Orient Freight International Inc. v Keithin Everett Forwarding Co. | G.R. No.

191937 | August 9,
2017 | Leonen, J.

Facts:
- October 16, 2001: Keihin-Everett entered into a Trucking Service Agreement with Matsushita
- Respondent would provide trucking services for Masushita
- Subcontracted the aforementioned to Orient Freight under their own Trucking Service Agreement
- April 2002: Matsushita called Keihin-Everett's Sales Manager, Salud Rizada, about a column in the
April 19, 2002 issue of the tabloid newspaper Tempo
- Said column is about a truck of the respondent containing Matsushita’s shipment of surveillance and
CCTV equipment being intercepted by Caloocan Police
- Respondent contacted petitioner and was informed that it was merely a towing situation when the truck
broke down. No delays in shipment were caused by this incident.
- Said truck was driven by Cudas with Aquino as truck helper, employees of Schmitz’s Trucking.
- May 8, 2002: when the shipment arrived in Yokohama, Japan it was discovered that 10 pallets of the
shipment's 218 cartons, worth US$34,226.14, were missing
- Respondent’s investigation yielded information from Caloocan Police that Aquino was told by Cudas
to report truck engine trouble to Orient Freight.
- Aquino left and came back to find the truck missing.
- Police intercepted the truck and Cudas was the subject of a manhunt.
- May 15, 2002: respondent wrote to petitioner regarding the information.
- Petitioner admitted that they gave false information and that pilferage of the items in the truck were
proven.
- June 6, 2002: Matsushita terminated the In-House Brokerage Agreement it had with respondent.
- Loss of confidence due to non-disclosure of the accurate facts of the April incident amounted to fraud
and disregard of law.
- September 16, 2002: respondent asked petitioner for indemnity of P 2,500,000.00 for loss of income,
arguing that Orient Freight’s mishandling of the incident caused the termination of their contract with
Matsushita.
- October 24, 2002: Keihin-Everett filed a complaint for damages against Orient Freight in the latter’s
refusal to pay for the aforementioned indemnity.
- Keihin-Everett alleged that Orient Freight's "misrepresentation, malice, negligence and fraud"
caused the termination of its In-House Brokerage Service Agreement with Matsushita. Keihin-Everett
prayed for compensation for lost income, with legal interest, exemplary damages, attorney's fees,
litigation expenses, and the costs of the suit
- December 20, 2002: Petitioner alleged that the report it gave the respondent was made in good faith on
the basis of the report of their employees and the subsequent on time delivery of the goods for ship-
ment.
- Assailed the indemnity sought as Keihin-Everett earned much less income than sought for.
- RTC, February 27, 2008: petitioner Orient Freight International, Inc.'s (Orient Freight) negligence
caused the cancellation of Keihin-Everett Forwarding Company, Inc.'s (Keihin-Everett) contract with
Matsushita Communication Industrial Corporation of the Philippines (Matsushita)
- ”negligent in failing to investigate properly the incident and make a factual report to Keihin[-Everett]
and Matsushita," despite having enough time to properly investigate the incident.
- Ordered Orient Freight "to pay [Keihin-Everett] the amount of [P] 1,666,667.00 as actual damages rep-
resenting net profit loss incurred" and P50,000.00 in attorney's fees. However, it denied respondent's
prayer for exemplary damages, finding that petitioner did not act with gross negligence.
- Petitioner’s failure to act with due diligence in non-disclosure of true facts to respondent.
- Petitioner appealed the RTC decision to the CA.
- CA, January 21, 2010: affirmed RTC.
- Ruled that the oral and documentary evidence has established both the damage suffered by Keihin-Ev-
erett and Orient Freight's fault or negligence.
- Amount of lost income correctly valued at P 1,666.667.00 based on petitioner’s presentation of respon-
dent’s audited statements.
- Denied petitioner’s Motion for Reconsideration.
- June 9, 2010: petitioner filed the case at bar, petition for review on certiorari (Rule 45)
- Argued that the finding of the CA in finding them negligent under 2176 CC was erroneous: pre-exist-
ing contractual relationship between them respondent precludes the application of the rules on quasi-
delicts being applied in the case
- Cited Far East Bank & Trust Company v CA: that their failure to inform respondent of the hijacking in-
cident was not part of their obligation under their contract and does not give rise to a quasi-delict. Fur-
ther, it was done in good faith and not an act of negligence.
- CA erred in the award for damages as the RTC computation of the damages awarded were based on
Keihin-Everetts’ profit and loss statement.
- August 2, 2010: Keihin-Everett filed its Comment, arguing that the petition does not contain the
names of the parties in violation of Rule 45, Section 4 of the Rules of Court. It contends that the issues
and the arguments raised in this petition are the same issues it raised in the Regional Trial Court and
the Court of Appeals. It claims that the findings of fact and law of the Court of Appeals are in accord
with this Court's decisions.
- October 7, 2010:  reply of petitioner Orient Freight
- a cursory reading of the petition would readily show the parties to the case
- what is being contested and appealed is the application of the law on negligence by lower courts
- reiterates that the pre-existing contractual relation between the parties should bar the application of the
principles of quasi-delict therefore the terms and conditions of the contract between the parties must be
applied
- claimed that the Regional Trial Court's computation of the award included figures from respondent's
Profit and Loss Statement, which the trial court had allegedly rejected, making it unreliable
- February 16, 2011: Court resolution required petitioner to submit a certified true copy of RTC deci-
sion
- Petitioner complied, submitting on March 31, 2011

Issues:
1. Whether the failure to state the names of the parties in this Petition for Review, in accordance with
Rule 45, Section 4 of the Rules of Court, is a fatal defect- NO
- mere formal defect, does not violate Rule 45, Section 4 of the Rules of Court for failing to state the
names of the parties in the body as the names of the parties are readily discernible from the caption of
the petition, clearly showing the appealing party as the petitioner and the adverse party as the respon-
dent.

