Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 46274

November 2, 1939

A.O. FISHER, plaintiff-appellee,

vs.
JOHN C. ROBB, defendant-appellant.
Marcial P. Lichauco and Manuel M. Mejia for appellant.
Wolfson, Barrion and Baradi and Ignacio Ycaza for appellee.

VILLA-REAL, J.:
The defendant John C. Robb appeals to this Court from the judgment of the Court of First Instance of Manila, the dispositive part of
which reads:
Judgment is hereby rendered in favor of the plaintiff and against the defendant, who is ordered to pay to the former the
sum of P2,000, with interest at the legal rate from March 11, 1938, until paid, plus costs.
The facts established at the trial without discussion are the following:
In September, 1935, the board of directors of the Philippine Greyhound Club, Inc., told the herein defendant-appellant John C.
Robb, to make a business trip to Shanghai to study the operation of a dog racing course. In Shanghai, the defendant-appellant
stayed at the American Club where be became acquainted with the plaintiff-appellee, A. O. Fisher, through their mutual friends. In
the course of a conversation, the defendant-appellant came to know that the plaintiff-appellee was the manager of a dog racing
course. Upon knowing the purpose of the defendant-appellant's trip, the plaintiff-appellee showed great interest and invited him to
his establishment and for several days gave him information about the business. It seems that the plaintiff became interested in the
Philippine Greyhound Club, Inc., and asked the defendant if he could have a part therein as a stockholder. As the defendantappellant answered in the affirmative, the plaintiff-appellee thereupon filled a subscription blank and, through his bank in Shanghai,
sent to the Philippine Greyhound Club, Inc., in Manila telegraphic transfer for P3,000 in payment of the first installment of his
subscription. Later on the defendant-appellant returned to Manila from Shanghai.
Some months thereafter, when the board of directors of the Philippine Greyhound Club, Inc., issued a call for the payment of the
second installment of the subscriptions, the defendant-appellant sent a radiogram to the plaintiff-appellee did so and sent P2,000
directly to the Philippine Greyhound Club, Inc., in payment of the said installment. Due to the manipulations of those who controlled
the Philippine Greyhound Club, Inc., during the absence of the defendant-appellant undertook the organization of a company called
The Philippine Racing Club, which now manages the race track of the Santa Ana park. The defendant immediately endeavored to
save the investment of those who had subscribed to the Philippine Greyhound Club, Inc., by having the Philippine Racing Club
acquire the remaining assets of the Philippine Greyhound Club, Inc. The defendant-appellant wrote a letter to the plaintiff-appellee in
Shanghai explaining in detail the critical condition of the Philippine Greyhound Club, Inc., and outlining his plans to save the
properties and assets of the plaintiff-appellee that he felt morally responsible to the stockholders who had paid their second
installment (Exh. C). In answer to said letter, the plaintiff-appellee wrote the defendant-appellant requiring him to return the entire
amount paid by him to the Philippine Greyhound Club, Inc., (exhibit E). Upon receiving this letter, the defendant-appellant answered
the plaintiff-appellee for any loss which he might have suffered in connection with the Philippine Greyhound Club, Inc., in the same
way that he could not expect anyone to reimburse him for his own losses which were much more than those of the plaintiff-appellee
(Exh. B).
The principal question to be decided in this appeal is whether or not the trial court erred in holding that there was sufficient
consideration to justify the promise made by the defendant-appellant in his letters Exhibits B and C.
In the fifth paragraph of the letter Exhibit B, dated March 16, 1936, addressed by the defendant-appellant to the plaintiff-appellee,
the former said: "I feel a moral responsibility for these second payments, which were made in order to carry out my plan (not the first
payments, as you have it in your letter), and Mr. Hilscher and I will see to it that stockholders who made second payments receive
these amounts back as soon as possible, out of our own personal funds. "As it is, I have had to take my loss along with everyone
else here, and so far as I can see that is what all of us must do. The corporation is finally flat, so it is out of the question to receive
back any of your investment from that source; the only salvage will be the second payment that you made, and that will come from
Hilscher and me personally, as I say, not because of any obligation, but simply because we have taken it on ourselves to do that.

