CONTRACTS as a source of Obligation

AYALA CORPORATION v. ROSA DIANA REALTY, G.R. No. 134284, December 1, 2000

FACTS:

Petitioner Ayala Corporation was the registration owner of a parcel of land located in Alfaro Street,
Salcedo Village, Makati City with an area of 840 square meters, more or less and covered by Transfer
Certificate of Title (TCT) No. 233435 of the Register of Deeds of Rizal.

On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka Kieng married to
Rosa Chan. The Deed of Sale executed between Ayala and the buyers contained Special conditions of
sale and Deed Restrictions. Among the Special Conditions of Sale were;

 The vendee shall build on the lot and submit the building plans to the vendor before September
30, 1976 for the latter’s approval.
 The construction of the building shall start on or before March 30, 1977 and completed before
1979. Before such completion, neither no the title released even if the purchase price shall have
been fully paid.
 There shall be no resale of the property.
 The Deed Restrictions, on the other hand, contained the stipulation that the gross floor area of
the building to be constructed shall not be more than five (5) times the lot area and the total
height shall not exceed forty two (42) meters. The restrictions were to expire in the year 2025.

Manuel Sy and Sy Ka Kieng failed to construct the building in violation of the Special Conditions of
Sale. Notwithstanding the violation, Manuel Sy and Sy Ka Kieng, in April 1989, were able to sell the lot to
respondent Rosa-Diana Realty and Development Corporation with Ayala’s approval. As a consideration
for Ayala to release the Certificate of title of the subject property, Rosa Diana, on July 27, 1989 executed
an Undertaking, together with the buildings plans for a condominium project, known as "The Peak",
Ayala released title to the lot, thereby enabling Rosa-Diana to register the deed of sale in its favor and
obtain Certificate of Title No. 165720 in its name. The title carried as encumbrances the special
conditions of sale and the deed restrictions. Rosa-Diana’s building plans as approved by Ayala were
‘subject to strict compliance of cautionary notices appearing on the building plans and to the restrictions
encumbering the Lot regarding the use and occupancy of the same.’

Thereafter, Rosa-Diana submitted to the building official of Makati another set of building plans for
"The Peak" which Rosa-Diana submitted to Ayala for approval envisioned a 24-meter high, seven (7)
storey condominium project with a gross floor area of 3,968.56 square meters, the building plans which
Rosa-Diana submitted to the building official of Makati, contemplated a 91.65 meter high, 38 storey
condominium building with a gross floor area of 23,305.09 square meters. Needless to say, while the
first set of building plans complied with the deed restrictions, the latter set seceded the same.
 During the construction of Rosa-Diana’s condominium project, Ayala filed an action with the
Regional Trial Court (RTC) of Makati, Branch 139 for specific performance, with application for a writ of
preliminary injunction/temporary restraining order against Rosa-Diana Realty seeking to compel the
latter to comply with the contractual obligations under the deed of restrictions annotated on its title as
well as with the building plans it submitted to the latter. In the alternative, Ayala prayed for rescission of
the sale of the subject lot to Rosa-Diana Realty.

The lower court denied Ayala’s prayer for injunctive relief, thus enabling Rosa-Diana to complete the
construction of the building. Undeterred, Ayala tried to cause the annotation of a notice of lis pendens
on Rosa-Diana’s title. The Register of Deeds of Makati, however, refused registration of the notice of lis
pendens on the ground that the case pending before the trial court, being an action for specific
performance and/or rescission, is an action in personal which does not involve the title, use or
possession of the property.2 The Land Registration Authority (LRA) reversed the ruling of the Register of
Deeds saying that an action for specific performance or recession may be classified as a proceeding of
any kind in court directly affecting title to the land or the use or occupation thereof for which a notice of
lis pendens may be held proper.3 The decision of the LRA, however, was overturned by the Court of
Appeals in C.A. G.R. S.P. No. 29157. In G.R. No. 112774, We affirmed the ruling of the CA on February 16,
1994 saying.

We agree with respondent court that the notice of lis pendens is not proper in this instance. The
case before the trial court is a personal action since the cause of action thereof arises primarily from the
alleged violation of the Deed of Restriction.

In the meantime, Ayala completed its presentation of evidence before the trial court. Rosa-Diana
filed a Demurrer to Evidence averring that Ayala failed to establish its right to the relief sought in-as
much as (a) Ayala admittedly does not enforce the deed restrictions uniformly and strictly (b) Ayala has
lost its right/power to enforce the restrictions due to its own acts and omissions; and (c) the deed
restrictions are no longer valid and effective against lot buyers in Ayala’s controlled subdivision.

The trial court sustained Rosa-Diana’s Demurrer to Evidence saying that Ayala was guilty of
abandonment and/or estoppel due to its failure to enforce the terms of deed of restrictions and special
conditions of sale against Manuel Sy and Sy Ka Kieng. The trial court noted that notwithstanding the
violation of the special conditions of sale, Manuel Sy and Sy Ka Kieng were able to transfer the title to
Rosa-Diana with the approval of Ayala. The trial court added that Ayala’s failure to enforce the
restrictions with respect to Trafalgar, Shellhouse, Eurovilla, LPL Plaza, Parc Regent, LPL Mansion and
Leronville, which are located within Salcedo Village, shows that Ayala discriminated against those which
it wants to have the obligation enforced. The trial court then concluded that for Ayala to discriminatory
choose which obligor would be made to follow certain conditions and which should not, did not seem
fair and legal.

The Court of Appeals affirmed the ruling of the trial court saying that the "appeal is seated by the
doctrine of the law of the case in C.A. G.R. S.P. No. 29157" where it was stated that
xxx Ayala is bared from enforcing the Deed of Restriction in question pursuant to the doctrine of waiver
and estoppel. Under the terms of the deed of sale, the vendee Sy Ka Kieng assumed faithful compliance
with the special conditions of sale and with the Salcedo Village Deed of Restrictions. One of the
conditions was that a building would be constructed within one year. However, Sy Ka Kieng failed to
construct the building as required under the Deed Sale. Ayala did nothing to enforce the terms of the
contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of petitioner Realty in 1989
or thirteen (13) years later. We, therefore, see no justifiable reason for Ayala to attempt to enforce the
terms of the conditions of sale against the petitioner.

xxx

The Court of Appeals also cited C.A. G.R. C.V. No. 46488 entitled, "Ayala Corporation vs. Ray Burton
Development Corporation’ which relied on C.A. G.R. S.P. No. 29157 in ruling that Ayala is barred from
enforcing the deed restrictions in dispute. Upon a motion for reconsideration filed by herein petitioner,
the Court of Appeals clarified that "the citation of the decision in Ayala Corporation vs. Ray Burton
Development Corporation, Ca G.R. C.V. No. 46488, February 27, 1996, was made not because said
decision is res judicata to the case at bar but rather because it is precedential under the doctrine of stare
decisis."

Upon denial of said motion for reconsideration, Ayala filed the present appeal.

Ayala contends that the pronouncement of the Court of Appeals in C.A. G.R. S.P. No. 29157 that it is
estopped from enforcing the deed restrictions is merely obiter dicta inasmuch as the only issue raised in
the aforesaid case was the propriety of a lis pendens annotation on Rosa-Diana’s certificate of title.

Ayala avers that Rosa-Diana presented no evidence whatsoever on Ayala’s supposed waiver or estoppel
in C.A. G.R. S.P. No. 29157. Ayala likewise pointed out that at the time C.A. G.R. S.P. No. 29157 was on
appeal, the issues of the validity and continued viability of the deed of restrictions and their
enforceability by Ayala were joined and then being tried before the trial court.

Petitioner’s assignment of errors in the present appeal may essentially be summarized as follows:

The Court of Appeals acted in manner not in accord with law and the applicable decisions of the
Supreme Court in holding that the doctrine of the law of the case, or stare decisis, operated to dismiss
Ayala’s appeal.

The Court of Appeals erred as a matter of law and departed from the accepted and usual course of
judicial proceedings when it failed to expressly pass upon the specific errors assigned in Ayala’s appeal.

A discussion on the distinctions between law of the case, stare decisis and obiter dicta is in order.

