance is an acquittal based on 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.

Conformably with the foregoing, therefore, the acquittal of an accused does not prevent a judgment from still being rendered
against him on the civil aspect of the criminal case unless the court finds and declares that the fact from which the civil liability
might arise did not exist.
Although it found the Prosecution’s evidence insufficient to sustain a judgment of conviction against the petitioner for the
crime charged, the RTC did not err in determining and adjudging his civil liability for the same act complained of based on
mere preponderance of evidence. In this connection, the Court reminds that the acquittal for insufficiency of the evidence did
not require that the complainant’s recovery of civil liability should be through the institution of a separate civil action for that
purpose.
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.

F. a. Independent Civil Action., Rationale and The Prejudicial Question Doctrine 

12.SPS. ANTONIO C. SANTOS and ESPERANZA C. SANTOS, NORA BARNALO, BELINDA LUMACTAD, MARIENELA DY,
NIKKA SANTOS and LEONARDO FERRER, Petitioners, 
 vs. HON. NORMANDIE B. PIZARDO, as Presiding Judge, RTC of Quezon City, Branch 101, DIONISIO M SIBAYAN, and
VIRON TRANSPORTATION COMPANY, INC., represented by VIRGILIO Q. RONDARIS, President/Chairman, Respondent.
G.R. No. 151452. July 29, 2005

Facts: In an Information dated April 25, 1994, Dionisio M. Sibayan (Sibayan) was charged with Reckless Imprudence Resulting
to Multiple Homicide and Multiple Physical Injuries in connection with a vehicle collision between a southbound Viron Transit
bus driven by Sibayan and a northbound Lite Ace Van, which claimed the lives of the van’s driver and three (3) of its
passengers, including a two-month old baby, and caused physical injuries to five (5) of the van’s passengers. After trial,
Sibayan was convicted and sentenced to suffer the penalty of imprisonment for two (2) years, four (4) months and one (1) day
to four (4) years and two (2) months. However, as there was a reservation to file a separate civil action, no pronouncement of
civil liability was made by the municipal circuit trial court in its decision promulgated on December 17, 1998.

On October 20, 2000, petitioners filed a complaint for damages against Sibayan, Viron Transit and its President/Chairman,
Virgilio Q. Rondaris, with the Regional Trial Court of Quezon City, pursuant to their reservation to file a separate civil action.
They cited therein the judgment convicting Sibayan.
Viron Transit moved to dismiss the complaint on the grounds of improper service of summons, prescription and laches, and
defective certification of non-forum shopping.

Petitioners opposed the motion to dismiss contending, among others, that the right to file a separate action in this case
prescribes in ten (10) years reckoned from the finality of the judgment in the criminal action. As there was no appeal of the
decision convicting Sibayan, the complaint which was filed barely two (2) years thence was clearly filed within the
prescriptive period.

The trial court dismissed the complaint on the principal ground that the cause of action had already prescribed. According to
the trial court, actions based on quasi delict, as it construed petitioners’ cause of action to be, prescribe four (4) years from the
accrual of the cause of action. Hence, notwithstanding the fact that petitioners reserved the right to file a separate civil action,
the complaint ought to be dismissed on the ground of prescription

Petitioners filed a petition for certiorari with the Court of Appeals which dismissed the same for error in the choice or mode of
appeal. The appellate court also denied petitioners’ motion for reconsideration reasoning that even if the respondent trial
court judge committed grave abuse of discretion in issuing the order of dismissal, certiorari is still not the permissible remedy
as appeal was available to petitioners and they failed to allege that the petition was brought within the recognized exceptions
for the allowance of certiorari in lieu of appeal.

Issue: WON the action has prescribed

Ruling: NO.

Our Revised Penal Code provides that every person criminally liable for a felony is also civilly liable. Such civil liability may
consist of restitution, reparation of the damage caused and indemnification of consequential damages.  When a criminal
action is instituted, the civil liability arising from the offense is impliedly instituted with the criminal action, subject to three
notable exceptions:
1. When the injured party expressly waives the right to recover damages from the accused; 
2. When the offended party reserves his right to have the civil damages determined in a separate action in order to take full
control and direction of the prosecution of his cause; and
3. When the injured party actually exercises the right to maintain a private suit against the offender by instituting a civil action
prior to the filing of the criminal case.
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 municipal circuit trial court, in its decision convicting Sibayan, did not make any
pronouncement as to the latter’s civil liability.
Predicating their claim on the judgment of conviction and their reservation to file a separate civil action made in the criminal
case, petitioners filed a complaint for damages against Sibayan, Viron Transit and its President/Chairman. Petitioners assert
that by the institution of the complaint, they seek to recover private respondents’ civil liability arising from crime.
Unfortunately, based on its misreading of the allegations in the complaint, the trial court dismissed the same, declaring that
petitioners’ cause of action was based on quasi delict and should have been brought within four (4) years from the time the
cause of action accrued, i.e., from the time of the accident.
A reading of the complaint reveals that the allegations therein are consistent with petitioners’ claim that the action was
brought to recover civil liability arising from crime. Although there are 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 civil 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 two separate civil liabilities on the part of the offender, i.e., (1)
civil liability ex delicto, under Article 100 of the Revised Penal Code; and (2) independent civil liabilities, such as those (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 action under Article 33
of the Civil Code.  Either of these liabilities may be enforced against the offender subject to the caveat under Article 2177 of the
Civil Code that the plaintiff cannot recover damages twice for the same act or omission of the defendant and the similar
proscription against double recovery under the Rules above-quoted.
At the time of the filing of the complaint for damages in this case, the cause of action ex quasi delicto had already prescribed.
Nonetheless, petitioners can 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.
The court also held in Mendoza v. La Mallorca Bus Compan (2 cases filed against the driver: One for reckless imprudence
resulting to damage to property with reservation-convicted and civil action for damage-dismissed), 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 the
discharge of the duties of the employees. This is so because Article 103 of the Revised Penal Code operates with 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.
The court 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 the discharge of the duties of the employees. This is so because Article 103 of the Revised
Penal Code operates with 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.
Seen in this light, the trial court should not have dismissed the complaint on the ground of prescription, but instead allowed
the complaint for damages ex delicto to be prosecuted on the merits, considering petitioners’ allegations in their complaint,
opposition to the motion to dismiss and motion for reconsideration of the order of dismissal, insisting that the action was to
recover civil liability arising from crime.
This does not offend the policy that the reservation or institution of a separate civil action waives the other civil actions. The
rationale behind this rule is the avoidance of multiple suits between the same litigants arising out of the same act or omission
of the offender. However, since the stale action for damages based on quasi delict should be considered waived, there is no
more occasion for petitioners to file multiple suits against private respondents as the only recourse available to them is to
pursue damages ex delicto. This interpretation is also consistent with the bar against double recovery for obvious reasons.
-Rysa Almoradie

13.

L.G. Foods Corporation and Victorino Gabor, Vice President and General Manager vs Hon. Philadelfa B. Pagapong-
Agraviador, in her capacity as Presiding Judge of RTC, Br43, Bacolod City and Sps Florentino and Theresa Vallejera (2006)

Facts:
On Feb. 26, 1996, Charles Vallejera, a 7-yr old son of the spouses Florentino Vallejera and Theresa Vallejera, died as he was hit
by a Ford Fiera van owned by the petitioners and driven at the time by their employee, Vincent Norman Ferrer. Eventually, an
information for Reckless Imprudence Resulting to Homicide was filed against the driver before the MTCC Bacolod City.
However, as the accused driver committed suicide, the case was dismissed. 

Claiming that the petitioners should be held civilly liable as they failed to exercise the necessary diligence required of a good
father of a family in the selection and supervision of their employee, the spouses Vallejera later on filed a complaint for
damages against them. 

For their part, the petitioners prayed, by way of an Answer w/ Compulsory Counterclaim, for the dismissal of the complaint.
They argued that they had exercised the required due diligence and maintained that for their liability to attach their driver
must first be convicted. Thus, since the driver died during the pendency of the criminal action, the sine qua non condition for
their subsidiary liability was not fulfilled. Hence, they argued that there is lack of cause of action on the part of the Spouses.
They also argued that since the Spouses Vallejera did not make a reservation to institute a separate action for damages when
the criminal case was filed, the damage suit in question is thereby deemed instituted with the criminal action w/c was already
dismissed. The RTC and the CA both denied petitioner’s motion to dismiss. Hence, this petition for review on certiorari.

Issue: 
Whether the spouses Vallejeras’ cause of action in the Civil Case for Damages is founded on Art. 103 of the RPC, as maintained
by the petitioners, or derived from Art. 2180 of the Civil Code, as decided by the lower courts.

Decision:
PETITION Denied.
From the allegations of their complaint, it is clear that quasi- delict was the spouses’ choice of remedy against the petitioners.
An act or omission causing damage to another may give rise to 2 separate civil liabilities on the part of the offender:
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 (culpa contractual or obligations arising from law, intentional torts and culpa aquiliana) 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. The victims of negligence or their heirs have a
choice between an action to enforce the civil liability arising from culpa criminal under Art. 100 of the RPC, and an
action for quasi-delict (culpa aquiliana) under Arts 2176- 2194 of the Civil Code. 
If, as in this case, the action chosen is for quasi-delict, the plaintiff may hold the employer liable for the negligent act of its
employee, subject to the employer’s defense of exercise of the diligence of a good father of the family. On the other hand, if the
action chosen is for culpa criminal, the plaintiff can hold the employer subsidiarily liable only upon proof of prior conviction of
its employee. According to Art. 2177, these are alternative remedies the plaintiff may choose from in case the obligation has
the possibility of arising indirectly from the crime or directly from tort. The choice is with the plaintiff who makes known his
cause of action in his initiatory pleading or complaint and not with the defendant who can not ask for the dismissal of the
plaintiff’s case of action or lack of it based on the defendant’s perception that the plaintiff should have opted to file a claim
under Art. 103, RPC. Under Art. 2180 of the CC, the liability of the employer is direct/immediate. It is not considered
upon prior recourse against the negligent employee and a prior showing of insolvency of such employee. Furthermore,
the circumstance that no reservation to institute a separate civil action for damages was made when the criminal case was
filed is of no moment for the simple reason that the criminal case was dismissed w/o any pronouncement having been made
therein. In reality, it is as if there was no criminal case to speak of in the first place.

Copied. Zarina

14. RAFAEL JOSE-CONSING, JR., Petitioner, vs. PEOPLE OF THE PHILIPPINES, Respondent.
G.R. No. 161075, FIRST DIVISION, July 15, 2013, BERSAMIN, J.

FACTS:

Petitioner negotiated with and obtained for himself and his mother, Cecilia de la Cruz (de la Cruz) various loans totaling
₱18,000,000.00 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 ₱21,221,500.00. 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 ₱41,377,851.48 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 (Pasig civil case) for injunctive relief, thereby seeking to enjoin Unicapital from proceeding against him for the collection
of the ₱41,377,851.48 on the ground that he had acted as a mere agent of his mother.

Unicapital initiated a criminal complaint against Consing and de la Cruz. The Makati City Prosecutor’s Office filed against
Consing and De la Cruz an information for estafa through falsification of public document in the RTC in Makati City (Criminal
Case No. 00-120), which was assigned to Branch 60 (Makati criminal case).

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 (Makati civil case).

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. 