(And I wish I could find someone who would undertake to repay a part of my own losses in the enterprise!)" And in the seventh
paragraph of the letter Exhibit C, dated February 21, 1936, addressed by the same defendant-appellant to the same plaintiffappellee the former said the following:
However, Mr. Fischer and I feel a personal responsibility to those few stockholders who made their second payments, including
yourself, and it is our intention to personally repay the amounts of the second payments made by those few.
. . . And, finally, paragraph 8 of the same letter Exhibit C states: "We are to receive a certain share of the new Philippine
Racing Club for our services as promoters of that organization, and as soon as this is received by us, we will be in a
position to compensate you and the few others who made the second payments. That, as T have said, will come from us
personally, in an effort to make things easier for those who were sportsmen enough to try to save the Greyhound
organization by making second payments.
Article 1254 of the Civil Code provides as follows:
A contract exists from the moment one or more persons consent to be bound with respect to another or others to deliver
something or to render some services.
And article 1261 of the same Civil Code provides the following:
ART. 1261. There is no contract unless the following requisites exists:
1. The consent of the contracting parties;
2. A definite object which is the subject-matter of the contract;
3. A consideration for the obligation established.
In the present case, while the defendant-appellant told the plaintiff-appellee that he felt morally responsible for the second payments
which had been made to carry out his plan, and that Mr. Hilscher and he would do everything possible so that the stockholders who
had made second payments may receive the amount paid by them from their personal funds because they voluntarily assumed the
responsibility to make such payment as soon as they receive from the Philippine racing Club certain shares for their services as
promoters of said organization, it does not appear that the plaintiff-appellee had consented to said form of reimbursement of the
P2,000 which he had directly paid to the Philippine Greyhound Club, Inc., in satisfaction of the second installment.
The first essential requisite, therefore, required by the cited article 1261 of the Civil Code for the existence of a contract, does not
exists.
As to the third essential requisite, namely, "A consideration for the obligation established," article 1274 of the same Code
provides:lawphi1.net
In onerous contracts the consideration as to each of the parties is the delivery or performance or the promise of delivery
or performance of a thing or service by the other party; in remuneratory contracts the consideration is the service or
benefit for which the remuneration is given, and in contracts of pure beneficence the consideration is the liberality of the
benefactors.
And article 1275 of the same Code provides:
ART. 1275. Contracts without consideration or with an illicit consideration produce no effect whatsoever. A consideration
is illicit when it is contrary to law or morality.
Manresa, in volume 8, 4rth edition, pages 618-619 of his Commentaries on the Civil Code, has this to say:
Considering the concept of the consideration as the explanation and motive of the contract, it is related to the latter's
object and even more to its motives with which it is often confused. It is differentiated from them, however, in that the
former is the essential reason for the contract, while the latter are the particular reasons of a contracting party which do
not affect the other party and which do not preclude the existence of a different consideration. To clarify by an example: A
thing purchased constitutes the consideration for the purchaser and not the motives which have influenced his mind, like
its usefulness, its perfection, its relation to another, the use thereof which he may have in mind, etc., a very important
distinction, which precludes the annulment of the contract by the sole influence of the motives, unless the efficacy of the
former had been subordinated to compliance with the latter as conditions.

The jurisprudence shows some cases wherein this important distinction is established. The consideration of contracts,
states the decision of February 24, 1904, is distinct from the motive which may prompt the parties in executing them. The
inaccuracies committed in expressing its accidental or secondary details do not imply lack of consideration or false
consideration, wherefore, they do not affect the essence and validity of the contract. In a loan the consideration in its
essence is, for the borrower the acquisition of the amount, and for the lender the power to demand its return, whether the
money be for the former or for another person and whether it be invested as stated or otherwise.
The same distinction between the consideration and the motive is found in the decisions of November 23, 1920 and
March 5, 1924.
The contract sought to be judicially enforced by the plaintiff-appellee against the defendant-appellant is onerous in character,
because it supposes the deprivation of the latter of an amount of money which impairs his property, which is a burden, and for it to
be legally valid it is necessary that it should have a consideration consisting in the lending or or promise of a thing or service by such
party. The defendant-appellant is required to give a thing, namely, the payment of the sum of P2,000, but the plaintiff-appellee has
not given or promised anything or service to the former which may compel him to make such payment. The promise which said
defendant-appellant has made to the plaintiff-appellee to return to him P2,000 which he had paid to the Philippine Greyhound Club,
Inc., as second installment of the payment of the amount of the shares for which he has subscribed, was prompted by a feeling of
pity which said defendant-appellant had for the plaintiff-appellee as a result of the loss which the latter had suffered because of the
failure of the enterprise. The obligation which the said defendant-appellant had contracted with the plaintiff-appellee is, therefore,
purely moral and, as such, is not demandable in law but only in conscience, over which human judges have no
jurisdiction.1awphi1.net
As to whether a moral obligation is a sufficient consideration, read in volume 12 of the American Jurisprudence, pages 589-590,
paragraphs 96, 67, the following:
SEC. 96. Moral obligation. Although there is authority in support of the board proposition that a moral obligation is
sufficient consideration, such proposition is usually denied. . . . .
The case presenting the question whether a moral obligation will sustain an express executory promise may be divided
into five classes: (1) Cases in which the moral obligation arose wholly from ethical considerations, unconnected with any
legal obligations, perfect or imperfect, and without the receipt of actual pecuniary or material benefit by the promisor prior
to the subsequent promise; (2) cases in which the moral obligation arose from a legal liability already performed or still
enforceable; (3) cases in which the moral obligation arose out of, or was connected with, a previous request or promise
creating originally an enforceable legal liability, which, however, at the time of the subsequent express promise had
become discharged or barred by operation of a positive rule of law, so that at that time there was no enforceable legal
liability; (4) cases in which the moral obligation arose from, or was connected with, a previous request or promise which,
however, never created any enforceable legal liability, because of a rule of law which rendered the original agreement
void, or at least unenforceable; and (5) cases in which the moral obligation arose out of, or was connected with, the
receipt of actual material or pecuniary benefit by the promisor, without, however, any previous request or promise on his
part, express or implied, and therefore, of course, without any original legal liability, perfect or imperfect.
SEC. 97. Moral obligation unconnected with legal liability or legal benefit. Although, as subsequently shown was
formerly some doubt as to the point, it is now well established that a mere moral obligation or conscience duty arising
wholly from ethical motives or a mere conscientious duty unconnected with any legal obligation, perfect or imperfect, or
with the receipt of benefit by the promisor of a material or pecuniary nature will not furnish a consideration for an
executory promise. . . . .
In view of the foregoing considerations, we are of the opinion and so hold, that the promise made by an organizer of a dog racing
course to a stockholder to return to him certain amounts paid by the latter in satisfaction of his subscription upon the belief of said
organizer that he was morally responsible because of the failure of the enterprise, is not the consideration rquired by article 1261 of
the Civil Code as an essential element for the legal existence of an onerous contract which would bind the promisor to comply with
his promise.
Wherefore, the appealed judgment is reversed and the costs to the plaintiff.
Avancea, C.J., Imperial, Diaz, Laurel, Concepcion, and Moran, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 138814