The doctrine of the law of the case has certain affinities with, but is clearly distinguishable from, the
doctrines of res judicata and stare decisis, principally on the ground that the rule of the law of the case
operates only in the particular case and only as a rule of policy and not as one of law.4 At variance with
the doctrine of stare decisis, the ruling adhered to in the particular case under the doctrine of the law of
the case need not be followed as a precedent in subsequent litigation between other parties, neither by
the appellate court which made the decision followed on a subsequent appeal in the same case, nor by
any other court. The ruling covered by the doctrine of the law of the case is adhered to in the single case
where it arises, but is not carried into other cases as a precedent.5 On the other hand, under the
doctrine of stare decisis, once a point of law has been established by the court, that point of law will,
generally, be followed by the same court and by all courts of lower rank in subsequent cases where the
same legal issue is raised.6 Stare decisis proceeds from the first principle of justice that, absent powerful
countervailing considerations, like cases ought to be decided alike.7

The Court of Appeals, in ruling against petitioner Ayala Corporation stated that the appeal is ‘sealed’ by
the doctrine of the law of the case, referring to G.R. No. 112774 entitled "Ayala Corporation, petitioner
vs. Courts of Appeals, et al., respondents". The Court of Appeals likewise made reference to C.A. G.R.
C.V. No. 46488 entitled, "Ayala Corporation vs. Ray Burton Development Corporation, Inc." in ruling
against petitioner saying that it is jurisprudentially under the doctrine of stare decisis.

It must be pointed out that the only issue that was raised before the Court of Appeals in C.A. G.R. S.P.
No. 29157 was whether or not the annotation of lis pendens is proper. The Court of Appeals, in its
decision, in fact stated "the principal issue to be resolved is: whether or not an action for specific
performance, or in the alternative, rescission of deed of sale to enforce the deed of restrictions
governing the use of property, is a real or personal action, or one that affects title thereto and its use or
occupation thereof.

In the aforesaid decision, the Court of Appeals even justified the cancellation of the notice of lis pendens
on the ground that Ayala had ample protection should it succeed in proving its allegations regarding the
violation of the deed of restrictions, without unduly curtailing the right of the petitioner to fully enjoy its
property in the meantime that there is as yet no decision by the trial court.

From the foregoing, it is clear that the Court of Appeals was aware that the issue as to whether
petitioner is estopped from enforcing the deed of restrictions has yet to be resolved by the trial court.
Though it did make a pronouncement that the petitioner is estopped from enforcing the deed of
restrictions, it also mentioned at the same time that this particular issue has yet to be resolved by the
trial court. Notably, upon appeal to this Court, We have affirmed the ruling of the Court of Appeals only
as regards the particular issue of the propriety of the cancellation of the notice of lis pendens.

We see no reason then, how the law of the case or stare decisis can be held to be applicable in the case
at bench. If at all, the pronouncement made by the Court of Appeals that petitioner Ayala is barred from
enforcing the deed of restrictions can only be considered as obiter dicta. As earlier mentioned the only
issue before the Court of Appeals at the time was the propriety of the annotation of the lis pendens. The
additional pronouncement of the Court of Appeals that Ayala is estopped from enforcing the deed of
restrictions even as it recognized that this said issue is being tried before the trial court was not
necessary to dispose of the issue as to the propriety of the annotation of the lis pendens. A dictum is an
opinion of a judge which does not embody the resolution or determination of the court, and made
without argument, or full consideration of the point, not the proffered deliberate opinion of the judge
himself.10 It is not necessarily limited to issues essential to the decision but may also include
expressions of opinion which are not necessary to support the decision reached by the court. Mere dicta
are not binding under the doctrine of stare decisis11.
While the Court of Appeals did not err in ruling that the present petition is not barred by C.A. G.R. C.V.
No. 46488 entitled "Ayala Corporation vs. Ray Burton Development Inc." under the doctrine of res
judicata, neither, however, can the latter case be cited as presidential under the doctrine of stare
decisis. It must be pointed out that at the time the assailed decision was rendered, C.A. G.R. C.V. No.
46488 was on appeal with this Court. Significantly, in the decision. We have rendered in Ayala
Corporation vs. Ray Burton Development Corporation12 which became final and executory on July 5,
1999 we have clearly stated that "An examination of the decision in the said Rosa-Diana case reveals
that the sole issue raised before the appellate court was the propriety of the lis pendens annotation.
However, the appellate court went beyond the sole issue and made factual findings bereft of any basis
in the record to inappropriately rule that AYALA is in estoppel and has waived its right to enforce the
subject restrictions. Such ruling was immaterial to the annotation of the lis pendens. The finding of
estoppel was thus improper and made in excess of jurisdiction."

Coming now to the merits of the case, petitioner avers that the Court of Appeals departed from the
usual course of judicial proceedings when it failed to expressly pass upon the specific errors assigned in
its appeal. Petitioner reiterates its contention that law and evidence do not support the trial court’s
findings that Ayala has waived its right to enforce the deed of restrictions.

We find merit in the petition.

It is basic that findings of fact of the trial court and the Court of Appeals are conclusive upon the
Supreme Court when supported by substantial evidence.13 We are constrained, however, to review the
trial court'’ findings of fact, which the Court of Appeals chose not to pass upon, in as much as there is
ample evidence on record to show that certain facts were overlooked which would affect the disposition
of the case.

In its assailed decision of February 4, 1994, the trial court, ruled in favor of respondent Rosa-Diana
Realty on the ground that Ayala had not acted fairly when it did not institute an action against the
original vendees despite the latter’s violation of the Special Conditions of Sale but chose instead to file
an action against herein respondent Rosa-Diana. The trial court added that although the 38-storey
building of Rosa-Diana is beyond the total height restriction, it was not violative of the National Building
Code. According to the trial court the construction of the 38 storey building known as "The Peak" has
not been shown to have been prohibited by law and neither is it against public policy.

It bears emphasis that as complainant, Ayala had the prerogative to initiate an action against violators of
the deed restrictions. That Rosa-Diana had acted in bad faith is manifested by the fact that it submitted
two sets of building plans, one which was in conformity with the deed restrictions submitted to Ayala
and MACEA, and the other, which exceeded the height requirement in the deed restrictions to the
Makati building official for the purpose of procuring a building permit from the latter. Moreover, the
violation of the deed restrictions committed by respondent can hardly be denominated as a minor
violation. It should be pointed out that the original building plan which was submitted to and approved
by petitioner Ayala Corporation, envisioned a twenty four (24) meter high, seven (7) storey
condominium whereas the respondent’s building plan which was submitted to and approved by the
building official of Makati is that of a thirty eight (38) storey, 91.65 meters high, building. At present, the
Peak building of respondent which actually stands at 133.65 meters with a total gross floor area of
23,305.09 square meters, seriously violates the dimensions indicated in the building plans submitted by
Rosa-Diana to petitioner Ayala for approval in as much as the Peak building exceeds the approved height
limit by about 109 meters and the allowable gross floor area under the applicable deed restrictions by
about 19,105 square meters. Clearly, there was a gross violation of the deed restrictions and evident
bad faith by the respondent.

It may not be amiss to mention that the deed restrictions were revised in a general membership
meeting of the association of lot owners in Makati Central Business District the Makati Commercial
Estate Association, Inc. (MACEA).

Whereby direct height restrictions were abolished in lieu of floor area limits. Respondent, however, did
not vote for the approval of this revision during the General Membership meeting, which was held on
July 11, 1990 at the Manila Polo Clud Pavilion, Makati, and Metro Manila. Hence, respondent continues
to be bound by the original deed restrictions applicable to Lot 7, Block 1 and annotated on its title to
said lot. In any event, assuming arguendo that respondent voted for the approval of direct height
restrictions in lieu of floor area limits, the total floor area of its Peak building would still be violative of
the floor area limits to the extent of about 9,865 square meters of allowable floor area under the
MACEA revised restrictions.

Respondent Rosa-Diana avers that there is nothing illegal or unlawful in the building plans which it used
in the construction of the Peak condominium ‘inasmuch as it bears the imprimatur of the building
official of Makati, who is tasked to determine whether building and construction plans are in accordance
with the law, notably, the National Building Code."

Respondent Rosa-Diana, however, misses the point inasmuch as it has freely consented to be bound by
the deed restrictions when it entered into a contract of sale with spouses Manuel Sy and Sy Ka Kieng.
While respondent claims that it was under the impression that Ayala was no longer enforcing the deed
restrictions, the Undertaking14 it executed belies this same claim. In said Undertaking, respondent
agreed to ‘construct and complete the construction of the house on said lot as required under the
special condition of sale." Respondent likewise bound itself to abide and comply with x x x the condition
of the rescission of the scale by Ayala Land, Inc. on the grounds therein stated x x x.