The RTC issued an order suspending the proceedings in the Makati criminal case on the ground of the existence of a prejudicial
question, and 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). 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.

In the meanwhile, Plus Builders commenced its own suit for damages against Consing (Civil Case No. 99-95381) in the RTC in
Manila (Manila civil case).

An information for estafa through falsification of public document was filed against Consing and De la Cruz in the RTC in Imus,
Cavite, docketed as Criminal Case No. 7668-00 and assigned to Branch 21 (Cavite criminal case). Consing filed a motion to
defer the arraignment on the ground of the existence of a prejudicial question, i.e., the pendency of the Pasig and Manila civil
cases. However, the RTC handling the Cavite criminal case denied Consing’s motion. Later on, it also denied his motion for
reconsideration. Thereafter, Consing commenced in the CA a special civil action for certiorari with prayer for the issuance of a
TRO and/or writ of preliminary injunction (C.A.-G.R. SP No. 63712), seeking to enjoin his arraignment and trial in the Cavite
criminal case. The CA granted the TRO and later promulgated its decision granting Consing’ petition for certiorari and setting
aside the order of the RTC, and permanently enjoining the RTC from proceeding with the arraignment and trial until the Pasig
and Manila civil cases had been finally decided.

Not satisfied, the State assailed the decision of the CA in this Court (G.R. No. 148193), praying for the reversal of the decision of
the CA. The Court granted the petition for review in G.R. No. 148193, and reversed and set aside the decision of the CA, viz:

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 liable for conspiring to falsify public documents. Hence, the determination of the issue involved in
Civil Case No. SCA 1759 for Injunctive Relief is irrelevant to the guilt or innocence of the respondent in the criminal case for
estafa through falsification of public document.

Likewise, the resolution of PBI’s right to be paid damages and the purchase price of the lot in question will not be
determinative of the culpability of the respondent in the criminal case for even if PBI is held entitled to the return of the
purchase price plus damages, it does not ipso facto follow that respondent should be held guilty of estafa through falsification
of public document. Stated differently, a ruling of the court in the civil case that PBI should not be paid the purchase price plus
damages will not necessarily absolve respondent of liability in the criminal case where his guilt may still be established under
penal laws as determined by other evidence.

Moreover, neither is there a prejudicial question if the civil and the criminal action can, according to law, proceed
independently of each other. Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in
Articles 32, 33, 34 and 2176 of the Civil Code, the independent civil action may be brought by the offended party. It shall
proceed independently of the criminal action and shall require only a preponderance of evidence. In no case, however, may the
offended party recover damages twice for the same act or omission charged in the criminal action.

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.

Turning back to the Makati criminal case, the State moved for the reconsideration of the adverse decision of the CA, citing the
ruling in G.R. No. 148193, supra, to the effect that the Pasig and Manila civil cases did not present a prejudicial question that
justified the suspension of the proceedings in the Cavite criminal case, and claiming that under the ruling in G.R. No. 148193,
the Pasig and Makati civil cases did not raise a prejudicial question that would cause the suspension of the Makati criminal
case.

In his opposition to the State’s motion for reconsideration, Consing contended that the ruling in G.R. No. 148193 was not
binding because G.R. No. 148193 involved Plus Builders, which was different from Unicapital, the complainant in the Makati
criminal case. 

The CA amended its decision, reversing itself. It relied upon the ruling in G.R. No. 148193, and held thusly:

CA-G.R. SP No. 63712 is similar with the case at bench. The transactions in controversy, the documents involved; the issue of
the respondent’s culpability for the questioned transactions are all identical in all the proceedings; and it deals with the same
parties with the exception of private complainant Unicapital.

However, the Supreme Court, upon review of CA-G.R. SP No. 63712, People of the Philippines vs. Rafael Jose Consing, Jr. (G.R.
No. 148193, January 16, 2003) held that "Civil Case No. 99-95381, for Damages and attachment on account of alleged fraud
committed by respondent and his mother in selling the disputed lot to Plus Builders, Inc. 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." In view of the aforementioned decision of the Supreme Court, We are thus amending Our May 20, 2003 decision
granting petitioner’s motion for reconsideration. It reversed the orders issued by the CA and ordered the CA to proceed with
the hearing of Criminal Case No. 00-120. 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.

Petitioner reiterates his contention that the decision in G.R. No. 148193 was not controlling in relation to C.A.-G.R. No.
71252, which involved Plus Builders, not Unicapital, the complainant in Criminal Case No. 00-120. He posits that in
arriving at its amended decision, the CA did not consider the pendency of the Makati civil case (Civil Case No. 99-
1418), which raised a prejudicial question, considering that the resolution of such civil action would include the issue
of whether he had falsified a certificate of title or had willfully defrauded Unicapital, the resolution of either of which
would determine his guilt or innocence in Criminal Case No. 00-120.

ISSUE:

1. Whether or not the Makati criminal case should be suspended pending the resolution of the Makati civil case that
Unicapital had filed. (NO)
2. Whether or not Consing’s being a mere agent of his mother should not be criminally liable. (NO)

RULING:
1.
NO. 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 manner in offering as security and later object of sale, a property which they do not own, and
foisting to the public a spurious title." As such, the action was one that could proceed independently of Criminal Case No. 00-
120 pursuant to Article 33 of the Civil Code.

It is well settled that a civil action based on defamation, fraud and physical injuries may be independently instituted
pursuant to Article 33 of the Civil Code, and does not operate as a prejudicial question that will justify the suspension
of a criminal case. 

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.

2.

NO. 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 liable for conspiring to falsify public documents. Hence, the determination of the issue involved in
Civil Case No. SCA 1759 for Injunctive Relief is irrelevant to the guilt or innocence of the respondent in the criminal case for
estafa through falsification of public document. 

Prepared by: Sherissa Marisse Bernabe

G. PRINCIPLE
1.1 Elements

15. SEA COMMERCIAL COMPANY, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, JAMANDRE INDUSTRIES,
INC. and TIRSO JAMANDRE, respondents

Facts:
SEACOM is a corporation engaged in the business of selling and distributing agricultural machinery, products and equipment.
SEACOM and JII entered into a dealership agreement whereby SEACOM appointed JII as its exclusive dealer in the City and
Province of Iloilo. The agreement was subsequently amended to include Capiz in the territorial coverage and to make the
dealership agreement on a non-exclusive basis.

JII allegedly incurred a balance of ₱18,843.85 for unpaid deliveries. SEACOM brought action to recover the amount. JII filed an
Answer denying the obligation and interposed a counterclaim for damages representing unrealized profits. 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, 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 profits. SEACOM alleges that the transaction with FSDC was the result of a public bidding. It alleges
that it did not know FSDC’s intent to buy machineries from JII. Moreover, the dealership agreement is a non-exclusive,
therefore, it can still compete in the market against JII.

RTC:

The trial court rendered a decision ordering JII to pay SEACOM P18,843.85 representing its outstanding obligation. It also
granted the JII’s counterclaim for unrealized profits and for moral and exemplary damages.

CA:

The Court of Appeals affirmed the decision of the trial court stating that while there exists no agency relationship between
SEACOM and JII, SEACOM is liable for damages and unrealized profits to JII.

Issue:

W/N there was an abuse of right by SEACOM resulting to bad faith when it competed with its own dealer, JII, as regards the
sale of farm machineries to FSDC

Held:

YES.

Petition DENIED. Decision of Court of Appeals affirmed.

The principle of abuse of rights stated in the above article (Art. 19 of NCC), departs from the classical theory that “he who uses
a right injures no one.” The modern tendency is to depart from the classical and traditional theory, and to grant indemnity for
damages in cases where there is an abuse of rights, even when the act is not illicit. 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 JII 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.

Even if the dealership agreement was amended to make it on a nonexclusive 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.

1.2. Test when principle may be invoked

 GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY, Petitioners, vs. THE HONORABLE COURT OF
APPEALS and RESTITUTO M. TOBIAS, Respondents
G.R. No. 81262 August 25, 1989 Cortes, J.

FACTS:

Restituto M. Tobias (TOBIAS) was employed by Globe Mackay Cable and Radio Corporation (GLOBE MACKAY) in a dual
capacity as a purchasing agent and administrative assistant to the engineering operations manager. 

In 1972, Tobias discovered fictitious purchases and fraudulent transactions which caused the company to loss several
hundreds of thousand pesos. Tobias reported the discovery to his immediate supervisors, including Herbert Hendry
(HENDRY), Globe Mackay’s general manager. However, Tobias was named as the primary suspect and was ordered to take a
one week forced leave. Upon his return to work, Tobias was called “crook” and “swindler” by Hendry. 

Thereafter, Tobias underwent a lie detector test and a police investigation, to which he was found to be clear from any
participation in the anomaly. Albeit, Globe Mackay conducted a private investigation regarding the anomaly and suspended
Tobias from work. 

Notwithstanding the negative results of both police report and private investigation, Globe Mackay filed a complaint for estafa
through falsification of commercial documents against Tobias. And thereafter, dismissed Tobias from work. 

Unemployed, Tobias applied with Republic Telephone Company (RETELCO). However, Hendry, without any request from
RETELCO, sent a letter stating that Tobias was dismmised by Globe Mackay due to dishonesty. 

Tobias filed a civil case for damages anchored on alleged unlawful, malicious, oppressive, and abusive acts of Hendry. RTC
rendered its judgment in favor of Tobias. On appeal, the CA affirmed the RTC’s decision in totoo, hence the instant petition for
review on certiorari. 

ISSUE:

Whether Globe Mackay and Hendry are liable for damages to Tobias. 

HELD:

Yes, Globe Mackay and Hendry are liable for damages to Tobias. 

Article 19 of the New 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. 

This article, known to contain what is commonly referred to as the principle of abuse of rights, sets 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 the
following: to act with justice; to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a
primordial limitation on all rights; that in their exercise, the norms of human conduct set forth in Article 19 must be observed.
A right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some
illegality. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But while Article
19 lays down a rule of conduct for the government of human relations and for the maintenance of social order, it does not
provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper.

Article 20, which pertains to damage arising from a violation of law, provides that: Every person who contrary to law, wilfully
or negligently causes damage to another, shall indemnify the latter for the same.

However, in the case at bar, petitioners claim that they did not violate any provision of law since they were merely exercising
their legal right to dismiss private respondent. This does not, however, leave private respondent with no relief because Article
21 of the Civil Code provides that: Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage. 

This article, adopted to remedy the "countless gaps in the statutes, which leave so many victims of moral wrongs helpless,
even though they have actually suffered material and moral injury" [Id.] should "vouchsafe adequate legal remedy for that
untold number of moral wrongs which it is impossible for human foresight to provide for specifically in the statutes" [Id. it p.
40; See also PNB v. CA, G.R. No. L-27155, May 18,1978, 83 SCRA 237, 247].

In determining whether or not the principle of abuse of rights may be invoked, there is no rigid test which can be applied.
While the Court has not hesitated to apply Article 19 whether the legal and factual circumstances called for its application [See
for e.g., Velayo v. Shell Co. of the Phil., Ltd., 100 Phil. 186 (1956); PNB v. CA, supra; Grand Union Supermarket, Inc. v. Espino, Jr.,
G.R. No. L -48250, December 28, 1979, 94 SCRA 953; PAL v. CA, G.R. No. L -46558, July 31,1981,106 SCRA 391; United General
Industries, Inc, v. Paler G.R. No. L -30205, March 15,1982,112 SCRA 404; Rubio v. CA, G.R. No. 50911, August 21, 1987 , 153
SCRA 183] the question of whether or not the principle of abuse of rights has been violated resulting in damages under Article
20 or Article 21 or other applicable provision of law, depends on the circumstances of each case. And in the instant case, 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.