April 16, 2009

MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE, MYRON C. PAPA, NORBERTO C.
NAZARENO, GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B. ARNAIZ, LUIS J.L. VIRATA, and ANTONIO GARCIA, JR.
Petitioners,
vs.
MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS,1 Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision2 dated 11 February 1997 and
Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP No. 38455.
The facts of the case are as follows:
SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos, who filed with the Securities,
Investigation and Clearing Department (SICD) of the Securities and Exchange Commission (SEC), a Petition against herein
petitioners Makati Stock Exchange, Inc. (MKSE) and MKSE directors, Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron C. Papa,
Norberto C. Nazareno, George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and Antonio Garcia, Jr. Respondent,
in said Petition, sought: (1) the nullification of the Resolution dated 3 June 1993 of the MKSE Board of Directors, which allegedly
deprived him of his right to participate equally in the allocation of Initial Public Offerings (IPO) of corporations registered with MKSE;
(2) the delivery of the IPO shares he was allegedly deprived of, for which he would pay IPO prices; and (3) the payment of P2 million
as moral damages, P1 million as exemplary damages, and P500,000.00 as attorneys fees and litigation expenses.
On 14 February 1994, the SICD issued an Order granting respondents prayer for the issuance of a Temporary Restraining Order to
enjoin petitioners from implementing or enforcing the 3 June 1993 Resolution of the MKSE Board of Directors.
The SICD subsequently issued another Order on 10 March 1994 granting respondents application for a Writ of Preliminary
Injunction, to continuously enjoin, during the pendency of SEC Case No. 02-94-4678, the implementation or enforcement of the
MKSE Board Resolution in question. Petitioners assailed this SICD Order dated 10 March 1994 in a Petition for Certiorari filed with
the SEC en banc, docketed as SEC-EB No. 393.
On 11 March 1994, petitioners filed a Motion to Dismiss respondents Petition in SEC Case No. 02-94-4678, based on the following
grounds: (1) the Petition became moot due to the cancellation of the license of MKSE; (2) the SICD had no jurisdiction over the
Petition; and (3) the Petition failed to state a cause of action.
The SICD denied petitioners Motion to Dismiss in an Order dated 4 May 1994. Petitioners again challenged the 4 May 1994 Order
of SICD before the SEC en banc through another Petition for Certiorari, docketed as SEC-EB No. 403.
In an Order dated 31 May 1995 in SEC-EB No. 393, the SEC en banc nullified the 10 March 1994 Order of SICD in SEC Case No.
02-94-4678 granting a Writ of Preliminary Injunction in favor of respondent. Likewise, in an Order dated 14 August 1995 in SEC-EB
No. 403, the SEC en banc annulled the 4 May 1994 Order of SICD in SEC Case No. 02-94-4678 denying petitioners Motion to
Dismiss, and accordingly ordered the dismissal of respondents Petition before the SICD.
Respondent filed a Petition for Certiorari with the Court of Appeals assailing the Orders of the SEC en banc dated 31 May 1995 and
14 August 1995 in SEC-EB No. 393 and SEC-EB No. 403, respectively. Respondents Petition before the appellate court was
docketed as CA-G.R. SP No. 38455.
On 11 February 1997, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 38455, granting respondents Petition for
Certiorari, thus:
WHEREFORE, the petition in so far as it prays for annulment of the Orders dated May 31, 1995 and August 14, 1995 in SEC-EB
Case Nos. 393 and 403 is GRANTED. The said orders are hereby rendered null and void and set aside.
Petitioners filed a Motion for Reconsideration of the foregoing Decision but it was denied by the Court of Appeals in a Resolution
dated 18 May 1999.
Hence, the present Petition for Review raising the following arguments:
I.

THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DISMISSED THE PETITION FILED BY RESPONDENT BECAUSE ON ITS FACE, IT FAILED TO STATE
A CAUSE OF ACTION.
II.
THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A MERE ACCOMMODATION GIVEN TO HIM BY
THE BOARD OF [DIRECTORS] OF THE MAKATI STOCK EXCHANGE, INC.
III.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT MADE AN EXTENDED INQUIRY AND PROCEEDED TO
MAKE A DETERMINATION AS TO THE TRUTH OF RESPONDENTS ALLEGATIONS IN HIS PETITION AND USED AS BASIS
THE EVIDENCE ADDUCED DURING THE HEARING ON THE APPLICATION FOR THE WRIT OF PRELIMINARY INJUNCTION
TO DETERMINE THE EXISTENCE OR VALIDITY OF A STATED CAUSE OF ACTION.
IV.
IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE BROKERS FOR THEMSELVES BUT ARE TO
BE DISTRIBUTED TO THE INVESTING PUBLIC. HENCE, RESPONDENTS CLAIM FOR DAMAGES IS ILLUSORY AND HIS
PETITION A NUISANCE SUIT.3
On 18 September 2001, counsel for respondent manifested to this Court that his client died on 7 May 2001. In a Resolution dated
24 October 2001, the Court directed the substitution of respondent by his surviving spouse, Julia Ortigas vda. de Campos.
Petitioners want this Court to affirm the dismissal by the SEC en banc of respondents Petition in SEC Case No. 02-94-4678 for
failure to state a cause of action. On the other hand, respondent insists on the sufficiency of his Petition and seeks the continuation
of the proceedings before the SICD.
A cause of action is the act or omission by which a party violates a right of another. 4 A complaint states a cause of action where it
contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in violation of said legal right. If these elements are absent, the complaint
becomes vulnerable to dismissal on the ground of failure to state a cause of action.
If a defendant moves to dismiss the complaint on the ground of lack of cause of action, he is regarded as having hypothetically
admitted all the averments thereof. The test of sufficiency of the facts found in a complaint as constituting a cause of action is
whether or not admitting the facts alleged, the court can render a valid judgment upon the same in accordance with the prayer
thereof. The hypothetical admission extends to the relevant and material facts well pleaded in the complaint and inferences fairly
deducible therefrom. Hence, if the allegations in the complaint furnish sufficient basis by which the complaint can be maintained, the
same should not be dismissed regardless of the defense that may be assessed by the defendant. 5
Given the foregoing, the issue of whether respondents Petition in SEC Case No. 02-94-4678 sufficiently states a cause of action
may be alternatively stated as whether, hypothetically admitting to be true the allegations in respondents Petition in SEC Case No.
02-94-4678, the SICD may render a valid judgment in accordance with the prayer of said Petition.
A reading of the exact text of respondents Petition in SEC Case No. 02-94-4678 is, therefore, unavoidable. Pertinent portions of the
said Petition reads:
7. In recognition of petitioners invaluable services, the general membership of respondent corporation [MKSE] passed a resolution
sometime in 1989 amending its Articles of Incorporation, to include the following provision therein:
"ELEVENTH WHEREAS, Mr. Miguel Campos is the only surviving incorporator of the Makati Stock Exchange, Inc. who has
maintained his membership;
"WHEREAS, he has unselfishly served the Exchange in various capacities, as governor from 1977 to the present and as President
from 1972 to 1976 and again as President from 1988 to the present;
"WHEREAS, such dedicated service and leadership which has contributed to the advancement and well being not only of the
Exchange and its members but also to the Securities industry, needs to be recognized and appreciated;

"WHEREAS, as such, the Board of Governors in its meeting held on February 09, 1989 has correspondingly adopted a resolution
recognizing his valuable service to the Exchange, reward the same, and preserve for posterity such recognition by proposing a
resolution to the membership body which would make him as Chairman Emeritus for life and install in the Exchange premises a
commemorative bronze plaque in his honor;
"NOW, THEREFORE, for and in consideration of the above premises, the position of the "Chairman Emeritus" to be occupied by Mr.
Miguel Campos during his lifetime and irregardless of his continued membership in the Exchange with the Privilege to attend all
membership meetings as well as the meetings of the Board of Governors of the Exchange, is hereby created."
8. Hence, to this day, petitioner is not only an active member of the respondent corporation, but its Chairman Emeritus as well.
9. Correspondingly, at all times material to this petition, as an active member and Chairman Emeritus of respondent corporation,
petitioner has always enjoyed the right given to all the other members to participate equally in the Initial Public Offerings (IPOs for
brevity) of corporations.
10. IPOs are shares of corporations offered for sale to the public, prior to the listing in the trading floor of the countrys two stock
exchanges. Normally, Twenty Five Percent (25%) of these shares are divided equally between the two stock exchanges which in
turn divide these equally among their members, who pay therefor at the offering price.
11. However, on June 3, 1993, during a meeting of the Board of Directors of respondent-corporation, individual respondents passed
a resolution to stop giving petitioner the IPOs he is entitled to, based on the ground that these shares were allegedly benefiting
Gerardo O. Lanuza, Jr., who these individual respondents wanted to get even with, for having filed cases before the Securities and
Exchange (SEC) for their disqualification as member of the Board of Directors of respondent corporation.
12. Hence, from June 3, 1993 up to the present time, petitioner has been deprived of his right to subscribe to the IPOs of
corporations listing in the stock market at their offering prices.
13. The collective act of the individual respondents in depriving petitioner of his right to a share in the IPOs for the aforementioned
reason, is unjust, dishonest and done in bad faith, causing petitioner substantial financial damage. 6
There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in favor of respondent, particularly, respondents
alleged right to subscribe to the IPOs of corporations listed in the stock market at their offering prices; and stipulates the correlative
obligation of petitioners to respect respondents right, specifically, by continuing to allow respondent to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.
However, the terms right and obligation in respondents Petition are not magic words that would automatically lead to the conclusion
that such Petition sufficiently states a cause of action. Right and obligation are legal terms with specific legal meaning. A right is a
claim or title to an interest in anything whatsoever that is enforceable by law. 7 An obligation is defined in the Civil Code as a juridical
necessity to give, to do or not to do.8 For every right enjoyed by any person, there is a corresponding obligation on the part of
another person to respect such right. Thus, Justice J.B.L. Reyes offers 9 the definition given by Arias Ramos as a more complete
definition:
An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the
observance of a determinative conduct (the giving, doing or not doing), and in case of breach, may demand satisfaction from the
assets of the latter.
The Civil Code enumerates the sources of obligations:
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.