Contractual obligations between parties have the force of law between them and absent any allegation
that the same are contrary to law, morals, good custom, public order or public policy, they must be
complied with in good faith. Hence, Article 1159 of the New Civil Code provides.

"Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith."

Respondent Rosa-Diana insists that the trial court had already ruled that the undertaking executed by its
Chairman and President cannot validly bind Rosa-Diana and hence, it should not be held bound by the
deed restrictions.

We agree with petitioner Ayala’s observation that respondent Rosa-Diana’s special and affirmative
defenses before the trial court never mentioned any allegation that its president and chairman were not
authorized to execute the Undertaking. It was inappropriate therefore for the trial court to rule that in
the absence of any authority or confirmation from the Board of Directors of respondent Rosa-Diana, its
Chairman and the President cannot validly enter into an undertaking relative to the construction of the
building on the lot within one year from July 27, 1989 and in accordance with the deed restrictions,
Curiously, while the trial court stated that it cannot be presumed that the Chairman and the President
can validly bind respondent Rosa-Diana to enter into the aforesaid Undertaking in the absence of any
authority or confirmation from the Board of Directors, the trial court held that the ordinary presumption
of regularity of business transactions is applicable as regards the Deed of Sale which was executed by
Manuel Sy and Sy Ka Kieng and respondent Rosa-Diana. In the light of the fact that respondent Rosa-
Diana never alleged in its Answer that its president and chairman were not authorized to execute the
Undertaking, the aforesaid ruling of the trial court is without factual and legal basis and suppressing to
say the least.

The fact alone that respondent Rosa-Diana conveniently prepared two sets of building plans –with one
set which fully conformed to the Deed Restrictions and another in gross violation of the same – should
have cautioned the trial court to conclude that respondent Rose-Diana was under the erroneous
impression that the Deed Restrictions were no longer enforceable and that it never intended to be
bound by the Undertaking signed by its President and Chairman. We reiterate that contractual
obligations have the force of law between parties and unless the same is contrary to public policy morals
and good customs, they must be complied by the parties in good faith.

Petitioners, in its Petition, prays that judgement be rendered:

ordering Rosa-Diana Realty and Development Corporation to comply with its contractual obligations in
the construction of the Peak by removing, or closing down and prohibiting Rosa-Diana from using,
selling, leasing or otherwise disposing, of the portions of areas thereof constructed beyond or in excess
of the approved height, as shown by the building plans submitted to, and approved by, Ayala, including
any other portion of the building constructed not in accordance with the said building plans, during the
effectivity of the Deed Restrictions;

Alternatively, in the event specific performance has become impossible;

ordering the cancellation and recession of the April 20, 1976 Deed of Sale by Ayala in favor of the
original vendees thereof as well as the subsequent Deed of Sale executed by such original vendees in
favor of Rosa-Diana, and ordering Rosa-Diana to return Ayala Lot 7, Block 1 of Salcedo Village;

ordering the cancellation of Transfer Certificate of Title No. 165720 (in the name of Rosa-Diana) and
directing the office of the Register of Deeds of Makati to issue a new title over the lot in the name of
Ayala; and

Ordering Rosa-Diana to pay Ayala attorney’s fees in the amount of P500, 000.00, exemplary damages in
the amount of P5, 000,000.00 and the costs of suit.

It must be noted that during the trial respondent Rosa-Diana was able to complete the construction of
The Peak as a building with a height of thirty-eight (38) floors or 133.65 meters. Having been completed
for a number of years already, it would be reasonable to assume that it is now fully tenanted.
Consequently, the remedy of specific performance by respondent is no longer feasible. However,
neither can we grant petitioner’s prayer for the cancellation and rescission of the April 20, 1976 Deed of
Sale by petitioner Ayala in favor of respondent Rosa-Diana inasmuch as the resale of the property by the
original vendees, spouses Manuel Sy and Ka Kieng to comply with their obligation to construct a building
within one year from April 20, 1976, has effectively waived its right to rescind the sale of the subject lot
to the original vendees.

Faced with the same question as to the proper remedy available to petitioner in the case of "Ayala
Corporation vs. Ray Burton Development Inc., ‘ a case which is on all fours with the case at bench, we
ruled therein that the party guilty of violating the deed restrictions may only be held alternatively liable
for substitute performance of its obligation, that is, for the payment of damages. In the aforesaid case it
was observed that the Consolidated and Revised Deed Restrictions (CRDR) imposed development
charges on constructions which exceed the estimated Gross Limits permitted under the original Deed
Restrictions but which are within the limits of the CRDR’s.

The pertinent portion of the Deed of Restrictions reads:

3. DEVELOPMENT CAHRGE For building construction within the Gross Floor Area limits defined under
Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area exceeding certain standards
defined in Paragraphs C-3.1-C below, the OWNER shall pay MACEA, prior to the construction of any new
building a DEVELOPMENT CHARGE as a contribution to a trust fund to be administered by MACEA. This
trust fund shall be used to improve facilities and utilities in Makati Central District.

3.1 The amount of the development charge that shall be due from the OWNER shall be computed as
follows:

DEVELOPMENT

CAHRGE = A x (B-C-D)

Where:

A – is equal to the a Area Assessment which shall be set at Five Hundred Pesos (P500.00) until December
31, 1990. Each January 1st thereafter, such amount shall increase by ten percent (10%) over the
immediately preceding year; provided that beginning 1995 and at the end of every successive five-year
period thereafter, the increase in the Area Assessment shall be reviewed and adjusted by the VENDOR
to correspond to the accumulated increase in the construction cost index during the immediately
preceding five years as based on the weighted average of wholesale price and wage indices of the
National Census and Statistics Office and the Bureau of Labor Statistics.
B – Is equal to the Gross Floor Area of the completed or expanded building in square meters.

C – is equal to the estimated Gross Floor Area permitted under the original deed restrictions, derived by
multiplying the lot area by the effective original FAR shown below for each location.

We then ruled in the aforesaid case that the development; charges are a fair measure of compensatory
damages which therein respondent Ray Burton Development Inc. is liable to Ayala Corporation. The
dispositive portion of the decision in the said case, which is squarely applicable to the case at bar, reads
as, follows:

WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated February 27,
1996, in CA G.R. C.V. No. 46488, and its Resolution dated October 7, 1996 are hereby REVERSED and SET
ASIDE, and in lieu thereof judgement is hereby rendered finding that:

The Deed Restrictions are valid and petitioner AYALA is not estopped from enforcing them against lot
owners who have not yet adopted the Consolidated and Revised Deed Restrictions.

Having admitted that the Consolidated and Revised Deed Restrictions are the applicable Deed
Restrictions to Ray Burton Development Corporation, RBDC should be, and is bound by the same.

Considering that Ray Burton Development Corporation’s Trafalgar plaza exceeds the floor area limits of
the Deed Restrictions, RBDC is hereby ordered to pay development charges as computed under the
provisions of the consolidated and Revised Deed Restrictions currently in force.

Ray Burton Development corporation is further ordered to pay AYALA exemplary damages in the
amount of P2, 500,000.00 attorney’s fees in the amount of P250,000.00

SO ORDERED:

There is no reason why the same rule should not be followed in the case at bar, the remedies of specific
performance and/or rescission prayed for by petitioner no longer being feasible. In accordance with the
peculiar circumstances of the case at bar, the development charges would certainly be a fair measure of
compensatory damages to petitioner Ayala.

Exemplary damages in the sum of P2, 500,000.00 as prayed for by petitioner are also in order inasmuch
as respondent Rosa-Diana was in evident bad faith when it submitted a set of building plans in
conformity with the deed restrictions to petitioner Ayala for the sole purpose of obtaining title to the
property, but only to prepare and later on submit another set of buildings plans which are in gross
violation of the Deed Restrictions. Petitioner Ayala is likewise entitled to an award of attorney’s fees in
the sum of P250, 000.00.
WHEREFORE, the assailed Decision of the Court of Appeals dated December 4, 1997 and its Resolution
dated June 19, 1998, C.A. G.R. C.V. No. 4598, are REVERSED and SET ASIDE. In lieu thereof, judgement is
rendered.