Prepared by: Paola E. Camilon

1.3 Requisites to be liable for Damages under the Principle 

17. ASTRID A. VAN DE BRUG, MARTIN G. AGUILAR AND GLENN G. AGUILAR, Petitioners, v. PHILIPPINE NATIONAL BANK,
Respondent.

G.R. No. 207004, June 06, 2018, SECOND DIVISION, CAGUIOA, J.

FACTS:

       The late spouses Aguilar used to be borrowing clients of PNB, Victoria Branch. The late spouses Aguilar's sugar crop
loans, which were obtained sometime between the late 1970's and the early 1980's,were secured by REM over four registered
parcels of land. However, for failure of the late spouses Aguilar to pay their obligations with PNB, the mortgage was foreclosed
in 1985 and subsequently, ownership of the subject four pieces of property was consolidated under the name of PNB.

       With the enactment of RA 7202 the late Aguilar wrote PNB on asking for a reconsideration of their account based on
the Sugar Restitution Law the Aguilars claimed that they complied with the stated requirements, and that subsequently,
inasmuch as the subject agricultural lots were already conveyed voluntarily by PNB to DAR, they were advised by PNB to
follow-up the payment for these pieces of realty with the LBP in order to apply the proceeds of the sale to the account of the
late spouses Aguilar. They were assured by PNB that if the proceeds from LBP would exceed the obligations of the late spouses
Aguilar, the excess amount would be returned to the Aguilars, including the subject residential property. For its part, PNB
emphasized that whatever rights the Aguilars have under RA 7202 were already forfeited when they failed to comply with the
requirements. The RTC found PNB guilty of malice and bad faith in not pursuing its duty in helping the Aguilars avail of the
benefits of RA 7202. Aggrieved by the RTC Decision, PNB appealed to the CA. The CA reversed the RTC Decision. The Aguilars
filed a Motion for Reconsideration which was denied by the CA. Hence this petition.

ISSUE: Whether or not PNB violated Art. 19 of the Civil Code (principle of abuse of rights).

RULING:

       NO.

       At the core of the instant case is RA 7202, which was approved on February 29, 1992, and its declared policy is "to
restitute the losses suffered by the sugar producers due to actions taken by government agencies in order to revive the
economy in the sugar-producing areas of the country."

       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.
       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.
       To make PNB liable under the principle of abuse of rights, the Aguilars have the burden to prove the requisites
enumerated above. They claim that they are similarly circumstanced as the spouses Pfleider and there was no reason for PNB
to treat them differently.

       PNB has explained that there are differences in the circumstances of its two sugar crop loan debtors which, to PNB,
justify the different accommodations that it accorded to them.

       PNB further contends that the Aguilars cannot invoke its Compromise Agreement with the spouses Pfleider because:
(1) the former are not parties thereto; (2) the principle of relativity of contract would be violated; and (3) PNB 's freedom to
enter into contracts would also be violated if PNB would be compelled to accommodate the Aguilars.

       Given the foregoing explanation by PNB, it was incumbent upon the Aguilars, to make PNB liable for damages based
on the principle of abuse of rights, to prove that PNB acted in bad faith and that its sole intent was to prejudice or injure them.
The Aguilars, however, failed in this regard. 

Prepared by: Rochelle Nieva D. Curiba

18. NIKKO HOTEL MANILA GARDEN and RUBY LIM, petitioners,  vs. ROBERTO REYES, a.k.a. "AMAY BISAYA," respondent.

FACTS:

The cause of action before the trial court was one for damages brought under the human relations provisions of the New Civil
Code. Roberto Reyes, known by the screen name "Amay Bisaya," alleged that in the evening of 13 October 1994, he was
spotted by his friend of several years, Dr. Violeta Filart, who then invited him to join her in a party at the hotel’s penthouse in
celebration of the natal day of the hotel’s manager. Reyes asked if she could vouch for him for which she replied: "of course."
Mr. Reyes then went up with the party of Dr. Filart carrying the basket of fruits as  a present. 

After a couple of hours, when the buffet dinner was ready, Mr. Reyes lined-up at the buffet table but, to his great shock, shame
and embarrassment, he was stopped by petitioner, Ruby Lim, who claimed to speak for Hotel Nikko. In a loud voice and within
the presence and hearing of the other guests who were making a queue at the buffet table, Ruby Lim told him to leave the
party ("huwag ka nang kumain, hindi ka imbitado, bumaba ka na lang").Mr. Reyes tried to explain that he was invited by Dr.
Filart. Dr. Filart, who was within hearing distance, however, completely ignored him thus adding to his shame and humiliation.
Not long after, while he was still recovering from the traumatic experience, a Makati policeman approached and asked him to
step out of the hotel and was escorted out of the party. Mr. Reyes asked for One Million Pesos actual damages, One Million
Pesos moral and/or exemplary damages and Two Hundred Thousand Pesos attorney’s fees. 

Ruby Lim admitted having asked Mr. Reyes to leave the party but not under the ignominious circumstance painted by the
latter. For Mr. Tsuruoka’s party, Ms. Lim generated an exclusive guest list and extended invitations accordingly. The guest list
was limited to approximately 60 of Mr. Tsuruoka’s closest friends and some hotel employees and that Mr. Reyes was not one of
those invited. Mindful of Mr. Tsuruoka’s wishes to keep the party intimate, Ms. Lim inquired as to the presence of Mr. Reyes
and asked several people in the party to ask Mr. Reyes to leave, but to no avail. When Ms. Lim spotted Mr. Reyes by the buffet
table, she decided to speak to him herself as there were no other guests in the immediate vicinity. When Mr. Reyes went to a
corner and started to eat, Ms. Lim approached him and said: "alam ninyo, hindi ho kayo dapat nandito. Pero total nakakuha na
ho kayo ng pagkain, ubusin na lang ninyo at pagkatapos kung pwede lang po umalis na kayo." She then turned around trusting
that Mr. Reyes would show enough decency to leave, but to her surprise, he began screaming and making a big scene, and even
threatened to dump food on her. 

Dr. Violeta Filart, the third defendant in the complaint before the lower court, also gave her version of the story to the effect
that she never invited Mr. Reyes to the party. According to her, it was Mr. Reyes who volunteered to carry the basket of fruits
intended for the celebrant as he was likewise going to take the elevator, not to the penthouse but to Altitude 49. When they
reached the penthouse, she reminded Mr. Reyes to go down as he was not properly dressed and was not invited. 

The RTC dismissed the complaint, rationating that Mr. Reyes assumed the risk of being thrown out of the party as he was
uninvited. Damages are pecuniary consequences which the law imposes for the breach of some duty or the violation of some
right. Thus, no recovery can be had against defendants Nikko Hotel and Ruby Lim because he himself was at fault.He knew that
it was not the party of defendant Violeta Filart even if she allowed him to join her and took responsibility for his attendance at
the party. His action against defendants Nikko Hotel and Ruby Lim must therefore fail. 

The CA  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. The Court of Appeals likewise ruled that the
actuation of Ms. Lim in approaching several people to inquire into the presence of Mr. Reyes exposed the latter to ridicule and
was uncalled for as she should have approached Dr. Filart first and both of them should have talked to Mr. Reyes in private.
The acts of [appellee] Lim are causes of action which are predicated upon mere rudeness or lack of consideration of one
person, which calls not only protection of human dignity but respect of such dignity. Consequently, the Court of Appeals
imposed upon Hotel Nikko, Ruby Lim and Dr. Violeta Filart the solidary obligation to pay Mr. Reyes (1) exemplary damages in
the amount of Two Hundred Thousand Pesos (P200,000); (2) moral damages in the amount of Two Hundred Thousand Pesos
(P200,000); and (3) attorney’s fees in the amount of Ten Thousand Pesos (P10,000). On motion for reconsideration, the Court
of Appeals affirmed its earlier decision as the argument raised in the motion had "been amply discussed and passed upon in
the decision sought to be reconsidered." 

ISSUE:

1. 1. Whether the CA erred in not applying the doctrine of volenti non fit injuria considering that by its own findings,
amay bisaya was a gate-crasher.
2. 2. Whether Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. "Amay Bisaya," to leave the party where he was
not invited by the celebrant thereof thereby becoming liable under Articles 19 and 21 of the Civil Code. 
3. 3. If Ruby Lim were so liable, whether Hotel Nikko, as her employer, is solidarily liable with her.

RULING:

1. No. The doctrine of volenti non fit injuria ("to which a person assents is not esteemed in law as injury") refers to self-inflicted
injury or to the consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed
himself to danger, even if he is not negligent in doing so. As formulated by petitioners, however, this doctrine does not find
application to the case at bar because even if respondent Reyes assumed the risk of being asked to leave the party, petitioners,
under Articles 19 and 21 of the New Civil Code, were still under obligation to treat him fairly in order not to expose him to
unnecessary ridicule and shame.

2. No. As the trial court and the appellate court reached divergent and irreconcilable conclusions concerning the same facts
and evidence of the case, this Court is left without choice but to use its latent power to review such findings of facts. From an in
depth review of the evidence, the Court finds more credible the lower court’s findings of fact.

The SC puts things in perspective and stated that the court is dealing with a formal party in a posh, five-star hotel,   or-
invitation-only, thrown for the hotel’s former Manager, a Japanese national. Then came a person who was clearly uninvited
and who could not just disappear into the crowd as his face is known by many, being an actor. Ms. Lim, mindful of the
celebrant’s instruction to keep the party intimate, would naturally want to get rid of the "gate-crasher" in the most hush-hush
manner in order not to call attention to a glitch in an otherwise seamless affair and, in the process, risk the displeasure of the
celebrant, her former boss. 

Mr. Reyes, upon whom the burden rests to prove that indeed Ms. Lim loudly and rudely ordered him to leave, could not offer
any satisfactory explanation why Ms. Lim would do that and risk ruining a formal and intimate affair. On the contrary, Mr.
Reyes, on cross-examination, had unwittingly sealed his fate by admitting that when Ms. Lim talked to him, she was very close.
Close enough for him to kiss. 

In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridicule and shame, it is
highly unlikely that she would shout at him from a very close distance. 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. Had plaintiff simply left the party as requested, there was no need for the
police to take him out. 

Moreover, another problem with Mr. Reyes’s version of the story is that it is unsupported. All his witnesses – Danny Rodinas,
Pepito Guerrero and Alexander Silva - proved only that it was Dr. Filart who invited him to the party.  

3. No. 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 employee.
Article 19, known to contain what is commonly referred to as the principle of abuse of rights, is not a panacea for all human
hurts and social grievances. Article 19 states:

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 object of this article 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 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.

 When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20 pertains to
damages arising from a violation of law which does not obtain herein as Ms. Lim was perfectly within her right to ask Mr.
Reyes to leave. Article 21, on the other hand, states:

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

Article 21 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. 