Therefore, an obligation imposed on a person, and the corresponding right granted to another, must be rooted in at least one of
these five sources. The mere assertion of a right and claim of an obligation in an initiatory pleading, whether a Complaint or Petition,
without identifying the basis or source thereof, is merely a conclusion of fact and law. A pleading should state the ultimate facts
essential to the rights of action or defense asserted, as distinguished from mere conclusions of fact or conclusions of law. 10 Thus, a
Complaint or Petition filed by a person claiming a right to the Office of the President of this Republic, but without stating the source
of his purported right, cannot be said to have sufficiently stated a cause of action. Also, a person claiming to be the owner of a
parcel of land cannot merely state that he has a right to the ownership thereof, but must likewise assert in the Complaint either a
mode of acquisition of ownership or at least a certificate of title in his name.
In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege respondents right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices, and petitioners obligation to continue respecting and observing such
right, the Petition utterly failed to lay down the source or basis of respondents right and/or petitioners obligation.
Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in 1989, granting him the position of
Chairman Emeritus of MKSE for life. However, there is nothing in the said Petition from which the Court can deduce that
respondent, by virtue of his position as Chairman Emeritus of MKSE, was granted by law, contract, or any other legal source, the
right to subscribe to the IPOs of corporations listed in the stock market at their offering prices.
A meticulous review of the Petition reveals that the allocation of IPO shares was merely alleged to have been done in accord with a
practice normally observed by the members of the stock exchange, to wit:
IPOs are shares of corporations offered for sale to the public, prior to their listing in the trading floor of the countrys two stock
exchanges. Normally, Twenty-Five Percent (25%) of these shares are divided equally between the two stock exchanges which in
turn divide these equally among their members, who pay therefor at the offering price. 11 (Emphasis supplied)
A practice or custom is, as a general rule, not a source of a legally demandable or enforceable right. 12 Indeed, in labor cases,
benefits which were voluntarily given by the employer, and which have ripened into company practice, are considered as rights that
cannot be diminished by the employer.13 Nevertheless, even in such cases, the source of the employees right is not custom, but
ultimately, the law, since Article 100 of the Labor Code explicitly prohibits elimination or diminution of benefits.
There is no such law in this case that converts the practice of allocating IPO shares to MKSE members, for subscription at their
offering prices, into an enforceable or demandable right. Thus, even if it is hypothetically admitted that normally, twenty five percent
(25%) of the IPOs are divided equally between the two stock exchanges -- which, in turn, divide their respective allocation equally
among their members, including the Chairman Emeritus, who pay for IPO shares at the offering price -- the Court cannot grant
respondents prayer for damages which allegedly resulted from the MKSE Board Resolution dated 3 June 1993 deviating from said
practice by no longer allocating any shares to respondent.1avvphi1
Accordingly, the instant Petition should be granted. The Petition in SEC Case No. 02-94-4678 should be dismissed for failure to
state a cause of action. It does not matter that the SEC en banc, in its Order dated 14 August 1995 in SEC-EB No. 403,
overstepped its bounds by not limiting itself to the issue of whether respondents Petition before the SICD sufficiently stated a cause
of action. The SEC en banc may have been mistaken in considering extraneous evidence in granting petitioners Motion to Dismiss,
but its discussion thereof are merely superfluous and obiter dictum. In the main, the SEC en banc did correctly dismiss the Petition
in SEC Case No. 02-94-4678 for its failure to state the basis for respondents alleged right, to wit:
Private respondent Campos has failed to establish the basis or authority for his alleged right to participate equally in the IPO
allocations of the Exchange. He cited paragraph 11 of the amended articles of incorporation of the Exchange in support of his
position but a careful reading of the said provision shows nothing therein that would bear out his claim. The provision merely created
the position of chairman emeritus of the Exchange but it mentioned nothing about conferring upon the occupant thereof the right to
receive IPO allocations.14
With the dismissal of respondents Petition in SEC Case No. 02-94-4678, there is no more need for this Court to resolve the
propriety of the issuance by SCID of a writ of preliminary injunction in said case.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 11 February 1997 and its Resolution dated 18
May 1999 in CA-G.R. SP No. 38455 are REVERSED and SET ASIDE. The Orders dated 31 May 1995 and 14 August 1995 of the
Securities and Exchange Commission en banc in SEC-EB Case No. 393 and No. 403, respectively, are hereby reinstated. No
pronouncement as to costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZ
ANTONIO EDUARDO B. NACHURA
Associate Justice
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.
REYNATO S. PUNO
Chief Justice
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 112182 December 12, 1994

BRICKTOWN DEVELOPMENT CORP. (its new corporate name MULTINATIONAL REALTY DEVELOPMENT CORPORATION)
and MARIANO Z. VERALDE, petitioners,
vs.
AMOR TIERRA DEVELOPMENT CORPORATION and the HON. COURT OF APPEALS, respondents.
Tabaquero, Dela Torre, Simando & Associates for petitioners.
Robles, Ricafrente & Aguirre Law Firm for private respondent.

VITUG, J.:
A contract, once perfected, has the force of law between the parties with which they are bound to comply in good faith and from
which neither one may renege without the consent of the other. The autonomy of contracts allows the parties to establish such
stipulations, clauses, terms and conditions as they may deem appropriate provided only that they are not contrary to law, morals,
good customs, public order or public policy. The standard norm in the performance of their respective covenants in the contract, as
well as in the exercise of their rights thereunder, is expressed in the cardinal principle that the parties in that juridical relation must
act with justice, honesty and good faith.
These basic tenets, once again, take the lead in the instant controversy.