Ordering respondent Rosa-Diana Realty and Development Corporation to pay development charges as
computed under the provisions of the consolidated and Revised Deed Restrictions currently in force;
and ordering respondent Rosa-Diana Realty and Development Corporation to pay petitioner Ayala
Corporation exemplary damages in the sum of P2,500,00.00, attorney’s fees in the sum of P250,000.00
and the costs of the suit.

SO ORDERED.

QUASI-CONTRACTS as a source of Obligations

LOCSIN v. MEKENI, G.R. No. 192105, December 9, 2013

FACTS:

In February 2004, respondent Mekeni Food Corporation–a Philippine company engaged in food
manufacturing and meat processing –offered petitioner Antonio Locsin II the position of Regional Sales
Manager to oversee Mekeni’s National Capital Region Supermarket/Food Service and South Luzon
operations. In addition to a compensation and benefit package, Mekeni offered petitioner a car plan,
under which one-half of the cost of the vehicle is to be paid by the company and the other half to be
deducted from petitioner’s salary. Mekeni’s offer was contained in an Offer Sheet which was presented
to petitioner.

Petitioner began his stint as Mekeni Regional Sales Manager on March 17, 2004. To be able to
effectively cover his appointed sales territory, Mekeni furnished petitioner with a used Honda Civic car
valued at ₱280,000.00, which used to be the service vehicle of petitioner’s immediate supervisor.
Petitioner paid for his 50% share through salary deductions of ₱5,000.00 each month.

Subsequently, Locsin resigned effective February 25, 2006. By then, a total of ₱112,500.00 had
been deducted from his monthly salary and applied as part of the employee’s share in the car plan.
Mekeni supposedly put in an equivalent amount as its share under the car plan. In his resignation letter,
petitioner made an offer to purchase his service vehicle by paying the outstanding balance thereon. The
parties negotiated, but could not agree on the terms of the proposed purchase. Petitioner thus returned
the vehicle to Mekeni on May 2, 2006.

Petitioner made personal and written follow-ups regarding his unpaid salaries, commissions,
benefits, and offer to purchase his service vehicle. Mekeni replied that the company car plan benefit
applied only to employees who have been with the company for five years; for this reason, the balance
that petitioner should pay on his service vehicle stood at ₱116,380.00 if he opts to purchase the same.

On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, a
Complaint for the recovery of monetary claims consisting of unpaid salaries, commissions, sick/vacation
leave benefits, and recovery of monthly salary deductions which were earmarked for his cost-sharing in
the car plan. The case was docketed in the National Labor Relations Commission(NLRC), National Capital
Region(NCR), Quezon City as NLRC NCR CASE NO. 00-05-04139-07.

On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a Decision, decreeing as
follows: WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered directing
respondents to turn-over to complainant x x x the subject vehicle upon the said complainant’s payment
to them of the sum of ₱100,435.84. SO ORDERED.

Ruling of the National Labor Relations Commission On appeal, the Labor Arbiter’s Decision was
reversed in a February 27, 2009 Decision of the NLRC, thus: WHEREFORE, premises considered, the
appeal is hereby Granted. The assailed Decision dated October 30, 2007 is hereby REVERSED and SET
ASIDE and a new one entered ordering respondent-appellee Mekeni Food Corporation to pay
complainant-appellee the following:

1.Unpaid Salary in the amount of ₱12,511.45;

2.Unpaid sick leave/vacation leave pay in the amount of ₱14,789.15;

3.Unpaid commission in the amount of ₱9,780.00; and

4.Reimbursement of complainant’s payment under the car plan agreement in the amount of
₱112,500.00; and

5.The equivalent share of the company as part of the complainant’s benefit under the car plan 50/50
sharing amounting to ₱112,500.00.

Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the sum of

₱4,736.50 representing complainant-appellant’s cash advance from his total monetary award. All other
claims are dismissed for lack of merit.

The NLRC held that petitioner’s amortization payments on his service vehicle amounting to
₱112,500.00 should be reimbursed; if not, unjust enrichment would result, as the vehicle remained in
the possession and ownership of Mekeni.

In addition, the employer’s share in the monthly car plan payments should likewise be awarded
to petitioner because it forms part of the latter’s benefits under the car plan. It held further that
Mekeni’s claim that the company car plan benefit applied only to employees who have been with the
company for five years has not been substantiated by its evidence, in which case the car plan agreement
should be construed in petitioner’s favor. Mekeni moved to reconsider, but in an April 30, 2009
Resolution, the NLRC sustained its original findings.

Ruling of the Court of Appeals

Mekeni filed a Petition for Certiorari with the CA assailing the NLRC’s February 27, 2009
Decision, saying that the NLRC committed grave abuse of discretion in holding it liable to petitioner as it
had no jurisdiction to resolve petitioner’s claims, which are civil in nature.

On January 27, 2010, the CA issued the assailed Decision, decreeing as follows:

WHEREFORE, the petition for certiorari is GRANTED. The Decision of the National Labor
Relations Commission dated 27 February 2009, in NLRC NCR Case No. 00-05-04139-07, and its
Resolution dated 30 April 2009 denying reconsideration thereof, are MODIFIED in that the
reimbursement of Locsin’s payment under the car plan in the amount of ₱112,500.00, and the payment
to him of Mekeni’s 50% share in the amount of ₱112,500.00 are DELETED. The rest of the decision is
AFFIRMED.

SO ORDERED.

Issue

Petitioner raises the following solitary issue:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING THE
CAR PLAN PRIVILEGE AS PART OF THE COMPENSATION PACKAGE OFFERED TO PETITIONER AT THE
INCEPTION OF HIS EMPLOYMENT AND INSTEAD LIKENED IT TO A CAR LOAN ON INSTALLMENT, IN SPITE
OF THE ABSENCE OF EVIDENCE ON RECORD.

Petitioner’s Arguments

In his Petition and Reply, petitioner mainly argues that the CA erred in treating his monthly
contributions to the car plan, totaling ₱112,500.00, as rentals for the use of his service vehicle during his
employment; the car plan which he availed of was a benefit and it formed part of the package of
economic benefits granted to him when he was hired as Regional Sales Manager. Petitioner submits that
this is shown by the Offer Sheet which was shown to him and which became the basis for his decision to
accept the offer and work for Mekeni.

Petitioner adds that the absence of documentary or other evidence showing the terms and
conditions of the Mekeni company car plan cannot justify a reliance on Mekeni’s self-serving claims that
the full terms thereof applied only to employees who have been with the company for at least five
years; in the absence of evidence, doubts should be resolved in his favor pursuant to the policy of the
law that affords protection to labor, as well as the principle that all doubts should be construed to its
benefit.
 Finally, petitioner submits that the ruling in the Elisco Tool case cannot apply to his case because
the car plan subject of the said case involved a car loan, which his car plan benefit was not; it was part of
his compensation package, and the vehicle was an important component of his work which required
constant and uninterrupted mobility. Petitioner claims that the car plan was in fact more beneficial to
Mekeni than to him; besides, he did not choose to avail of it, as it was simply imposed upon him. He
concludes that it is only just that his payments should be refunded and returned to him.

Petitioner thus prays for the reversal of the assailed CA Decision and Resolution, and that the
Court reinstate the NLRC’s February 27, 2009 Decision.

Respondent’s Arguments

In its Comment, Mekeni argues that the Petition does not raise questions of law, but merely of
fact, which thus requires the Court to review anew issues already passed upon by the CA – an
unauthorized exercise given that the Supreme Court is not a trier of facts, nor is it its function to analyze
or weigh the evidence of the parties all over again. It adds that the issue regarding the car plan and the
conclusions of the CA drawn from the evidence on record are questions of fact.

Mekeni asserts further that the service vehicle was merely a loan which had to be paid
through the monthly salary deductions. If it is not allowed to recover on the loan, this would
constitute unjust enrichment on the part of petitioner.

Our Ruling

The Petition is partially granted.

To begin with, the Court notes that Mekeni did not file a similar petition questioning the CA
Decision; thus, it is deemed to have accepted what was decreed. The only issue that must be resolved in
this Petition, then, is whether petitioner is entitled to a refund of all the amounts applied to the cost of
the service vehicle under the car plan.

When the conclusions of the CA are grounded entirely on speculation, surmises and conjectures,
or when the inferences made by it are manifestly mistaken or absurd, its findings are subject to review
by this Court.