A common theme runs through Articles 19 and 21, and that is, the act complained of must be intentional. 
As applied to herein case, Mr. Reyes has not shown that Ms. Lim was driven by animosity against him. These two people did
not know each other personally, thus, Mr. Reyes had nothing to offer for an explanation for Ms. Lim’s alleged abusive conduct
except the statement that Ms. Lim, being "single at 44 years old," had a "very strong bias and prejudice against (Mr. Reyes)
possibly influenced by her associates in her work at the hotel with foreign businessmen." The lameness of this argument need
not be belabored. Suffice it to say that a complaint based on Articles 19 and 21 of the Civil Code must necessarily fail if it has
nothing to recommend it but innuendos and conjectures. Parenthetically, the manner by which Ms. Lim asked Mr. Reyes to
leave was likewise acceptable and humane under the circumstances. 

Not being liable for both actual and moral damages, neither can petitioners Lim and Hotel Nikko be made answerable for
exemplary damages. All told, and as far as Ms. Lim and Hotel Nikko are concerned, any damage which Mr. Reyes might have
suffered through Ms. Lim’s exercise of a legitimate right done within the bounds of propriety and good faith, must be his to
bear alone.

 alit

1.4 Factors to be considered whether a case is a Nuisance or Harassment Suit

19. 
JUANITO ANG, for and in behalf of SUNRISE MARKETING (BACOLOD), INC.,* Petitioner vs. SPOUSES ROBERTO and
RACHEL ANG, Respondents.
G.R. No. 201675
June 19, 2013
CARPIO, J.
FACTS:

Sunrise Marketing (Bacolod), Inc. (SMBI) is a duly registered corporation owned by the Ang family. Juanito Ang (Juanito) and
Roberto Ang (Roberto) are siblings. Anecita Limoco-Ang (Anecita) is Juanito’s wife and Jeannevie is their daughter. 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. 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."  
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.

Thereafter, Juanito claimed that payments to Nancy and Theodore ceased sometime after 2006. On 24 November 2008, Nancy
and Theodore, 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. Roberto and Rachel replied to the letter refusing to comply 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 and such loan shall be secured by: a) Juanito and Anecita’s fifty percent share over a parcel of land registered in the name
of SMBI; b) a parcel of land registered in the name of Juanito Ang; c) Juanito’s fifty percent share in 7 parcels of land registered
in his and Roberto’s name; d) a parcel of land registered in the name of Roberto; e) a parcel of land registered in the name of
Rachel; and f) Roberto and Rachel’s fifty percent share in 2 parcels of land registered in the name of their son, Livingstone
L. Ang (Livingstone), and in another lot.

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."

On 29 January 2009, the RTC Bacolod issued an Order granting the application for an ex-parte writ of attachment and break
open order.  In her Verified Answer Ad Cautelam which was filed on 10 February 2009, Rachel prayed that the Complaint be
dismissed as it was not a bona fide derivative suit as defined under the Interim Rules.  According to Rachel, the Complaint,
although labelled as a derivative suit, is actually a collection suit since the real party in interest is not SMBI, but Nancy and
Theodore. Rachel also argued that the Complaint failed to allege that Juanito "exerted all reasonable efforts to exhaust all intra-
corporate remedies”

On 27 September 2010, the RTC Bacolod issued an Order ruling that the present action is a DERIVATIVE SUIT and the Motion
to Dismiss based on Affirmative Defenses raised by defendants is DENIED for lack of merit. The Order likewise stated that the
requirement of exhaustion of intra-corporate remedies is no longer necessary since Rachel and Roberto exercised complete
control over SMBI.

Aggrieved, Rachel filed a Petition for Certiorari with the CA-Cebu. On 20 September 2011, the CA-Cebu promulgated its
Decision which reversed and set aside the Order of the RTC Bacolod dated 27 September 2010. According to the CA-Cebu, the
Complaint filed by Juanito should be dismissed because it is a harassment suit, and not a valid derivative suit as defined under
the Interim Rules. The CA-Cebu also found that Juanito failed to exhaust intra-corporate remedies and that the loan extended
by Nancy and Theodore was not SMBI’s corporate obligation.

ISSUE:

             Whether based on the allegations of the complaint, the nature of the case is one of a derivative suit or not.
Corollary to the above, whether the Honorable Court of Appeals erred in ordering the dismissal of the Complaint on
the ground that the case is not a derivative suit.

RULING:

             The petition has no merit

             We uphold the CA-Cebu’s finding that the 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. Under Sections 23 and 36 of the Corporation Code, the directors or officers, as provided under the by-laws, 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. In derivative suits, the real party ininterest is the
corporation, while the stockholder is a mere nominal party.

             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

The fact that Juanito and Anecita attempted to constitute a mortgage over "their" share in a corporate asset cannot affect
SMBI. The Civil Code provides that in order for a mortgage to be valid, the mortgagor must be the "absolute owner of the thing
mortgaged." Corporate assets may be mortgaged by authorized directors or officers on behalf of the corporation as owner.
However, the wording of the Mortgage reveals that it was signed by Juanito and Anecita in their personal capacity as the
"owners" of a pro-indiviso share in SMBI’s land and not on behalf of SMBI.

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.

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;
(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. Records
show that Juanito, apart from being Vice President, owns the highest number of shares, equal to those owned by Roberto. Also,
as explained earlier, there appears to be no damage to SMBI if the loan extended by Nancy and Theodore remains unpaid. The
CA-Cebu correctly concluded that "a plain reading of the allegations in the Complaint would readily show that the case was
mainly filed to collect a debt allegedly extended by the spouses Theodore and Nancy Ang to [SMBI]. Thus, the aggrieved party
is not SMBI but the spouses Theodore and Nancy Ang, who are not even stockholders.

WHEREFORE, we DENY the petition. We AFFIRM the 20 September 2011 Decision of the Court of Appeals-Cebu in CA-G.R. SP
No. 05546.

-JV FERMIN
 1.5 Other Illustrative cases

20.

JOSE S. ROQUE, JR., SUBSTITUTED BY HIS WIFE NORMA ROQUE, PETITIONER, VS. JAIME T. TORRES, SUBSTITUTED BY
HIS SON JAMES KENLEY M. TORRES, AND THE HONORABLE COURT OF APPEALS, RESPONDENTS.

G.R. NO. 157632, December 06, 2006. CHICO-NAZARIO, J.

FACTS:

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 allegedly inflicted by the security guards employed by
respondent.
Petitioner was the administrator of certain parcels of land in covered by OCT 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 MTC of Rizal.

Prior to the incident, respondent instituted an Action for cancellation of OCTs in the name of petitioner's son Rafael Roque
before the RTC of Antipolo which was dismissed.

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 guarding the property upon orders of respondent. 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 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.

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 case for frustrated murder before the
RTC of Antipolo against the security guards. Eventually, after suffering for more than nine years, petitioner died.

The RTC rendered judgment in favor of petitioner. 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 . The RTC held that Torres is
liable.

RTC ruled that 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 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. Hence, defendant Torres is liable for the unlawful acts committed by the said security guards
against herein plaintiff.

CA reversed the RTC judgment and rendered a Decision, the pertinent portions of which read: 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.

 ISSUE: Whether or not CA erred in ruling that Torres is absolved from liability

 RULING: YES.

 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.

 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. 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 intimidate,
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 RTC affirming
Rafael Roque's ownership of the properties and dismissing the case Torres filed for the cancellation title 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 Torres to escape liability, despite his misdeeds, will not only result in grave injustice to Jose Roque,
Jr. who eventually died 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 which he failed or refused to honor.

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."

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.

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. SO ORDERED.

Ina

21. UNIVERSITY OF THE EAST, petitioner, vs. ROMEO A. JADER, respondent.

G.R. No. 132344 February 17, 2000, YNARES-SANTIAGO, J.:

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 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 absence without 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.

Lower court ruled in favor of defendant. CA affirmed it with modification. CA ordered petitioner to pay respondent P50,000 for
moral damages.
ISSUE:

Whether an educational institution shall be held liable for damages for misleading a student into believing that the latter had
satisfied all the requirements for graduation when such is not the case (YES)

RULING:

When a student is enrolled in any educational or learning institution, a contract of education is entered into between said
institution and the student. The professors, teachers or instructors hired by the school are considered merely as agents and
administrators tasked to perform the school's commitment under the contract. It is the contractual obligation of the school to
timely inform and furnish sufficient notice and information to each and every student as to whether he or she had already
complied with all the requirements for the conferment of a degree or whether they would be included among those who will
graduate. 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. The negligent act of a
professor who fails to observe the rules of the school, for instance by not promptly submitting a student's grade, is not only
imputable to the professor but is an act of the school, being his employer.

Considering further, that the institution of learning involved herein is a university which is engaged in legal education, it
should have practiced what it inculcates in its students, more specifically the principle of good dealings enshrined in Articles
19 and 20 of the Civil Code which states:

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

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

Art. 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.

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 been awarded moral 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.

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.

Prepared by: Mika Ituriaga

22. G.R. No. 165569. July 29, 2010.

, GLENDA A. VARGAS, MA. SOCORRO S. GUANHING, in their capacities as Dean and Assistant Dean, respectively, of the College
of Nursing of the University of Santo Tomas, and RODOLFO N. CLAVIO, in his capacity as Registrar of the University of Santo
Tomas, petitioners, vs. DANES B. SANCHEZ, respondent.

FACTS 
In his Complaint, respondent alleged that he graduated from UST on April 2, 2002 with a Bachelor’s Degree of Science in
Nursing. He was included in the list of candidates for graduation and attended graduation ceremonies.

The respondent sought to secure a copy of his ToR with the UST Registrar’s 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 enrollment, 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, attorney’s fees, and the costs
of suit.

Petitioners filed a Motion to Dismiss where they claimed that they refused to release respondent’s 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
respondent’s 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 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 dated January 21, 2003. Thus, petitioners claimed that
the CHED had primary jurisdiction to resolve matters pertaining to school controversies, and the filing of the instant case was
premature.

RTC: denied the petitioner’s Motion to Dismiss 

CA: affirmed RTC 

ISSUE:
Whether or not CHED has jurisdiction over the case for damages and mandamus. 

RULING:
The petition is denied for lack of merit. 

The doctrine of exhaustion of administrative remedies does not apply 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. 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.

Prepared by: Zarina

24. MWSS vs Act Theatre Inc.

Facts:

On September 22, 1988, four employees of the respondent Act Theater, Inc., namely, Rodolfo Tabian, Armando Aguilar, Arnel
Concha and Modesto Ruales, were apprehended by members of the Quezon City police force for allegedly tampering a water
meter in violation of P.D. No. 401, as amended by B.P. Blg. 876. The respondent’s employees were subsequently criminally
charged. On account of the incident, the respondent’s water service connection was cut off. Consequently, the respondent filed
a complaint for injunction with damages against the petitioner MWSS.

In the civil case, the respondent alleged in that the petitioneracted arbitrarily, whimsically and   capriciously, in cutting off the
respondent’s water service connection without prior notice. Due to lack of water, the health and sanitation, not only of the
respondent’s patrons but in the surrounding premises as well, were adversely affected.

After due trial, the court acquitted the four employees of Act Theater, Inc. in the criminal case. In the civil case, the court
ordered MWSS to pay Act Theater, Inc. actual damage in the amount of P25,000 and to return the sum of P200,000.00
deposited by the plaintiff for the restoration of its water services after its disconnection on September 23, 1988.