Private respondent reminds us that the factual findings of the trial court, sustained by the Court of Appeals, should be considered
binding on this Court in this petition. We concede to this reminder since, indeed, there appears to be no valid justification in the case
at bench for us to take an exception from the rule. We shall, therefore, momentarily paraphrase these findings.
On 31 March 1981, Bricktown Development Corporation (herein petitioner corporation), represented by its President and copetitioner Mariano Z. Velarde, executed two Contracts to Sell (Exhs. "A" and "B") in favor of Amor Tierra Development Corporation
(herein private respondent), represented in these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential lots,
situated at the Multinational Village Subdivision, La Huerta, Paraaque, Metro Manila, with an aggregate area of 82,888 square
meters. The total price of P21,639,875.00 was stipulated to be paid by private respondent in such amounts and maturity dates, as
follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31 December 1981; and the balance
of P11,500,000.00 to be paid by means of an assumption by private respondent of petitioner corporation's mortgage liability to the
Philippine Savings Bank or, alternatively, to be made payable in cash. On even date, 31 March 1981, the parties executed a
Supplemental Agreement (Exh. "C"), providing that private respondent would additionally pay to petitioner corporation the amounts
of P55,364.68, or 21% interest on the balance of downpayment for the period from 31 March to 30 June 1981, and of P390,369.37
representing interest paid by petitioner corporation to the Philippine Savings Bank in updating the bank loan for the period from 01
February to 31 March 1981.
Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21 (Exhs. "A" to "K"). In the meanwhile,
however, the parties continued to negotiate for a possible modification of their agreement, although nothing conclusive would
appear to have ultimately been arrived at.
Finally, on 12 October 1981, petitioner corporation, through its legal counsel, sent private respondent a "Notice of Cancellation of
Contract" (Exh. "D") on account of the latter's continued failure to pay the installment due 30 June 1981 and the interest on the
unpaid balance of the stipulated initial payment. Petitioner corporation advised private respondent, however, that it (private
respondent) still had the right to pay its arrearages within 30 days from receipt of the notice "otherwise the actual cancellation of the
contract (would) take place."
Several months later, or on 26 September 1983, private respondent, through counsel, demanded (Exh. "E") the refund of private
respondent's various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest within fifteen days
from receipt of said letter, or, in lieu of a cash payment, to assign to private respondent an equivalent number of unencumbered lots
at the same price fixed in the contracts. The demand, not having been heeded, private respondent commenced, on 18 November
1983, its action with the court a quo. 1
Following the reception of evidence, the trial court rendered its decision, the dispositive portion of which read:
In view of all the foregoing, judgment is hereby rendered as follows:
1. Declaring the Contracts to Sell and the Supplemental Agreement (Exhibits "A", "B" and "C") rescinded;
2. Ordering the [petitioner] corporation, Bricktown Development Corporation, also known as Multinational Realty
Development Corporation, to return to the [private respondent] the amount of One Million Three Hundred Thirty
Four Thousand Four Hundred Forty-Three Pesos and Twenty-One Centavos (P1,334,443.21) with interest at
the rate of Twelve (12%) percent per annum, starting November 18, 1983, the date when the complaint was
filed, until the amount is fully paid;
3. Ordering the [petitioner] corporation to pay the [private respondent] the amount of Twenty-five Thousand
(P25,000.00) Pesos, representing attorney's fees;
4. Dismissing [petitioner's] counterclaim for lack of merit; and
5. With costs against the [petitioner] corporation.
SO ORDERED. 2
On appeal, the appellate court affirmed in toto the trial court's findings and judgment.
In their instant petition, petitioners contend that the Court of Appeals has erred in ruling that
(1) By petitioners' acts, conduct and representation, they themselves delayed or prevented the performance of
the contracts to sell and the supplemental agreement and were thus estopped from cancelling the same.
(2) Petitioners were no justified in resolving the contracts to sell and the supplemental agreement.