From the evidence on record, it is seen that the Mekeni car plan offered to petitioner was
subject to no other term or condition than that Mekeni shall cover one-half of its value, and petitioner
shall in turn pay the other half through deductions from his monthly salary. Mekeni has not shown, by
documentary evidence or otherwise, that there are other terms and conditions governing its car plan
agreement with petitioner. There is no evidence to suggest that if petitioner failed to completely cover
one-half of the cost of the vehicle, then all the deductions from his salary going to the cost of the vehicle
will be treated as rentals for his use thereof while working with Mekeni, and shall not be refunded.
Indeed, there is no such stipulation or arrangement between them. Thus, the CA’s reliance on Elisco
Tool is without basis, and its conclusions arrived at in the questioned decision are manifestly mistaken.
To repeat what was said in Elisco Tool –
 First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in
question under a car plan for executives of the Elizalde group of companies. Under a typical car plan, the
company advances the purchase price of a car to be paid back by the employee through monthly
deductions from his salary. The company retains ownership of the motor vehicle until it shall have been
fully paid for. However, retention of registration of the car in the company’s name is only a form of a
lien on the vehicle in the event that the employee would abscond before he has fully paid for it. There
are also stipulations in car plan agreements to the effect that should the employment of the employee
concerned be terminated before all installments are fully paid, the vehicle will be taken by the employer
and all installments paid shall be considered rentals per agreement. (Emphasis supplied)

It was made clear in the above pronouncement that installments made on the car plan may be
treated as rentals only when there is an express stipulation in the car plan agreement to such effect. It
was therefore patent error for the appellate court to assume that, even in the absence of express
stipulation, petitioner’s payments on the car plan may be considered as rentals which need not be
returned.

Indeed, the Court cannot allow that payments made on the car plan should be forfeited by
Mekeni and treated simply as rentals for petitioner’s use of the company service vehicle. Nor may they
be retained by it as purported loan payments, as it would have this Court believe. In the first place, there
is precisely no stipulation to such effect in their agreement. Secondly, it may not be said that the car
plan arrangement between the parties was a benefit that the petitioner enjoyed; on the contrary, it
was an absolute necessity in Mekeni’s business operations, which benefited it to the fullest extent:
without the service vehicle, petitioner would have been unable to rapidly cover the vast sales
territory assigned to him, and sales or marketing of Mekeni’s products could not have been booked or
made fast enough to move Mekeni’s inventory. Poor sales, inability to market Mekeni’s products, a
high rate of product spoil age resulting from stagnant inventory, and poor monitoring of the sales
territory are the necessary consequences of lack of mobility. Without a service vehicle, petitioner would
have been placed at the mercy of inefficient and unreliable public transportation; his official schedule
would have been dependent on the arrival and departure times of buses or jeeps, not to mention the
availability of seats in them. Clearly, without a service vehicle, Mekeni’s business could only prosper at a
snail’s pace, if not completely paralyzed. Its cost of doing business would be higher as well. The Court
expressed just such a view in the past. Thus –

In the case at bar, the disallowance of the subject car plan benefits would hamper the officials in
the performance of their functions to promote and develop trade which requires mobility in the
performance of official business. Indeed, the car plan benefits are supportive of the implementation of
the objectives and mission of the agency relative to the nature of its operation and responsive to the
exigencies of the service.26 (Emphasis supplied) Any benefit or privilege enjoyed by petitioner from
using the service vehicle was merely incidental and insignificant, because for the most part the vehicle
was under Mekeni’s control and supervision. Free and complete disposal is given to the petitioner only
after the vehicle’s cost is covered or paid in full. Until then, the vehicle remains at the beck and call of
Mekeni. Given the vast territory petitioner had to cover to be able to perform his work effectively and
generate business for his employer, the service vehicle was an absolute necessity, or else Mekeni’s
business would suffer adversely. Thus, it is clear that while petitioner was paying for half of the vehicle’s
value, Mekeni was reaping the full benefits from the use thereof.

In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to the car
plan. Under Article 22 of the Civil Code, "[e]very 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." Article 214227 of the same Code likewise clarifies
that there are certain lawful, voluntary and unilateral acts which give rise to the juridical relation of
quasi-contract, to the end that no one shall be unjustly enriched or benefited at the expense of another.
In the absence of specific terms and conditions governing the car plan arrangement between the
petitioner and Mekeni, a quasi-contractual relation was created between them. Consequently, Mekeni
may not enrich itself by charging petitioner for the use of its vehicle which is otherwise absolutely
necessary to the full and effective promotion of its business. It may not, under the claim that petitioner’s
payments constitute rents for the use of the company vehicle, refuse to refund what petitioner had
paid, for the reasons that the car plan did not carry such a condition; the subject vehicle is an old car
that is substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for the most
part; and any personal benefit obtained by petitioner from using the vehicle was merely incidental.

Conversely, petitioner cannot recover the monetary value of Mekeni’s counterpart

contribution to the cost of the vehicle; that is not property or money that belongs to him, nor was it
intended to be given to him in lieu of the car plan. In other words, Mekeni’s share of the vehicle’s cost
was not part of petitioner’s compensation package. To start with, the vehicle is an asset that belonged
to Mekeni. Just as Mekeni is unjustly enriched by failing to refund petitioner’s payments, so should
petitioner not be awarded the value of Mekeni’s counter part contribution to the car plan, as this
would unjustly enrich him at Mekeni’s expense.

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." The principle of unjust enrichment requires two conditions: (1) that a
person is benefited without a valid basis or justification, and (2) that such benefit is derived at the
expense of another. The main objective of the principle against unjust enrichment is to prevent one
from enriching himself at the expense of another without just cause or consideration. x x x28

WHEREFORE, the Petition is GRANTED IN PART. The assailed January 27, 2010 Decision and April
23, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 109550 are MODIFIED, in that respondent
Mekeni Food Corporation is hereby ordered to REFUND petitioner Antonio Locsin II's payments under
the car plan agreement in the total amount of₱112,500.00.

Thus, except for the counterpart or equivalent share of Mekeni Food Corporation in the car plan
agreement amounting to ₱112,500.00, which is DELETED, the February 27, 2009 Decision of the National
Labor Relations Commission is affirmed in all respects.

SO ORDERED.
DELICTS as a source of Obligations

BERMUDEZ v. MELENCIO-HERRERA, February 26, 1988

FACTS:

A cargo truck, driven by Domingo Pontino and owned by Cordova Ng Sun Kwan, bumped a jeep
on which Rogelio, a six-year old son of plaintiffs-appellants, was riding. The boy sustained injuries which
caused his death. As a result, Criminal Case No.92944 for Homicide Through Reckless Imprudence was
filed against Domingo Pontino by the Manila City Fiscal's Office. Plaintiffs-appellants filed on July 27,
1969 in the said criminal case "A Reservation to File Separate Civil Action."

On July 28, 1969, the plaintiffs-appellants filed a civil case for damages with the Court of First
Instance of Manila docketed as Civil Case No. 77188, entitled "Reynaldo Bermudez, Sr. et al., Plaintiffs
vs. Domingo Pontino y Tacorda and Cordova Ng Sun Kwan, Defendants." Finding that the plaintiffs
instituted the action "on the assumption that defendant Pontino's negligence in the accident of May
10, 1969 constituted a quasi-delict," the trial court stated that plaintiffs had already elected to treat the
accident as a "crime" by reserving in the criminal case their right to file a separate civil action. That
being so, the trial court decided to order the dismissal of the complaint against defendant Cordova Ng
Sun Kwan and to suspend the hearing of the case against Domingo Pontino until after the criminal
case for Homicide Through Reckless Imprudence is finally terminated. From said order, plaintiffs filed
the present appeal, stating as their main reasons the following:

I. The main issue brought before this Honorable Court is whether the present action is based on
quasi-delict under the Civil Code and therefore could proceed independently of the criminal case for
homicide thru reckless imprudence.

II. The second question of law is whether the lower court could properly suspend the hearing of
the civil action against Domingo Pontino and dismiss the civil case against his employer Cordova Ng Sun
Kwan by reason of the fact that a criminal case for homicide thru reckless imprudence is pending in the
lower court against Domingo Pontino

III. The last question of law is whether the suspension of the civil action against Domingo
Pontino and the dismissal of the civil case against his employer Cordova Ng Sun Kwan by reason of the
pending criminal case against Domingo Pontino for homicide thru reckless imprudence in the lower
court could be validly done considering that the civil case against said defendants-appellees also sought
to recover actual damages to the jeep of plaintiffs-appellants."