The petitioner appealed the civil aspect of the decision to the CA. The appellate court, however, dismissed the appeal.
According to the CA, the petitioner’s act of cutting off the respondent’s water service connection without prior notice was
arbitrary, injurious and prejudicial to the latter justifying the award of damages under Article 19 of the Civil Code.

Issue: WON THE HONORABLE COURT OF APPEAL[S] CORRECTLY APPLIED THE PROVISION OF ARTICLE 19 OF THE NEW
CIVIL CODE WITHOUT CONSIDERING THE APPLICABLE PROVISION OF ARTICLE 429 OF THE SAME CODE
Decision: 

The petition is devoid of merit. Article 429 of the Civil Code, relied upon by the petitioner in justifying its act of disconnecting
the water supply of the respondent without prior notice, reads:

Art. 429. The 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.

A right is a power, privilege, or immunity guaranteed under a Constitution, statute or decisional law, or recognized as a result
of long usage, constitutive of a legally enforceable claim of one person against the other. 

Concededly, the petitioner, 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. Having the right should not be confused with the manner by which
such right is to be exercised. Article 19 of the Civil Code sets the norms for the exercise of one’s rights:

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.

When a right is exercised in a manner which discards these norms resulting in damage to another, a legal wrong is committed
for which actor can be held accountable. In this case, the petitioner failed to act with justice and give the respondent what is
due to it when the petitioner unceremoniously cut off the respondent’s water service connection. 

While it is true that MWSS had sent a notice of investigation to plaintiff-appellee prior to the disconnection of the latter’s water
services, this was done only a few hours before the actual

disconnection. Clearly, the plaintiff-appellee was denied due process when it was deprived of the water services. As a
consequence thereof, Act had to contract another source to provide water for a number of days. Plaintiff-appellee was also
compelled to deposit with MWSS the sum of P200,000.00 for the restoration of their water services.

25. I.                 Short Title: Manoloto vs. Veloso III          

II.                 FULL TITLE: ERMELINDA C. MANALOTO, AURORA J. CIFRA, FLORDELIZA J. ARCILLA, LOURDES J. CATALAN,
ETHELINDA J. HOLT, BIENVENIDO R. JONGCO, ARTEMIO R. JONGCO, JR. and JOEL JONGCO, petitioners, vs. ISMAEL VELOSO
III, respondent.

III.               TOPIC: Torts and Damages – Requisites to be liable for Damages under Abuse of Rights (Illustrative cases in
syllabus) 

IV.               STATEMENT OF FACTS:

This case is an off-shoot of an unlawful detainer case filed by [herein petitioners] Ermelinda C. Manaloto, Aurora J. Cifra,
Flordeliza J. Arcilla, Lourdes J. Catalan, Ethelinda J. Holt, Bienvenido R. Jongco, Artemio R. Jongco, Jr. and Joel Jongco against
[herein respondent]. The action was instituted on the ground of [respondent’s] failure to pay rentals on a residential house in
Horseshoe Village, Quezon City despite repeated demands. [Respondent] denied the non-payment of rentals and alleged that
he made an advance payment of P825,000.00 when he paid for the repairs done on the leased property. MeTC ruled in favor of
petitioners. RTC reversed the MeTC decision. When both parties moved for the reconsideration of the RTC decision, the RTC
issued an Order dated February 23, 2001 modifying its previous ruling by increasing the value of the improvements
introduced by respondent.

V.                 STATEMENT OF THE CASE:

Whilst respondent’s appeal of the Metropolitan Trial Court (MeTC) judgment in the unlawful detainer case was pending,
respondent filed a Complaint for Breach of Contract and Damages against the petitioners on the basis of two causes of action:
The first cause of action was for damages because the respondent supposedly suffered embarrassment and humiliation when
petitioners distributed copies of the above-mentioned MeTC decision in the unlawful detainer case to the homeowners of
Horseshoe Village while respondent’s appeal was still pending before the Quezon City RTC-Branch 88. The second cause of
action was for breach of contract since petitioners, as lessors, failed to make continuing repairs on the subject property to
preserve and keep it tenantable. Petitioners argued that respondent had no cause of action against them because the MeTC
decision in the unlawful detainer case was a matter of public record and its disclosure to the public violated no law or any legal
right of the respondent.

RTC dismissed the Breach of Contract case. The Court of Appeals found petitioners liable to respondent for damages and ruled
that the distribution of the court decision during the pendency of an appeal was clearly intended to cause [respondent] some
form of harassment and/or humiliation and that there was evident bad faith intended to mock [respondent’s] right to appeal.

Hence, the instant Petition for Review.

VI.                ISSUE:

Whether or not the respondent is entitled to the award of moral and exemplary damages.

VII.             RULING:

NO. A cause of action (for damages) exists if the following elements are present: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to
violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting
a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages. We
find that all three elements exist in the case at bar. Respondent may not have specifically identified each element, but it may be
sufficiently determined from the allegations in his complaint.

First, respondent filed the complaint to protect his good character, name, and reputation. Every man has a right to build, keep,
and be favored with a good name. This right is protected by law with the recognition of slander and libel as actionable wrongs,
whether as criminal offenses or tortuous conduct. Second, petitioners are obliged to respect respondent’s good name even
though they are opposing parties in the unlawful detainer case. As Article 19 of the Civil Code requires, “[e]very 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.

The principle of abuse of rights departs from the classical theory that “he who uses a right injures no one.” The modern
tendency is to depart from the classical and traditional theory, and to grant indemnity for damages in cases where there is an
abuse of rights, even when the act is not illicit.

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.”

Nevertheless, we further declare that the Court of Appeals erred in already awarding moral and exemplary damages in
respondent’s favor when the parties have not yet had the chance to present any evidence before the RTC-Branch 227. In civil
cases, he who alleges a fact has the burden of proving it by a preponderance of evidence. It is incumbent upon the party
claiming affirmative relief from the court to convincingly prove its claim. Bare allegations, unsubstantiated by evidence are not
equivalent to proof under our Rules. In short, mere allegations are not evidence. At this point, the finding of the Court of
Appeals of bad faith and malice on the part of petitioners has no factual basis. Good faith is presumed and he who alleges bad
faith has the duty to prove the same.

VIII.           DISPOSITIVE PORTION:

WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The Decision dated January 31, 2006 of the
Court of Appeals in CA-G.R. CV No. 82610 is AFFIRMED WITH MODIFICATIONS. The award of moral and exemplary damages
made by the Court of Appeals in favor of respondent Ismael Veloso III is DELETED. The complaint of respondent Ismael Veloso
III in Civil Case No. Q-02-48341 is hereby REINSTATED before Branch 227 of the Regional Trial Court of Quezon City

2. UNJUST ENRICHMENT (SOLUTION INDEBITI)

2.1 REQUISITES AND CONDITIONS

26. H.L. CARLOS CONSTRUCTION, INC., Petitioner, v. MARINA PROPERTIES CORPORATION, JESUS K.
TYPOCO SR. and TAN YU, Respondents.

G.R. NO. 147614,  January 29, 2004, PANGANIBAN, J.:

FACTS: 

Respondent MARINA PROPERTIES CORPORATION (MPC) is engaged in the business of real estate development. On May 10,
1988, MPC entered into a contract with [Petitioner] H.[L.] CARLOS CONSTRUCTION, INC. (HLC) to construct Phase III of a
condominium complex called MARINA BAYHOMES CONDOMINIUM PROJECT within a period of 365 days from receipt of
Notice to Proceed. The original completion date of the project was May 16, 1989, but it was extended to October 31,
1989 with a grace period until November 30, 1989.

On December 15, 1989, HLC instituted this case for sum of money against not only MPC but also against the 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. 

The trial court ruled for Petitioner H.L. CARLOS CONSTRUCTION, INC. and as against Respondents MARINA PROPERTIES
CORPORATION, TAN YU, and JESUS K. TYPOCO, SR., who are hereby ordered to pay, jointly and severally the petitioner such
amount  representing unpaid labor escalation costs, change orders and material price escalations, 10% retention money
withheld by the respondents from petitioners progress billing, the value of construction materials, the sum equivalent to 15%
of the principal sum as and by way of attorneys fees, and the costs of this suit.

The counterclaim for liquidated damages, are hereby DISMISSED for lack of evidence. Liquidated damages can only be
awarded under paragraph 2 of the amended construction contract that extended the completion period and mainly on the
finding of the 85% substantial completion of the project, and that the delay and stoppage of the project was caused by
respondents’ default in payment of the progress billings that would have allowed petitioner to have the capability to continue
and complete the project.

On appeal, the CA held that respondents were not liable for escalations in the cost of labor and construction materials.
Respondents were also absolved from paying for change orders and extra work. The CA further failed to find any basis for the
release of the 10 percent retention fee. 

Furthermore, the CA ruled that petitioner was liable for actual and liquidated damages. The latter had abandoned the project
prior to its completion; hence, MPC contracted out the work to another entity and incurred actual damages in excess of the
remaining balance of the contract price. In addition, the Construction Contract had stipulated payment of liquidated damages
in an amount equivalent to 1/1000 of the contract price for each calendar day of delay.Hence, this Petition. 

ISSUES: 

(1)    Whether petitioner is entitled to:

a.      a price escalation for labor and material cost (YES but to labor component only)

b.      the cost of change orders and extra work (YES)

c.      the release of the 10 percent retention money (NO)

d.       the cost of illegally detained materials (NO)

 e.       Attorney’s fees (NO)

(2)    Whether Typoco and Tan are solidarily liable with MPC. (NO)

(3)    Whether petitioner is liable for actual and liquidated damages. (YES)

RULING:

 The Petition is partly meritorious.

1.       

a.      Price Escalation for Labor and Material Cost (YES)

YES. This Court agrees with petitioner that it is entitled to price escalation, but only for the labor component of Progress
Billing No. 24. Since the Contract allows escalation only of the labor component, the implication is that material cost
escalations are barred. There appears to be no provision, either in the original or in the amended contract, that would justify
billing of increased cost of materials. Furthermore, no evidence -- like official economic data showing an increase in the price
index of construction materials -- was even adduced by petitioner to prove that there had indeed been increases in material
costs.

·       Petitioner attempts to pass off these cost escalations as a form of damages suffered by it as a natural consequence of the
delay in the payment of billings and claims for additional work. It argues that the baseless and malicious refusal to pay
for those claims renders respondents liable for damages under Article 2201 of the Civil Code.

The Court disagrees. Without tackling the issue of delay, this Court finds that the contentious Progress Billing No. 24 contains
no claim for material cost escalation. The other unsettled bills claimed by petitioner are those for change orders or extra work,
which have not been shown to be related to the increase in cost of materials. 

We clarify. The claimed cost of labor escalation pertains to the period September 1 to December 15, 1989, in the amount of
P170,722.10; and December 16 to January 27, 1990, P45,983.91. During those periods, petitioner had not yet incurred any
delay in the project, originally stipulated to be finished by May 16, 1989. But by mutual agreement, the period was extended
up to October 31, 1989, with a grace period until November 30, 1989. Furthermore, a legislated wage increase became
effective after the expiration of the original period. Respondents are, therefore, liable for this increase in labor cost,
because they allowed petitioner to continue working on the project until April 20, 1990 (even beyond November 30,
1989).

·       MPC argues that to allow the claim for labor cost escalation would be to reward petitioner for incurring delay, thereby
breaching a contractual obligation.