(3) The cancellation of the contract required a positive act on the part of petitioners giving private respondent
the sixty (60) day grace period provided in the contracts to sell; and
(4) In not holding that the forfeiture of the P1,378,197.48 was warranted under the liquidated damages
provisions of the contracts to sell and the supplemental agreement and was not iniquitous nor unconscionable.
The core issues would really come down to (a) whether or not the contracts to sell were validly rescinded or cancelled by petitioner
corporation and, in the affirmative, (b) whether or not the amounts already remitted by private respondent under said contracts were
rightly forfeited by petitioner corporation.
Admittedly, the terms of payment agreed upon by the parties were not met by private respondent. Of a total selling price of
P21,639,875.00, private respondent was only able to remit the sum of P1,334,443.21 which was even short of the stipulated initial
payment of P2,200,000.00. No additional payments, it would seem, were made. A notice of cancellation was ultimately made
months after the lapse of the contracted grace period. Paragraph 15 of the Contracts to Sell provided thusly:
15. Should the PURCHASER fail to pay when due any of the installments mentioned in stipulation No. 1 above,
the OWNER shall grant the purchaser a sixty (60)-day grace period within which to pay the amount/s due, and
should the PURCHASER still fail to pay the due amount/s within the 60-day grace period, the PURCHASER
shall have the right to ex-parte cancel or rescind this contract, provided, however, that the actual cancellation or
rescission shall take effect only after the lapse of thirty (30) days from the date of receipt by the PURCHASER
of the notice of cancellation of this contract or the demand for its rescission by a notarial act, and thereafter, the
OWNER shall have the right to resell the lot/s subject hereof to another buyer and all payments made, together
with all improvements introduced on the aforementioned lot/s shall be forfeited in favor of the OWNER as
liquidated damages, and in this connection, the PURCHASER obligates itself to peacefully vacate the aforesaid
lot/s without necessity of notice or demand by the OWNER. 3
A grace period is a right, not an obligation, of the debtor. When unconditionally conferred, such as in this case, the grace period is
effective without further need of demand either calling for the payment of the obligation or for honoring the right. The grace period
must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would generally still require
judicial or extrajudicial demand before "default" can be said to arise. 4
Verily, in the case at bench, the sixty-day grace period under the terms of the contracts to sell became ipso facto operative from the
moment the due payments were not met at their stated maturities. On this score, the provisions of Article 1169 of the Civil Code
would find no relevance whatsoever.
The cancellation of the contracts to sell by petitioner corporation accords with the contractual covenants of the parties, and such
cancellation must be respected. It may be noteworthy to add that in a contract to sell, the
non-payment of the purchase price (which is normally the condition for the final sale) can prevent the obligation to convey title from
acquiring any obligatory force (Roque vs. Lapuz, 96 SCRA 741; Agustin vs. Court of Appeals, 186 SCRA 375).
The forfeiture of the payments thus far remitted under the cancelled contracts in question, given the factual findings of both the trial
court and the appellate court, must be viewed differently. While clearly insufficient to justify a foreclosure of the right of petitioner
corporation to rescind or cancel its contracts with private respondent, the series of events and circumstances described by said
courts to have prevailed in the interim between the parties, however, warrant some favorable consideration by this Court.
Petitioners do not deny the fact that there has indeed been a constant dialogue between the parties during the period of their
juridical relation. Concededly, the negotiations that they have pursued strictly did not result in the novation, either extinctive or
modificatory, of the contracts to sell; nevertheless, this Court is unable to completely disregard the following findings of both the trial
court and the appellate court. Said the trial court:
It has been duly established through the testimony of plaintiff's witnesses Marcosa Sanchez and Vicente Casas
that there were negotiations to enter into another agreement between the parties, after March 31, 1981. The
first negotiation took place before June 30, 1981, when Moises Petilla and Renato Dragon, Vice-President and
president, respectively, of the plaintiff corporation, together with Marcosa Sanchez, went to the office of the
defendant corporation and made some proposals to the latter, thru its president, the defendant Mariano
Velarde. They told the defendant Velarde of the plaintiff's request for the division of the lots to be purchased into
smaller lots and the building of town houses or smaller houses therein as these kinds of houses can be sold
easily than big ones. Velarde replied that subdivision owners would not consent to the building of small houses.
He, however, made two counter-proposals, to wit: that the defendant corporation would assign to the plaintiff a
number of lots corresponding to the amounts the latter had already paid, or that the defendant corporation may
sell the corporation itself, together with the Multinational Village Subdivision, and its other properties, to the
plaintiff and the latter's sister companies engaged in the real estate business. The negotiations between the
parties went on for sometime but nothing definite was accomplished. 5

For its part, the Court of Appeals observed:

We agree with the court a quo that there is, therefore, reasonable ground to believe that because of the
negotiations between the parties, coupled with the fact that the plaintiff never took actual possession of the
properties and the defendants did not also dispose of the same during the pendency of said negotiations, the
plaintiff was led to believe that the parties may ultimately enter into another agreement in place of the "contracts
to sell." There was, evidently, no malice or bad faith on the part of the plaintiff in suspending payments. On the
contrary, the defendants not only contributed, but had consented to the delay or suspension of payments. They
did not give the plaintiff a categorical answer that their counter-proposals will not materialize. 6
In fine, while we must conclude that petitioner corporation still acted within its legal right to declare the contracts to sell rescinded or
cancelled, considering, nevertheless, the peculiar circumstances found to be extant by the trial court, confirmed by the Court of
Appeals, it would be unconscionable, in our view, to likewise sanction the forfeiture by petitioner corporation of payments made to it
by private respondent. Indeed, in the opening statement of this ponencia, we have intimated that the relationship between parties in
any contract must always be characterized and punctuated by good faith and fair dealing. Judging from what the courts below have
said, petitioners did fall well behind that standard. We do not find it equitable, however, to adjudge any interest payment by
petitioners on the amount to be thus refunded, computed from judicial demand, for, indeed, private respondent should not be
allowed to totally free itself from its own breach.
WHEREFORE, the appealed decision is AFFIRMED insofar as it declares valid the cancellation of the contracts in question but
MODIFIED by ordering the refund by petitioner corporation of P1,334,443.21 with 12% interest per annum to commence only,
however, from the date of finality of this decision until such refund is effected. No costs.
SO ORDERED.
Bidin, Romero and Melo, JJ., concur.
Feliciano, J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-30056 August 30, 1988
MARCELO AGCAOILI, plaintiff-appellee
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellant.
Artemio L. Agcaoili for plaintiff-appellee.
Office of the Government Corporate Counsel for defendant-appellant.