We find the appeal meritorious.

The heart of the issue involved in the present case is whether the civil action filed by the
plaintiffs-appellants is founded on crime or on quasi-delict. The trial court treated the case as an action
based on a crime in view of the reservation made by the offended party in the criminal case (Criminal
Case No. 92944), also pending before the court, to file a separate civil action. Said the trial court:
 It would appear that plaintiffs instituted this action on the assumption that defendant
Pontino's negligence in the accident of May 10, l969 constituted a quasi-delict. The Court cannot
accept the validity of that assumption. In Criminal Case No. 92944 of this Court, plaintiffs had already
appeared as complainants. While that case was pending, the offended parties reserved the right to
institute a separate civil action. If, in a criminal case, the right to file a separate civil action for
damages is reserved, such civil action is to be based on crime and not on tort. That was the ruling in
Joaquin vs. Aniceto, L-18719, Oct. 31, 1964."

We do not agree. The doctrine in the case cited by the trial court is inapplicable to the instant
case. In Joaquin vs. Aniceto, the Court held:

The issue in this case is: May an employee's primary civil liability for crime and his employer's
subsidiary liability therefor be proved in a separate civil action even while the criminal case against the
employee is still pending?

To begin with, obligations arise from law, contract, quasi-contract, crime and quasi-delict.
According to appellant, her action is one to enforce the civil liability arising from crime. With respect to
obligations arising from crimes, Article 1161 of the New Civil Code provides:

Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to
the provisions of article 21 77, and of the pertinent provisions of Chapter 2, Preliminary, Title, on Human
Relations, and of Title XVIII of this book, regulating damages.

xxx xxx xxx

It is now settled that for an employer to be subsidiarily liable, the following requisites must be present:
(1) that an employee has committed a crime in the discharge of his duties; (2) that said employee is
insolvent and has not satisfied his civil liability; (3) that the employer is engaged in some kind of
industry. (1 Padilla, Criminal Law, Revised Penal Code 794 [1964])

Without the conviction of the employee, the employer cannot be subsidiarily liable.

In cases of negligence, the injured party or his heirs has the choice between an action to enforce
the civil liability arising from crime under Article 100 of the Revised Penal Code and an action for quasi-
delict under Article 2176-2194 of the Civil Code. If a party chooses the latter, he may hold the employer
solidarity liable for the negligent act of his employee, subject to the employer's defense of exercise of
the diligence of a good father of the family.

In the case at bar, the action filed by the appellant was an action for damages based on quasi-
delict. The fact that appellants reserved their right in the criminal case to file an independent civil action
did not preclude them from choosing to file a civil action for quasi-delict.
The appellants invoke the provisions of Sections 1 and 2 of Rule 111 of the Rules of Court, which
provide:

Section 1. — Institution of criminal and civil action. — When a criminal action is instituted, the
civil action for recovery of civil liability arising from the offense charged is impliedly instituted with the
criminal action, unless the offended party expressly waives the civil action or reserves his right to
institute it separately.

Section 2. — Independent civil action.-In the cases provided for in Articles 31, 32, 33, 34 and
2177 of the Civil Code of the Philippines, an independent civil action entirely separate and distinct from
the criminal action, may be brought by the injured party during the pendency of the criminal case,
provided the right is reserved as required in the preceding section. Such civil action shall proceed
independently of the criminal prosecution and shall require only a preponderance of evidence.

Article 2177 of the Civil Code, cited in Section 2, of Rule 111, provides that —

Article 2177. Responsibility for fault or negligence under the preceding article is entirely
separate and distinct from the civil liability arising from negligence under the Penal Code. But the
plaintiff cannot recover damages twice for the same act or omission of the defendant.

The appellant precisely made a reservation to file an independent civil action in accordance with
the provisions of Section 2 of Rule 111, Rules of Court. In fact, even without such a reservation, we have
allowed the injured party in the criminal 1 case which resulted in the acquittal of the accused to recover
damages based on quasi-delict. In People vs. Ligon, G.R. No. 74041, we held:

However, 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 (Article
29, Civil Code). 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 (Padilla vs.
Court of Appeals, 129 SCRA 559).

WHEREFORE, we grant the petition and annul and set aside the appealed orders of the trial
court, dated March 10, 1970 and May 7, 1970, and remand the case for further proceedings. No costs.

SO ORDERED.
QUASI-DELITS as a source Obligation

FEGARIDO v ALCANTARA, G.R. No. 240066, June 13, 2022

In negligence cases, the aggrieved party may file an independent civil action for damages based
on quasi-delict separately from a criminal action for imprudence. This civil action may proceed
simultaneously with the Criminal action and requires only preponderance of evidence. Nevertheless, the
aggrieved party may recover damages only once based on the same act or omission.

This Court resolves a Petition for Review on Certiorari assailing the Decision and Resolution of
the Court of Appeals, which affirmed the Regional Trial Court's Decision[6] finding Gerry S. Fegarido
(Fegarido) and Linalie A. Milan (Milan) solidarily liable for damages.

At around 6:30 p.m. on October 15, 2008, Cristina S. Alcantara (Alcantara) figured in a vehicular
crash while crossing the road on 25th Street, East Bajac-Bajac, Olongapo City. She was hit by a public
utility jeepney driven by Fegarido, who was making a left turn toward 25th Street. The impact threw
Cristina off a few meters away before hitting the pavement. She was rushed to the hospital to be treated
for physical injuries, but was declared braindead and died three days later.

Fegarido was charged with reckless imprudence resulting in homicide in an amended

Information filed before the Municipal Trial Court in Cities.

Meanwhile, the heirs of Cristina S. Alcantara filed before the Regional Trial Court a Complaint for
damages with prayer for the issuance of a writ of preliminary injunction/temporary restraining order not
only against Fegarido, but also Milan, the registered owner of the jeepney.

In its June 19, 2012 Decision, the Municipal Trial Court in Cities acquitted Fegarido of the crime
charged. It found that the evidence on record was insufficient to prove with moral certainty that
Fegarido recklessly drove the jeepney.

Meanwhile, the Regional Trial Court rendered a Decision in the civil action for damages on
March 9, 2015, finding Fegarido and Alcantara solidarily liable to Alcantara's heirs. It disposed of the
case in this wise:

WHEREFORE, judgment is rendered in favor of the plaintiffs. The defendants are ordered to pay plaintiffs
solidarily the amount[s] of:

Php138,591.00 as actual damages;

Php100,000.00 as moral damages;

Php50,000.00 as exemplary damages;

Php40,000.00 as attorney's fees & litigation expenses; and

The cost of the suit.

Defendants['] counterclaim is dismissed; while plaintiff's application for a writ of preliminary injunction
is denied.

SO DECIDED.[15]

In so ruling, the Regional Trial Court relied on the witnesses' narration of the events and found that
Fegarido negligently operated the jeepney causing Cristina's death. It likewise held Milan vicariously
liable after she failed to exercise the required diligence in the selection and supervision of her
employees. It found that Milan had entrusted her legal duties to her husband, Nestor, who testified that
he tested Fegarido's driving skills only once.

Fegarido and Milan appealed before the Court of Appeals.

In its October 13, 2017 Decision, the Court of Appeals affirmed the Regional Trial Court Decision
finding Fegarido and Milan solidarily liable for damages. It ruled that Fegarido's acquittal in the criminal
case for the prosecution's failure to prove his criminal liability with moral certainty did not preclude a
finding of liability for damages based on negligence. It stressed that the pieces of evidence weighted
against Fegarido, when taken together, established his negligence based on quasi-delict.

As to Milan's liability, the Court of Appeals similarly decreed that she failed to exercise the due
diligence required by law when she entrusted her legal duties in the selection and supervision of her
employee to her husband.[21]

Fegarido and Milan moved for reconsideration, but their Motion[22] was denied in a May 4,
2018 Resolution.[23]

Dissatisfied, Fegarido and Milan filed the Petition for Review on Certiorari[24] before this Court
against the heirs of Alcantara.