2. Whether the Court of Appeals, considering the existing contracts in this case, erred in applying
Article 2176 of the Civil Code-YES
 Presumption and Burden
Definition Defense
of Proof

- "the wrongful or neg-

ligent act or omission
which creates a vin- - No presumption of
negligence.
- Defense of "good fa-
2176 CC
culum juris and gives
ther of a family" is a
Culpa Aquilana rise to an obligation - Burden of proof to complete and proper
between two persons prove negligence is defense
not formally bound on defendant.
by any other obliga-
tion,”

- "the fault or negli-

gence incident in the - Once breach is
performance of an proven, the presump- - Defense of "good fa-
obligation which al- tion of negligence ther of a family" is
1770-1774 CC
Culpa Contractual ready-existed, and arises. not a defence in se-
which increases the - Burden of proof on lection and supervi-
liability from such al- petitioner to prove sion of employees
ready existing obliga- absence of fault
tion.”

- Culpa aquilana and culpa contractual generally cannot co-exist

- However, there are instances when Article 2176 may apply even when there is a pre-existing contrac-
tual relation. A party may still commit a tort or quasi-delict against another, despite the existence of a
contract between them (Cangco v Manila Railroad).
- If a contracting party's act that breaches the contract would have given rise to an extra-contractual lia -
bility had there been no contract, the contract would be deemed breached by a tort, and the party may
be held liable under Article 2176 and its related provisions.
- However, if the act complained of would not give rise to a cause of action for a quasi-delict indepen-
dent of the contract, then the provisions on quasi-delict or tort would be inapplicable.
- It is a fact that no such obligation or provision to inform the respondent of the hijacking existed in the
contract. Absent said terms and obligations, applying the principles on tort as a cause for breaching a
contract would therefore miserably fail as the lower Court erroneously did in this case.
- The doctrine "the act that breaks the contract may also be a tort," on which the lower courts relied, is
inapplicable here.
- Petitioner's negligence, arising as it does from its performance of its obligation to respondent, is depen-
dent on this obligation.
- Art. 21 CC also not applicable: there was inaction on the part of the defendant which caused damage to
the plaintiff, but there is nothing to show that the defendant intended to conceal the truth or to avoid li-
ability.
- While petitioner and respondent were contractually bound under the Trucking Service Agreement and
the events at the crux of this controversy occurred during the performance of this contract, it is appar-
ent that the duty to investigate and report arose subsequent to the Trucking Service Agreement.
- Petitioner’s is being sued for their negligence (which existed after the duty imposed by the Trucking
Service Agreement) in non-disclosure of facts, not for the negligence of the employees fo Schmitz
Trucking so the argument that the proximate cause of the damage is the negligence of the aforemen-
tioned employees is not a valid defense.
- Articles 1170, 1172, and 1173 of the Civil Code on negligence in the performance of an obligation
should apply.

3. Whether Orient Freight, Inc. was negligent for failing to disclose the facts surrounding the hi-
jacking incident on April 17, 2002, which led to the termination of the Trucking Service Agree-
ment between Keihin-Everett Forwarding Co., Inc. and Matsushita Communication Industrial
Corporation of the Philippines
- Article 1170 of the Civil Code, liability for damages arises when those in the performance of their obli-
gations are guilty of negligence, among others.
- If the party did not exercise reasonable care and caution, then it is guilty of negligence.
- Petitioner's argument that its acts were a "sound business judgment which the court cannot sup-
plant or question nor can it declare as a negligent act" lacks merit. 
- Petitioner failed to listen carefully to Aquino’s narration of the events.
- Petitioner should have investigated upon receiving the news of the hijacking. Petitioner is responsible
for the damages that respondent incurred due to the former's negligent performance of its obligation.

4. Whether the trial court erred in the computation of the awarded actual and pecuniary loss by basing it
on, among others, the Profit and Loss Statement submitted by Keihin-Everett Forwarding Co., Inc.
- 2220 and 2221 CC: liability for damages in contractual obligations
- 2220 CC: profits may be recovered as damages
- 2221 CC:  damages recoverable for the breach of obligations not originating in fraud (dolo) are those
which were or might have been foreseen at the time the contract was entered into
- Petitioner’s negligence (misleading the respondent and Matsushita) the proximate cause of the termina-
tion of the contract due to loss of trust & confidence and is therefore liable for the loss of profit
- RTC computation not a matter that can be ruled on by the Court: Rule 45 not for review of factual mat-
ters such as award for damages.
- Further, petitioner failed to substantiate as to why the RTC computation is erroneous.
Ruling: WHEREFORE, the petition is DENIED. The January 21, 2010 Decision and April 21, 2010
Resolution of the Court of Appeals in CA-G.R. CV No. 91889 are AFFIRMED.

[Cited cases from syllabus: Cangco, Syquia, Air France, PSBA]