This contention is untenable. Before the expiration of the extended period, petitioner was not yet in delay. It was granted by
MPC an extension to complete the project until November 30, 1989. Moreover, despite the expiration of the extended period,
MPC allowed it to continue working on the project until the former took over and awarded that project to another contractor.
Hence, labor costs were actually incurred by petitioner until April 20, 1990. It was thus entitled to reimbursement for labor
cost escalation until that date. Noteworthy is the fact that MPC paid for the labor cost escalation during the period August 1-15,
1989, which was past the expiration of the original period. Apparently, it thereafter stopped paying for labor cost escalation in
response to the suit filed against it by petitioner.

·       The CA denied the labor cost escalation claim because, despite having billed MPC therefor, petitioner accepted payments
that did not include such claim. The appellate court construed the acceptance by petitioner as a waiver of the latter’s
right to be reimbursed for the increased labor cost.

We believe that this position is untenable. The CA mistook Exhibits C-7-B and D-1 as bills coming from petitioner, when in
truth they were Accomplishment Evaluation Sheets issued by MPC. The notation labor escalation not included in the said
Exhibits was an admission on the part of MPC that it had not paid such amount, upon the advice of Atty. Jose C. Laureta, its
resident counsel. According to him, petitioner should be faulted for having incurred labor cost increases after the expiration of
the original period (after May 16, 1989). Not having waived such increases, it should thus bear them. To allow MPC to acquire
the partially accomplished project without paying for labor cost escalation validly incurred would constitute unjust
enrichment at the expense of petitioner.

There is unjust enrichment under Article 22 of the Civil Code when (1) a person is unjustly benefited, and (2) such
benefit is derived at the expense of or with damages to another. Since petitioner had rendered services that were
accepted by MPC, then the former should be compensated for them. Labor cost escalation, in this case, has already
been earned by petitioner.

b.      Change Orders and Extra Work (YES)

YES. This Court sided with petitioner. 

The General Conditions to the Construction Contract provides: 

If the Contractor claims that any construction by drawings or otherwise involve extra cost under this Contract, he shall
give the Owner and/or the Architect, written notice thereof within a reasonable time after receipt of such instructions,
and in any event before proceeding to execute the work, except in emergency endangering life or property. No such claim
shall be valid unless so made. Extra work for which no price is provided in the proposal shall be covered by a
supplementary agreement to be signed by both parties before such work is commenced. 

The CA is correct in holding that there is no supplemental agreement covering the claimed extra work and change orders.
MPC, however, never denied having ordered additional work. Evidence on record further reveals that MPC approved
some change order jobs despite the absence of any supplementary agreement. Petitioner may have failed to show the
construction memoranda covering its claim, but it inarguably performed extra work that was accepted by MPC.
Hence, we will consider Annex C as the proper valuation thereof.

Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value of the thing or services
rendered despite the lack of a written contract, in order to avoid unjust enrichment. Quantum meruit means that in an action
for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves. To deny payment for a
building almost completed and already occupied would be to permit unjust enrichment at the expense of the contractor.

c.      Retention Money

·      The CA denied the claim for the 10 percent retention money, because petitioner had failed to comply with the conditions
under of the Construction Contract. On the other hand, the latter avers that these conditions were deemed fulfilled under
Article 1186 of the Civil Code because, when its contract was terminated, MPC prevented the fulfillment of those
conditions. It would allegedly be unfair and unreasonable for petitioner to guarantee a project finished by another
contractor.

NO. This Court disagrees with the petitioner. In the construction industry, the 10 percent retention money is a portion of the
contract price automatically deducted from the contractors billings, as security for the execution of corrective work -- if any --
becomes necessary. This amount is to be released one year after the completion of the project, minus the cost of corrective
work.

None of the foregoing conditions were satisfied. Hence, the CA was correct in forfeiting the retention fee. The completion of the
work was stipulated in the Contract to be within 365 days from the issuance of a Notice to Proceed or until May 16, 1989. Then
the period was extended up to November 30, 1989. Petitioner worked on the project till April 20, 1990. It was given by MPC
ample time and two extensions to complete the project. The simple truth is that in failing to finish the project, the former
failed to fulfill a prerequisite for the release of the retention money.

d.      Detained Materials (NO)

·       Petitioner claims cost reimbursement of illegally detained materials, as it was allowed to withdraw them from the site
only after two years from the unilateral termination of the Contract. 

NO. This contention has no merit. According to the CAs ruling, the only proof that MPC detained materials belonging to
petitioner was the denial of the request, contained in the latter’s letter for the release of used form lumber. Aside from that
letter, however, no other attempt was shown to have been made by petitioner to obtain its request. It should have tried again
to do so before claiming that respondents unreasonably prevented it from removing its construction materials from the
premises. As to the other materials, there was absolutely no attempt to remove them from the construction site. Hence, we
cannot say that these were ever withheld from petitioner.

e.      Attorney’s Fees (NO)

·       Petitioner argues that it is entitled to attorneys fees based on Article 2208 of the Civil Code, because (1) respondents act
or omission has compelled it to litigate with third persons or to incur expenses to protect its interest; and (2) respondents
acted in gross and evident bad faith in refusing to satisfy its plainly valid, just and demandable claim.

NO. The grant of some of the claims of petitioner does not change the fact that it did not finish the project. Attorney’s fees are
not granted every time a party prevails in a suit, because no premium should be placed on the right to litigate. Petitioner is not,
after all, blameless in the present controversy. Just because MPC withheld some payments from petitioner does not mean that
the former was in gross or evident bad faith. MPC had claims that it wanted to offset with those of the latter.

2.      

NO. The Supreme Court concurs with the CA that these two respondents are not liable. 

The personal liability of corporate officers validly attaches only when (a) they assent to a patently unlawful act of the
corporation; or (b) they are guilty of bad faith or gross negligence in directing its affairs; or (c) they incur conflict of interest,
resulting in damages to the corporation, its stockholders or other persons. 

The records are bereft of any evidence that Typoco acted in bad faith with gross or inexcusable negligence, or that he acted
outside the scope of his authority as company president. 

Respondent Tan is not an officer or a director of MPC. His participation is limited to an alleged conversation between him and
Engineer Mario Cornista, petitioners project manager. Supposedly, the former verbally agreed therein to guarantee the
payment of the latters progress billings. We find no satisfactory evidence to show respondents alleged solidary liability to
petitioner.

3.     

YES. In comparison, 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. As of November 30, 1989,
petitioner accomplished only approximately 80 percent of the project. In other words, it was already in delay at the time.

Petitioner was in delay and in breach of contract. Clearly, the obligor is liable for damages that are the natural and probable
consequences of its breach of obligation. Petitioner was already paid by MPC in the amount of P31,435,187 out of the total
contract price of P38,580,609; thus, only P7,145,422 remained outstanding. In order to finish the project, the latter had to
contract the services of a second construction firm for P11,750,000. Hence, MPC suffered actual damages in the amount of
P4,604,579 for the completion of the project.

Petitioner is also liable for liquidated damages as provided in the Contract. Liquidated damages are those that the parties
agree to be paid in case of a breach. As worded, the amount agreed upon answers for damages suffered by the owner due to
delays in the completion of the project. Under Philippine laws, these damages take the nature of penalties.   A penal clause is an
accessory undertaking to assume greater liability in case of a breach. It is attached to an obligation in order to ensure
performance.

PREPARED BY: NICOLE ANN CRYSTA M. ROMERO

 
27. SPS. FELIX A. CHUA and CARMEN L. CHUA, et al., Petitioners, 
vs. UNITED COCONUT PLANTERS BANK, et al. Respondents.

FACTS:

On March 3, 1997, petitioner Spouses Felix and Carmen Chua entered into a Joint Venture Agreement (JVA) with Gotesco
Properties, Inc. (Gotesco) for the development of their property in Lucena City into a mixed use, residential and commercial
subdivision. Gotesco was then represented by respondent Jose Go. It appears, however, that the development project under
this JVA did not ultimately materialize. 
Pursuant to the JVA, several deeds of absolute sale were executed over Sps Chua’s 12 parcels of land situated in Lucena City in
favor of Revere, a corporation controlled and represented by Jose Go. The deeds of absolute sale were complemented by a
deed of trust under which it was confirmed that Revere did not part with any amount in its supposed acquisition of the 12
parcels of land. The deed of trust further confirmed Sps Chua’s absolute ownership of the properties. 

Prior to the execution of the JVA, Sps Chua and Jose Go had separate outstanding loan obligations with UCPB.  Spouses Chua
executed a real estate mortgage (REM) in favor of UCPB involving several parcels of land to secure the loans obtained in their
personal capacities and in their capacities as corporate officers and stockholders of the Lucena Grand Central Terminal, Inc.
(LGCTI). 

Sps Chua entered into a MOA with UCPB to consolidate the obligations of the Spouses Chua and LGCTI. Petitioners exchanged
their 30 parcels of land to effectively reduce their total unpaid obligations to only P68,000,000.00. To settle the balance, they
agreed to convert it into equity in LGCTI in case they would default in their payment. To implement the MOA, they signed the
REM drafted by UCPB, which included the properties listed in the MOA as security for the credit accommodation of
P404,597,177.04. Unknown to them, however, Jose Go, acting in behalf of Revere, likewise executed another REM covering the
properties that Revere was holding in trust for them. When UCPB foreclosed the mortgages, it applied about P75.09 million
out of the P227,700,000.00 proceeds of the foreclosure sale to the obligations of Revere and Jose Go. 

Spouses Chua wrote UCPB to request an accounting of Jose Go's liabilities that had been mistakenly secured by the mortgage of
petitioners' properties, as well as to obtain a list of all the properties subject of their REM as well as of the Revere REM for
reappraisal by an independent appraiser. The Spouses Chua further requested that the proceeds of the foreclosure sale of the
properties be applied only to petitioners' obligation and that the rest of the properties or any excess of their obligations should
be returned to them. However, UCPB did not heed petitioners' requests.

Sps Chua filed their complaint against UCPB, Revere, Jose Go, and the Register of Deeds of Lucena City in the RTC in Lucena
City. The RTC issued a writ of preliminary injunction at the instance of petitioners and declared Go and Revere in default. 
Thereafter, the RTC rendered a partial judgment against Jose Go and Revere.
 
Meanwhile, Asset Pool A moved to be substituted for UCPB as a party-defendant on February 15, 2006 on the basis that UCPB
had assigned to it the rights over petitioners’ ₱68,000,000.00 obligation. The RTC approved the substitution.
 
Thereafter, the RTC rendered judgment in favor of Sps. Chua. The RTC declared the Revere REM as null and void for having
been entered into outside the intent of the J A; and opined that the Revere REM did not even bear any of Sps Chua’s signatures.
It ruled that the application of the proceeds of the foreclosure sale of petitioners' properties to settle Jose Go's liabilities was
improper, invalid and contrary to the intent of the principal contract of the parties.

The CA reversed and set aside the judgment of the RTC. The CA made reference to three REMs: the first, would secure the
Spouses Chua' s obligations with UCPB; the second, was petitioners' REM in connection with the March 21, 2000 MOA; and the
Revere REM executed. It opined that the first REM remained outstanding and was not extinguished as claimed by petitioners;
that the Revere REM was valid based on the application of the complementary contracts construed together doctrine whereby
the accessory contract must be read in its entirety and together with the principal contract between the parties; that it was the
intention of the parties to extend the benefits of the two REMs under the first MOA in favor of Jose Go and/or his group of
companies; and that petitioners' obligations with UCPB under the first MOA had not been fully settled.