Petitioners argue that the Regional Trial Court erred in declaring Fegarido negligent. They
maintain that Fegarido was acquitted in the criminal case after not being found negligent, thus negating
any basis for liability.[25]

Petitioners likewise contend that the Regional Trial Court's ruling "was based on presumptions
without any factual basis."[26] They stress that respondents' witnesses never testified that petitioner
Fegarido drove the vehicle in a negligent and reckless manner. The Regional Trial Court merely inferred
that since Fegarido had to deliberately step hard on the gas, the jeepney he was driving was moving too
fast.[27]

In their Comment,[28] respondents aver that petitioners cannot use Fegarido's acquittal to
escape liability. They maintain that under the law, the aggrieved party in a negligence case can choose
to enforce the erring party's civil liability through a separate civil action for damages, where they only
need preponderance of evidence—which, respondents insist, was met by the pieces of evidence they
presented.[29]
For this Court's resolution are the following issues:

First, whether or not the Court of Appeals erred in affirming the Regional Trial Court Decision
finding petitioner Gerry S. Fegarido liable for negligence;

Second, whether or not the Court of Appeals erred in affirming the Regional Trial Court Decision
finding petitioner Linalie A. Milan vicariously liable for petitioner Gerry S. Fegarido's supposed
negligence; and

Finally, whether or not the Court of Appeals erred in ordering petitioners to pay actual, moral,
and exemplary damages, and attorney's fees and litigation expenses.

The Petition is denied.

The issue of whether petitioners acted negligently is a question of fact beyond the ambit of a
Rule 45 petition.[30] This Court is not a trier of facts.[31] It need not reassess or reevaluate the evidence
presented by the parties, especially when the findings of both the Regional Trial Court and the Court of
Appeals are similar as to petitioners' negligence.[32] In Torres v. People:[33]

It is a fundamental rule that only questions of law may be raised in a petition for review on
certiorari under Rule 45. The factual findings of the trial court, especially when affirmed by the Court of
Appeals, are generally binding and conclusive on this Court. This Court is not a trier of facts. It is not
duty-bound to analyze, review, and weigh the evidence all over again in the absence of any showing of
any arbitrariness, capriciousness, or palpable error. A departure from the general rule may only be
warranted in cases where the findings of fact of the Court of Appeals are contrary to the findings of the
trial court or when these are unsupported by the evidence on record.[34] (Citations omitted)

In this case, both the Regional Trial Court and the Court of Appeals found that petitioner
Fegarido's gross negligence in operating the jeepney was the proximate cause of Alcantara's death. They
relied on the testimonies of the following witnesses, which, when taken together, sufficiently proved his
negligence:

a) Testimony of Joe Barnes, a traffic enforcer of the Olongapo City Traffic Management & Public
Safety Office who was at duty at the time of the incident. He gave the go signal to the vehicles to
turn left to the 25th [S]treet, when he suddenly heard the screeching sound of a vehicle on
sudden break. He checked the vehicle and found a person lying on the pavement and personally
rushed the victim to the hospital.[35]
b) Dr. Rolando Ortiz, the physician who examined the victim stated that the patient sustained
mostly head injuries consistent with the vehicular accident.[36]
c) Marcelino Menor[,] Jr., the security guard on duty at the Landbank branch located at 25th
[S]treet East Bajac-Bajac, Olongapo City, stated that he saw a woman bumped by a brown
passenger jeepney which was later on discovered to be the subject vehicle driven by Fegarido.
He saw how the victim was hit on the left side of the jeep, the part where the reserved tire was.
 She was about to cross the street when the jeep sideswept [sic] her. The jeep was running fast
because it was turning on the corner.[37]

Likewise based on the testimony of Joe Barnes, the traffic enforcer, the Regional Trial Court observed
the following:

One, Fegarido's jeep was on full stop along Rizal Avenue awaiting Barnes' signal to execute a left
turn towards 25th Street. That means his gear must be either on neutral position; or if he was stepping
on the brakes and clutch, the jeep must be on its 1st gear. Either way, a jeep or any manually operated
vehicle on 1st gear is not expected to run fast outright unless the driver deliberately stepped hard on
the gas. And this is more likely what happened. The court was not apprised why Fegarido must be in a
hurry to turn left to 25th Street, but at any rate it is undeniable that the jeep roared fast ("pina-
arangkada") as can be gleaned from the second detail of Barnes' testimony. Two, Barnes said at the
moment Cristina was side swept [sic] by the jeep, he heard a screeching sound. That means Fegarido
stepped hard on the brakes. And the only explanation he had to step hard on it coming from a full stop
position was because he was moving fast.[38]

Based on this, it can be inferred that at the time of the incident, the jeepney was being driven
fast from the time it made a left turn toward 25th Street up to the moment it hit the victim. The
screeching sound the jeepney made when it abruptly stopped after the incident, and Alcantara being
thrown off a few meters away, prove that petitioner Fegarido was making a left turn swiftly and
negligently. This is bolstered by the personal account of Marcelino Menor, Jr., the security guard who
saw the jeepney moving fast while turning the corner, sideswiping Alcantara.

Neither can petitioner Fegarido's acquittal in the criminal case relieve him and petitioner Milan
from civil liability.

Settled is the rule that the accused's acquittal, "even if based on a finding that [they are] not
guilty, does not carry with it the extinction of the civil liability based on quasi[-]delict."[39] This is based
on the theory that a single act or omission causing injury to another creates two kinds of liability: (1) civil
liability ex delicto; and (2) civil liability quasi delicto. The aggrieved party may choose to enforce either
liability against the erring party, subject only to the prohibition against double recovery of damages
under Article 2177 of the Civil Code.[40] In Safeguard Security Agency, Inc. v. Tangco:[41]

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 offended party cannot recover
damages twice for the same act or omission or under both causes.[42] (Citation omitted)

Similarly, in Elcano v. Hill:[43]

 [A] separate civil action lies against the offender in a criminal act, whether or not he is criminally
prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is
actually charged also criminally, to recover damages on both scores, and would be entitled in such
eventuality only to the bigger award of the two, assuming the awards made in the two cases vary. In
other words, the extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively
to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same
act considered as a quasi-delict only and not as a crime is not extinguished even by a declaration in the
criminal case that the criminal act charged has not happened or has not been committed by the
accused.[44] (Emphasis supplied, citations omitted)

In Philippine Rabbit Bus Lines, Inc. v. People,[45] this Court said that under the Rules of Criminal
Procedure, only civil liability arising from the crime charged is deemed instituted in the criminal action:

At the outset, we must explain that the 2000 Rules of Criminal Procedure has clarified what civil
actions are deemed instituted in a criminal prosecution.

Section 1 of Rule 111 of the current Rules of Criminal Procedure provides:

"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.

....

Only the civil liability of the accused arising from the crime charged is deemed impliedly instituted in a
criminal action; that is, unless the offended party waives the civil action, reserves the right to institute it
separately, or institutes it prior to the criminal action. Hence, the subsidiary civil liability of the employer
under Article 103 of the Revised Penal Code may be enforced by execution on the basis of the judgment
of conviction meted out to the employee.

It is clear that the 2000 Rules deleted the requirement of reserving independent civil actions and
allowed these to proceed separately from criminal actions. Thus, the civil actions referred to in Articles
32, 33, 34 and 2176 of the Civil Code shall remain "separate, distinct and independent" of any criminal
prosecution based on the same act. Here are some direct consequences of such revision and omission:

1. The right to bring the foregoing actions based on the Civil Code need not be reserved in the criminal
prosecution, since they are not deemed included therein.

2. The institution or the waiver of the right to file a separate civil action arising from the crime charged
does not extinguish the right to bring such action.

3. The only limitation is that the offended party cannot recover more than once for the same act or
omission.
 What is deemed instituted in every criminal prosecution is the civil liability arising from the
crime or delict per se (civil liability ex delicto), but not those liabilities arising from quasi-delicts,
contracts or quasi-contracts. In fact, even if a civil action is filed separately, the ex delicto civil liability in
the criminal prosecution remains, and the offended party may — subject to the control of the
prosecutor — still intervene in the criminal action, in order to protect the remaining civil interest
therein.

This discussion is completely in accord with the Revised Penal Code, which states that "[e]very
person criminally liable for a felony is also civilly liable."[46] (Citations omitted)

To repeat, an independent civil action, such as that based on quasi-delict under Article 2176 of
the Civil Code, no longer requires a prior reservation to be made before it can proceed independently
and be tried simultaneously with its concomitant criminal action.

Thus, here, the independent civil action for damages filed by respondents shall proceed
regardless of Fegarido's acquittal in the criminal case. It can be prosecuted independently of the criminal
action and requires only preponderance of evidence.[47]

Preponderance of evidence means "that the evidence as a whole adduced by one side is
superior to that of the other."[48] In Sabellina v. Buray:[49]

Preponderance of evidence simply means evidence that is of greater weight or more convincing
than what is offered against it. In determining where the preponderance of evidence lies, the court may
consider all the facts and circumstances of the case, such as: the witnesses' demeanor, their intelligence,
their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to
which they testify, the probability or improbability of their testimony, their interest or want of interest,
and their personal credibility so far as it may legitimately appear to the court.[50] (Citations omitted)

On the other hand, to convict in a criminal case, the prosecution must prove the accused's guilt beyond
reasonable doubt. This quantum of evidence does not require absolute certainty, but must nonetheless
produce in the court's mind a moral certainty of guilt. In the event of doubt, the accused must be
acquitted.[51] Macayan, Jr. v. People[52] teaches:

This rule places upon the prosecution the task of establishing the guilt of an accused, relying on the
strength of its own evidence, and not banking on the weakness of the defense of an accused. Requiring
proof beyond reasonable doubt finds basis not only in the due process clause of the Constitution, but
similarly, in the right of an accused to be "presumed innocent until the contrary is proved."
"Undoubtedly, it is the constitutional presumption of innocence that lays such burden upon the
prosecution." Should the prosecution fail to discharge its burden, it follows, as a matter of course, that
an accused must be acquitted.[53] (Citations omitted)

In a criminal case, the private complainants' interest is limited to the civil liability arising from the
criminal action, their role being limited to being prosecution witnesses, since it is the State that is
considered the offended party.[54] But in a civil case like the present one, the plaintiffs are the heirs of
the deceased, some of whom may not have initiated the criminal case.
Here, contrary to petitioners' argument, while the Municipal Trial Court in Cities acquitted petitioner
Fegarido, it did not discount the possibility that he acted negligently. It merely ruled that it could not
ascertain with moral certainty the reckless manner by which he drove the jeepney, ultimately killing
Alcantara:

Prosecution witnesses, Marcelino Menor, Jr., security guard of Landbank, and Jomarie Barnes, traffic
enforcer of Olongapo City, identified the accused in open court and were in accord that the latter was
the driver of the passenger jeepney that hit and bumped the victim. However, the Court could not
ascertain with moral certainty from their testimonies the reckless manner by which the accused drove
the said vehicle on October 18, 2009.

....

On the other hand, the accused never denied that he was the driver of the passenger j[eep]ney at the
time of the accident. However, there is no direct evidence on record that would warrant accused's
recklessness in driving his vehicle that look the life of the victim. . . . The testimonies of prosecution
witnesses Marcelino Menor, Jr. and Traffic Enforcer Barnes as well as the traffic sketch report
corroborate accused's account of the incident, hence, acquittal of accused's criminal liability in this case
is inevitable.[55]

Moreover, despite petitioner Fegarido's acquittal, the Municipal Trial Court in Cities decreed that the
prosecution established by preponderance of evidence that petitioner Fegarido was negligent in driving
the vehicle:

While this Court exonerates the accused of the crime imputed against him, the Court finds him civilly
liable to the heirs of the victim. The accused's admission, the prosecution witnesses' declaration in open
court that the former was the driver of the passenger j[eep]ney that bumped the victim and the
presentation of the death certificate of the victim find the existence of a preponderance of evidence
that the accused was negligent in driving his vehicle on October 15, 2008.[56]

Accordingly, there is no cogent reason to reverse the findings of the Regional Trial Court, as affirmed by
the Court of Appeals.

Article 2180 of the Civil Code provides that "[e]mployers shall be liable for the damages caused by their
employees ... acting within the scope of their assigned tasks[.]"[57] As this Court has said, "[o]nce
negligence on the part of the employee is established, a presumption instantly arises that the employer
was negligent in the selection and/or supervision of said employee."[58] The employer may refute this
presumption by presenting adequate evidence that they exercised the diligence of a good father of a
family in the selection and supervision of their employee.[59]

A review of the records reveals that petitioner Milan, the registered owner of the jeepney, had
never personally vetted petitioner Fegarido when he was applying as driver.[60] She delegated her legal
duties to her husband Nestor, who admitted having tested Fegarido's driving skill only once. Nestor
likewise testified that he never experienced riding with Fegarido as the driver. Moreover, Fegarido was
required to submit only clearances from the police and the National Bureau of Investigation, but was not
required to undergo a medical, physiological, or even drug test.[61]

Petitioner Milan failed to exercise the diligence that the law requires of her in selecting and
supervising her employees. Nestor's testimony confirms the insufficient screening process petitioner
Fegarido had gone through before being employed. Accordingly, this Court affirms the Court of
Appeals' ruling that she is vicariously liable for Alcantara's death, and must solidarily pay with
petitioner Fegarido the liabilities they owe respondents.

We likewise affirm the damages awarded by the Court of Appeals.

Actual or compensatory damages are "compensation for an injury that will put the injured party
in the position where it was before the injury. They pertain to such injuries or losses that are actually
sustained and susceptible of measurement."[62] They are "awarded in satisfaction of, or in recompense
for, loss or injury sustained."[63]

Under the law, "[i]n crimes and quasi-delicts, the defendant shall be liable for all damages which
are the natural and probable consequences of the act or omission complained of[,]"[64] which may
include damages for loss of earning capacity.[65]

To justify an award of actual damages, the claimant is duty bound to substantiate their claim by
presenting competent proof of the actual amount of loss.[66] In Viron Transportation Company, Inc. v.
Delos Santos:[67]

Actual damages, to be recoverable, must not only be capable of proof, but must actually be
proved with a reasonable degree of certainty. Courts cannot simply rely on speculation, conjecture or
guesswork in determining the fact and amount of damages. To justify an award of actual damages, there
must be competent proof of the actual amount of loss, credence can be given only to claims which are
duly supported by receipts.[68] (Citations omitted)

Particularly on the required proof of loss of earning capacity, this Court has held that either or
both testimonial and documentary evidence may be presented to establish the deceased's income.[69]

In this case, other than the expenses incurred by respondents for the alleged hospitalization,
medical, funeral, and transportation, no other evidence was presented to prove Alcantara's earning
capacity. In their Complaint, respondents prayed for damages worth P350,000.00 for the expenses they
allegedly incurred.[70] The Regional Trial Court instead awarded P138,591.00 as actual damages, based
on the receipts respondents presented during trial.[71] Thus, the Court of Appeals committed no
reversible error when it affirmed the award of actual damages to respondents.

The award of moral damages is likewise proper.

 "Moral damages are awarded to enable the injured party to obtain means, diversions or
amusements that will serve to alleviate the moral suffering he has undergone, by reason of the
defendant's culpable action."[72] They are granted to "compensate the claimant for [their] actual injury,
and not to penalize the wrongdoer."[73]

Unlike actual damages, moral damages may be granted even without proof of pecuniary loss, as
long as it is established that the offender's act caused the complainant's injury.[74]

There is no doubt here that respondents have undergone emotional pain and mental anguish
with the death of their loved one. Alcantara's untimely demise undeniably caused them pain. To
alleviate their suffering, this Court affirms the award of damages worth P100,000.00.

This Court likewise sustains the award of exemplary damages.

In cases involving vehicular crashes, courts award exemplary damages as a means of molding "behavior
that has socially deleterious consequences," so as to serve as an example or warning for the public good.
[75]

Petitioners here are a public utility driver and an operator who are duty bound "to exercise
extraordinary degree of diligence for the safety of the travelling public and their passengers."[76] To
ensure that public utility drivers and operators will refrain from disregarding their duty to the public, the
award of exemplary damages worth P50,000.00 is in order.

Finally, due to the prolonged litigation of this dispute, attorney's fees and litigation expenses worth
P40,000.00 are awarded to respondents.

WHEREFORE, the Petition is DENIED. The October 13, 2017 Decision and May 4, 2018 Resolution of the
Court of Appeals in C.A.-G.R. CV No. 105000 are AFFIRMED.

Petitioners Gerry S. Fegarido and Linalie A. Milan are solidarily liable to pay respondents-heirs of Cristina
S. Alcantara the following:

Actual damages worth P138,591.00;

Moral damages worth P100,000.00;

Exemplary damages worth P50,000.00; and

Attorney's fees and litigation expenses worth P40,000.00.

The total amount shall earn legal interest at the rate of 6% per annum from the finality of this Decision
until full payment.[77]

SO ORDERED.