Issues

Did the CA commit reversible errors in finding that the Revere REM was valid and binding on petitioners, and in upholding the
propriety of applying the proceeds of the foreclosure sale to settle the obligations of Jose Go and his group of companies before
fully satisfying the liabilities of petitioners?

RULING:

Yes. While the RTC and the CA both dealt with and examined the same set of facts and agreements of the parties, they ended
up with totally opposing factual findings. In this regard, there is a need to review the records to determine which findings by
the lower courts should be preferred for being conformable with the records.

On March 21, 2000, UCPB and petitioners entered into the MOA consolidating the outstanding obligations of the Spouses Chua
and LGCTI. In consideration of the premises, the parties hereto agree as follows:

SECTION 1.0.
 CONTRACTUAL INTENT
 
Section 1.1. Intent of the Parties - Subject to the provisions of this Agreement, and the satisfactory performance by the
BORROWER of the obligations and undertakings set forth herein, the parties hereto declare, confirm and agree that:
(a) title to the Property shall be transferred and conveyed to the BANK; the BANK shall have the sole discretion to
determine and implement the appropriate actions for the conveyance of such title in favor of the BANK;
(b) the BANK shall: (i) grant the Spouses Chua a continuing right of first refusal over the Property and (ii) consider
entering into and concluding with the Spouses Chua a contractual arrangement for the development of the Property;
and
(c) the parties shall implement the appropriate acts and deeds necessary or required for the execution, delivery and
performance of this Agreement and the completion of the transactions contemplated herein, conformably with the
terms and conditions set forth hereunder.
 
xxxx
 
SECTION 5.0.
MISCELLANEOUS PROVISIONS
 
Section 5 .1. Binding Effect - This Agreement shall take effect upon its execution and the rights and obligation
contained hereunder shall be valid and binding on the parties and their respective successors-in-interest.
Section 5.2. Governing Law - The provisions of this Agreement shall be governed, and be construed in all respects, by
the laws of the Philippines.
Section 5.3. Further Assurance - LGCTI and the Spouses Chua warrant that they shall execute and deliver any and all
additional documents or instruments and do such acts and deeds as may be necessary to fully implement and
consummate the transactions contemplated under this Agreement.
Section 5.4. Entire Agreement - This Agreement constitutes the entire, complete and exclusive statement of the terms
and conditions of the agreement between the parties with respect to the subject matter referred to herein. No
statement or agreement, oral or written, made prior to the signing hereof and no prior conduct or practice by either
party shall vary or modify the written terms embodied hereof, and neither party shall claim any modification of any
provision set forth herein unless such modification is in writing and signed by both parties. 

The Court refuses to subscribe to the CA's declaration that the 1997 REM still subsisted separately from the consolidated
obligations of Sps Chua. As early as the latter part of 1999, correspondence and negotiation on the matter were already
occurring between UCPB, on one hand, and the Spouses Chua and LGCTI, on the other. Specifically, in its letter to petitioners,
UCPB wrote: "This will formalize our earlier discussions on the manner of settlement of your personal and that of LGCTI's
outstanding obligations. " 

The outstanding obligations adverted to referred to the Spouses Chua's unsettled, unpaid and remaining debt with UCPB. In
discussing how the Spouses Chua could settle their obligations, there was no distinction whatsoever between the loans
obtained in 1997 and those made in subsequent years. To be readily inferred from the tenor of the correspondence was
that the Spouses Chua's obligations were already consolidated.

The MOA referred to the outstanding obligations of LGCTI and the Spouses Chua as being in the amount of ₱204,597,177.04 as
of November 30, 1999. This meant that all of the Spouses Chua's obligations with UCPB on or prior to November 30, 1999 had
already been combined. It was plain enough to see that the MOA constituted the entire, complete and exclusive agreement
between the parties. 

There is no question about the validity of the March 21, 2000 MOA as well as the REM executed by petitioners in support of
this MOA. However, much controversy attended the Revere REM. There is no proof that plaintiffs have consented to the
application of the properties to the loan obligation of defendant Jose Go. UCPB is therefore lawfully bound to return to
Sps Chua the TCTs.

We have to note that the REM was executed by Revere through Jose Go purportedly in connection with the March 21, 2000
MOA on the very same day that Sps. Chua’s REM were executed. Yet, Sps. Chua disclaimed any knowledge or conformity to the
Revere REM. With the two deeds of trust executed in favor of Revere not having been expressly cancelled or rescinded, the
properties mortgaged by Revere to UCPB were still owned by petitioners for all intents and purposes.

For clarity, deeds of trust expressly provide that:

 2. The TRUSTEE hereby acknowledges and obliges itself not to dispose of, sell, transfer, convey, lease or
mortgage the said twelve (12) parcels of land without the written consent of the TRUSTORS first obtained;
(bold emphasis added)

By entering into the Revere REM, therefore, Revere openly breached its undertakings under the deeds of trust in
contravention of the express prohibition therein against the disposition or mortgage of the properties. It is also worth
mentioning that the records are bereft of any allegation that Revere had obtained the approval of petitioners or that the latter
had acquiesced to the mortgage of the properties in favor of UCPB. 

Additionally, UCPB could not now feign ignorance of the deeds of trust. UCPB's own Vice President expressly mentioned in
writing that UCPB would secure from Jose Go the titles necessary for the execution of the mortgages. As such, UCPB's actual
knowledge of the deeds of trust became undeniable. In addition, UCPB, being a banking institution whose business was
imbued with public interest, was expected to exercise much greater care and due diligence in its dealings with the public. By
approving the loan application of Revere obviously without making prior verification of the mortgaged properties' real
owners, UCPB became a mortgagee in bad faith. 

The CA pronounced that the parties had intended to extend the benefits of the two REMs under the first MOA to Jose Go
and/or his group of companies. It premised its pronouncement on the express stipulation in petitioners' REM to the effect that
it was "the intention of the parties to secure as well the payment of all loans, overdrafts xxxx by the MORTGAGORS and/or by
LGCTI, Spouses Chua, and Jose Go."  

The imperatives of the parties' obligations under their contracts require the proceeds of the foreclosure in the total amount of
₱227,700,000.00 be applied, first, to Sps Chua’s obligation, as agreed upon in the First MOA, and the remaining balance to
Jose Go's outstanding obligations with UCPB. 
 
 alit

2.2 MANIFESTATIONS OF UNJUST ENRICHMENT

28.  VICENTE S. ALMARIO, Petitioner, vs. PHILIPPINE AIRLINES, INC., Respondent.

G.R. No. 170928
September 11, 2007
CARPIO MORALES, J.
FACTS:
On October 21, 1988, petitioner, Vicente S. Almario (Almario), was hired by respondent, Philippine Airlines, Inc. (PAL), as a
Boeing 747 Systems Engineer. On April 28, 1995, Almario, then about 39 years of age and a Boeing 737 (B-737) First Officer at
PAL, successfully bid for the higher position of Airbus 300 (A-300) First Officer. Since said higher position required
additional training, he underwent, at PAL’s expense, more than five months of training consisting of ground schooling in
Manila and flight simulation in Melbourne, Australia.
After completing the training course, Almario served as A-300 First Officer of PAL, but after eight months of service as such or
on September 16, 1996, he tendered his resignation, for "personal reasons," effective October 15, 1996.
A letter from PAL was sent to Almario stating that the Company invested heavily on his   professional training in the estimated
amount of PHP786,713.00 on the basis that he continue to serve the Company for a definite period of time which is
approximately three (3) years or thirty-six (36) months. In view of the foregoing, the company urges Almario to reconsider
his  proposed resignation otherwise he will be required to reimburse the Company an amount equivalent to the cost of
his professional training and the damaged caused to the Company.
Despite receipt of the letter, Almario pushed through with his resignation. Then, by letter of October 9, 1996, Almario’s counsel
sought PALs explanation behind its September 27, 1996 letter considering that Almario did not sign anything regarding any
reimbursement. PAL did not reply, prompting Almario’s counsel to send two letters following-up PAL’s reply, as well as the
release of Almario’s clearances which he needed to avail of his benefits.
PAL filed a Complaint against Almario before the Makati Regional Trial Court (RTC), for reimbursement of P851,107 worth of
training costs, attorneys fees equivalent to 20% of the said amount, and costs of litigation. PAL invoked the existence of an
innominate contract of do ut facias (I give that you may do) with Almario in that by spending for his training, he would render
service to it until the costs of training were recovered in at least three (3) years. Almario having resigned before the 3-year
period, PAL prayed that he should be ordered to reimburse the costs for his training.
Almario denied the existence of any agreement with PAL that he would have to render service to it for three years after his
training failing which he would reimburse the training costs. Almario thus prayed for the award of actual damages on account
of PAL’s withholding of the necessary clearances which he needed in order to obtain his lawful benefits, and moral and
exemplary damages for malicious prosecution and unjust harassment.
PAL hinges its arguments on its right to be reimbursed for training expenses based on Article XXIII, Section 1 of the 1991-1994
CBA and which was taken from the decision of the Secretary of Labor that a pilot should remain in the position where he is
upon reaching the age of fifty-seven (57).
By Decision of October 25, 2000, the RTC, finding no provision in the CBA between PAL and ALPAP stipulating that a pilot who
underwent a training course for the position of A-300 First Officer must serve PAL for at least three years failing which he
should reimburse the training expenses, rendered judgment in favor of Almario. The trial court denied Almario’s claim for
moral damages, however.16 It denied too Almario’s claim for the monetary equivalent of his family trip pass benefits (worth
US$49,824), it holding that the same had been forfeited as he did not avail of them within one year from the date of his
separation.
On appeal by both parties, the Court of Appeals, by Decision dated March 31, 2005, reversed the trial courts decision. It found
Almario liable under the CBA between PAL and ALPAP, , in any event, under Article 22 of the Civil Code.
ISSUES:
1.       Whether or not PAL is entitled to reimbursement
2.       Whether the Court of Appeals committed reversible error in holding that Article 22 of the Civil Code can be applied to
recover training costs which were never agreed to nor included as reimbursable expenses under the CBA;
3.       Whether the availing by petitioner of a required training is a legal ground justifying the entitlement to a benefit and
therefore, negating claims of unjust enrichment;
RULING:
             The petition fails.
             The pertinent provision of the CBA and its rationale aside, contrary to Almario’s claim, Article 22 of the Civil Code
which reads:
Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him,
applies.
This provision on unjust enrichment recognizes the principle that one may not enrich himself at the expense of another. An
authority on Civil Law34 writes on the subject, viz:
Enrichment of the defendant consists in every patrimonial, physical, or moral advantage, so long as it is appreciable in money.
It may consist of some positive pecuniary value incorporated into the patrimony of the defendant, such as: (1) the enjoyment
of a thing belonging to the plaintiff; (2) the benefits from service rendered by the plaintiff to the defendant; (3) the acquisition
of a right, whether real or personal; (4) the increase of value of property of the defendant; (5) the improvement of a right of
the defendant, such as the acquisition of a right of preference; (6) the recognition of the existence of a right in the defendant;
and (7) the improvement of the conditions of life of the defendant.
The enrichment of the defendant must have a correlative prejudice, disadvantage, or injury to the plaintiff. This
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.
Admittedly, PAL invested for the training of Almario to enable him to acquire a higher level of skill, proficiency, or technical
competence so that he could efficiently discharge the position of A-300 First Officer. Given that, PAL expected to recover the
training costs by availing of Almario’s services for at least three years. The expectation of PAL 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.
Following the computation by the appellate court which was arrived at by offsetting the respective claims of the parties, viz:
Training Cost P851,107.00
Less Appellee's corresponding 8 months
: Service after training [P850,107.00
divided by 36 months (3 years)
= P23,640.86 x 8 months] 189,126.88
Equals
 P661,980.12

Less Accrued Benefits

: 102,240.22
Net Reimbursable Amount or
Appellee's Outstanding Account P559,739.9036
*****************
Almario must pay PAL the sum of ₱559,739.90, to bear the legal interest rate of 6% per annum from the filing of PAL’s
complaint on February 11, 1997 until the finality of this decision.
WHEREFORE, the petition is DENIED and the decision appealed from is AFFIRMED.
JV FERMIN

 29. 

BENGUET CORPORATION, Petitioner, vs. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES-MINES

ADJUDICATION BOARD and J.G. REALTY AND MINING CORPORATION, Respondents.

G.R. No. 163101, February 13, 2008 VELASCO JR., J.

FACTS:

On June 1, 1987, Benguet and J.G. Realty entered into a Royalty Agreement with Option to Purchase (RAWOP,) wherein J.G.
Realty was acknowledged as the owner of four mining claims in Camarines Norte. The mining claims were covered by MPSA
Application No. APSA-V-0009 jointly filed by J.G. Realty as claimowner and Benguet as operator.

J.G. Realty relay its intention to develop the mining claims. However, on another date. J.G. Realty, 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. Non-payment of the royalties thereon as provided in the RAWOP.

As to the royalties, Benguet claims that the checks representing payments for the royalties of J.G. Realty were available for
pick-up in its office and it is the latter which refused to claim them. Benguet then thus concludes that it did not violate the
RAWOP for nonpayment of royalties. Further, Benguet reasons that J.G. Realty has the burden of proving that the former did
not pay such royalties following the principle that the complainants must prove their affirmative allegations.

With regard to the failure to pursue the MPSA application, alleging that Benguet complied with its obligations under the
RAWOP by investing PhP 42.4 million to rehabilitate the mines, and that the commercial operation was hampered by the non-
issuance of a Mines Temporary Permit by the Mines and Geosciences Bureau (MGB) which must be considered as force
majeure, entitling Benguet to an extension of time to prosecute such permit.

J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP with the Legaspi City POA. POA issued a
Decision that Benguet violated the RAWOP justifying the unilateral cancellation of the RAWOP by J.G. Realty.

Benguet filed a Notice of Appeal Department of Environment and Natural Resources-Mining Adjudication Board   which denied
it. MR was also denied by DENR-MAB. Hence, Benguet filed the instant petition.

ISSUES:

1. Was the cancellation of the RAWOP was supported by evidence (YES)

2. Did the cancellation of the RAWOP amount to unjust enrichment of J.G. Realty at the expense of Benguet? (NO)
RULING: Note that this case failed to comply with the procedural requirement that a decision of the MAB must first be
appealed to the CA under Rule 43 of the Rules of Court, before recourse to the SC

1. YES. The cancellation of the RAWOP was supported by evidence 

The cancellation of the RAWOP by the POA was based on two grounds: (1) Benguet’s failure to pay J.G. Realty’s royalties for the
mining claims; and (2) Benguet’s failure to seriously pursue MPSA Application over the mining claims.

Sec. 14.05 of the RAWOP provides:

14.05 Bank Account

OWNER shall maintain a bank account at ___________ or any other bank from time to time selected by OWNER with
notice in writing to BENGUET where BENGUET shall deposit to the OWNER’s credit any and all advances and
payments which may become due the OWNER under this Agreement as well as the purchase price herein agreed upon
in the event that BENGUET shall exercise the option to purchase provided for in the Agreement. Any and all deposits
so made by BENGUET shall be a full and complete acquittance and release to BENGUET from any further
liability to the OWNER of the amounts represented by such deposits.  

Evidently, the RAWOP itself provides for the mode of royalty payment by Benguet. The fact that there was the
previous practice whereby J.G. Realty picked-up the checks from Benguet is unavailing. The mode of payment is
embodied in a contract between the parties. As such, the contract must be considered as the law between the parties
and binding on both. Thus, after J.G. Realty informed Benguet of the bank account where deposits of its royalties may be
made, Benguet had the obligation to deposit the checks. J.G. Realty had no obligation to furnish Benguet with a Board
Resolution considering that the RAWOP itself provided for such payment scheme.

Notably, Benguet’s claim that J.G. Realty must prove nonpayment of its royalties is both illogical and unsupported by law and
jurisprudence. Thus, this Court ruled in Jimenez v. National Labor Relations Commission: As a general rule, one who pleads
payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that the burden
rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of
showing with legal certainty that the obligation has been discharged by payment

It should also be borne in mind that MPSA Application No. APSA-V-0009 has been pending with the MGB for a considerable
length of time. Benguet, in the RAWOP, obligated itself to perfect the rights to the mining claims and/or otherwise acquire the
mining rights to the mineral claims but failed to present any evidence showing that it exerted efforts to speed up and have the
application approved. In fact, Benguet never even alleged that it continuously followed-up the application with the MGB and
that it was in constant communication with the government agency for the expeditious resolution of the application. Such
allegations would show that, indeed, Benguet was remiss in prosecuting the MPSA application and clearly failed to comply
with its obligation in the RAWOP.

2. NO. There is no unjust enrichment in the instant case

Based on the foregoing discussion, the cancellation of the RAWOP was based on valid grounds and is, therefore, justified. The
necessary implication of the cancellation is the cessation of Benguet’s right to prosecute MPSA Application and to further
develop such mining claims.

In Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation: We have held that “there is unjust enrichment when a
person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience.”

Article 22 of the Civil Code provides that “every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same
to him.” 

The 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.

There is no unjust enrichment when the person who will benefit has a valid claim to such benefit. 
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.

WHEREFORE, we DISMISS the petition, and AFFIRM the December 2, 2002 Decision and March 17, 2004 Resolution of the
DENR-MAB in MAB Case No. 0124-01 upholding the cancellation of the June 1, 1987 RAWOP. No costs. SO ORDERED.

-Ina. 

30. ADVANCED FOUNDATION CONSTRUCTION SYSTEMS CORPORATION vs. NEW WORLD PROPERTIES AND
VENTURES, INC.

G.R. No. 143154 & G.R. No. 143177, June 21, 2006, CHICO-NAZARIO, J.:

FACTS:

New World conducted a bidding for the construction of 69 bored piles which would form the foundation of the 36-storey
World Trade Exchange Building it planned to erect on a parcel of land it owned in Binondo, Manila. New World notified AFCSC
of the acceptance of its bid to construct the 69 bored piles for the lump sum of Thirty-six Million Pesos (P36,000,000.00). New
World issued to AFCSC the Notice to Proceed Work wherein AFCSC was instructed to commence work on 27 November 1996
and complete the same by 24 February 1997. Under said notice, it was stated that in case of delay in the completion of the
project, AFCSC would pay New World liquidated damages in the amount of P36,000.00 per calendar day of delay.

During the subsistence of the contract, New World directed AFCSC to make changes and additional works. Thereafter,
sometime in August 1997, AFCSC billed New World the costs of the change orders in addition to the original contract price.
Included in said billing is the cost of the removal of underground obstructions in the project site as well as the installation of
sonic pipes to be used to conduct load tests on the bored piling works. AFCSC claimed that these works were not part of the
original contract and should be treated as extra work. New World informed AFCSC of the former’s rejection of the 21
November 1996 proposal of AFCSC regarding the exclusion of the removal of underground obstructions from the original
scope of work and AFCSC’s claim for compensation for alleged extra work. New World maintained that the alleged additional
works were all part of the contract signed by both parties.

The construction of the bored piles were completed only on 27 November 1997, or more than eight months after the original
date of 24 February 1997 contemplated in the contract. New World, however, refused to pay its outstanding obligations to
AFCSC due to the defective bored piles. Upon New World’s continuous refusal to pay its obligation, AFCSC filed a Request for
Adjudication before the CIAC

ISSUES:

(1) Which between New World and AFCSC should shoulder the expenses incurred for the removal of the underground
obstructions and the conduct of the pile tests; and (New World)

(2) Whether or not AFCSC is liable for liquidated damages for its failure to complete the construction work by 24 February
1997. (YES)

HELD:

(1) In light of the ratiocination of the CIAC that the removal of underground obstruction is a major item of work and cannot
merely be contemplated as a miscellaneous item in a construction bid and must therefore be considered as extra work, We
conclude that there was nothing in the bid nor in the contract explicitly discussing the obligations of both parties in the event
that the contractor will encounter underground obstructions in the project site and may be constrained to remove the same.

According to the Court of Appeals, in failing to formally notify New World regarding the underground obstructions that it has
encountered, AFCSC failed to set in motion the mechanism for a modification of the contract and the equitable adjustment of
the contract price. Thus, for such negligence, the appellate court reduced the original award of the CIAC to only one-half of the
cost of the removal of the underground obstructions.

We do not agree. As explained by the appellate court itself, the experts and CIAC have agreed that the removal of the
underground obstructions was not covered by the scope of work in the contract. It is not disputed though that the same was a
major work entailing additional expenses and extra working time. Neither was it denied that such major work was indeed
necessary for the successful completion of the project. Indeed, to deny AFCSC relief for the expenses it incurred in removing
said obstructions would result in allowing New World to unjustly enrich itself at the expense of AFCSC. Equity necessarily
dictates that New World be held liable for the expenses incurred for the extra work conducted for its sole benefit. Further, it
cannot be said that New World was not made aware of the existence of the underground obstruction nor of the additional
expense that would be necessary for its removal. As heretofore stated, AFCSC, on 21 November 1996, sent a proposal to New
World regarding the additional expenses that would be incurred in the instance that the contractor shall encounter
underground obstructions; however, New World never responded to said proposal until 9 September 1997, when it informed
AFCSC of the rejection of said proposal or almost ten (10) months after said proposal was first offered, and after all the
necessary extra work had been accomplished. Article 22 of the Civil Code states:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.

Hence, to allow New World to acquire the finished project at a price far below its actual construction cost would undoubtedly
constitute unjust enrichment for the bank to the prejudice of AFCSC. Such unjust enrichment, as previously discussed, is not
allowed by law. As found by the CIAC and affirmed by the Court of Appeals, the cost of the removal of the underground
obstructions was P8,025,836.37. Beyond cavil, AFCSC is entitled to full payment of the expenses incurred for the removal of
the underground obstructions.

(2) Finally, with respect to the issue of whether or not AFCSC is liable for liquidated damages for its failure to complete the
construction work by the contract date of 24 February 1997, We agree with the findings of the CIAC that AFCSC never sent
notice to New World regarding a request for extension of time to finish the work despite the existence of circumstances fairly
entitling it to an extension of the contract period. Thus, AFCSC, must bear some consequences for the delay in the completion
of the project and for disregarding the owner’s right to determine the length of extension to be given to the contractor and to
consequently adjust the period to finish the extra work.

Prepared by: Mika Ituriaga