NARVASA, J.:
The appellant Government Service Insurance System, (GSIS, for short) having approved the application of the appellee Agcaoili for
the purchase of a house and lot in the GSIS Housing Project at Nangka Marikina, Rizal, subject to the condition that the latter
should forthwith occupy the house, a condition that Agacoili tried to fulfill but could not for the reason that the house was absolutely
uninhabitable; Agcaoili, after paying the first installment and other fees, having thereafter refused to make further payment of other
stipulated installments until GSIS had made the house habitable; and appellant having refused to do so, opting instead to cancel the
award and demand the vacation by Agcaoili of the premises; and Agcaoili having sued the GSIS in the Court of First Instance of
Manila for specific performance with damages and having obtained a favorable judgment, the case was appealled to this Court by
the GSIS. Its appeal must fail.
The essential facts are not in dispute. Approval of Agcaoili's aforementioned application for purchase 1 was contained in a letter 2
addressed to Agcaoili and signed by GSIS Manager Archimedes Villanueva in behalf of the Chairman-General Manager, reading as
follows:

Please be informed that your application to purchase a house and lot in our GSIS Housing Project at Nangka,
Marikina, Rizal, has been approved by this Office. Lot No. 26, Block No. (48) 2, together with the housing unit
constructed thereon, has been allocated to you.
You are, therefore, advised to occupy the said house immediately.
If you fail to occupy the same within three (3) days from receipt of this notice, your application shall be
considered automatically disapproved and the said house and lot will be awarded to another applicant.
Agcaoili lost no time in occupying the house. He could not stay in it, however, and had to leave the very next day, because the
house was nothing more than a shell, in such a state of incompleteness that civilized occupation was not possible: ceiling, stairs,
double walling, lighting facilities, water connection, bathroom, toilet kitchen, drainage, were inexistent. Agcaoili did however ask a
homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending completion of the construction of
the house. Agcaoili thereafter complained to the GSIS, to no avail.
The GSIS asked Agcaoili to pay the monthly amortizations and other fees. Agcaoili paid the first monthly installment and the
incidental fees, 3 but refused to make further payments until and unless the GSIS completed the housing unit. What the GSIS did
was to cancel the award and require Agcaoili to vacate the premises. 4 Agcaoili reacted by instituting suit in the Court of First
Instance of Manila for specific performance and damages. 5 Pending the action, a written protest was lodged by other awardees of
housing units in the same subdivision, regarding the failure of the System to complete construction of their own houses. 6 Judgment
was in due course rendered , 7 on the basis of the evidence adduced by Agcaoili only, the GSIS having opted to dispense with
presentation of its own proofs. The judgment was in Agcaoili's favor and contained the following dispositions, 8 to wit:
1) Declaring the cancellation of the award (of a house and lot) in favor of plaintiff (Mariano Agcaoili) illegal and
void;
2) Ordering the defendant (GSIS) to respect and enforce the aforesaid award to the plaintiff relative to Lot No.
26, Block No. (48) 2 of the Government Service Insurance System (GSIS) low cost housing project at Nangka
Marikina, Rizal;
3) Ordering the defendant to complete the house in question so as to make the same habitable and authorizing
it (defendant) to collect the monthly amortization thereon only after said house shall have been completed under
the terms and conditions mentioned in Exhibit A ;and
4) Ordering the defendant to pay P100.00 as damages and P300.00 as and for attorney's fees, and costs.
Appellant GSIS would have this Court reverse this judgment on the argument that
1) Agcaoili had no right to suspend payment of amortizations on account of the incompleteness of his housing unit, since said unit
had been sold "in the condition and state of completion then existing ... (and) he is deemed to have accepted the same in the
condition he found it when he accepted the award;" and assuming indefiniteness of the contract in this regard, such circumstance
precludes a judgment for specific performance. 9
2) Perfection of the contract of sale between it and Agcaoili being conditioned upon the latter's immediate occupancy of the house
subject thereof, and the latter having failed to comply with the condition, no contract ever came into existence between them ; 10
3) Agcaoili's act of placing his homeless friend, Villanueva, in possession, "without the prior or subsequent knowledge or consent of
the defendant (GSIS)" operated as a repudiation by Agcaoili of the award and a deprivation of the GSIS at the same time of the
reasonable rental value of the property. 11
Agcaoili's offer to buy from GSIS was contained in a printed form drawn up by the latter, entitled "Application to Purchase a House
and/or Lot." Agcaoili filled up the form, signed it, and submitted it. 12 The acceptance of the application was also set out in a form
(mimeographed) also prepared by the GSIS. As already mentioned, this form sent to Agcaoili, duly filled up, advised him of the
approval of his "application to purchase a house and lot in our GSIS Housing Project at NANGKA, MARIKINA, RIZAL," and that "Lot
No. 26, Block No. (48) 2, together with the housing unit constructed thereon, has been allocated to you." Neither the application
form nor the acceptance or approval form of the GSIS nor the notice to commence payment of a monthly amortizations, which
again refers to "the house and lot awarded" contained any hint that the house was incomplete, and was being sold "as is," i.e., in
whatever state of completion it might be at the time. On the other hand, the condition explicitly imposed on Agcaoili "to occupy
the said house immediately," or in any case within three (3) days from notice, otherwise his "application shall be considered
automatically disapproved and the said house and lot will be awarded to another applicant" would imply that construction of the
house was more or less complete, and it was by reasonable standards, habitable, and that indeed, the awardee should stay and live
in it; it could not be interpreted as meaning that the awardee would occupy it in the sense of a pioneer or settler in a rude
wilderness, making do with whatever he found available in the envirornment.

There was then a perfected contract of sale between the parties; there had been a meeting of the minds upon the purchase by
Agcaoili of a determinate house and lot in the GSIS Housing Project at Nangka Marikina, Rizal at a definite price payable in
amortizations at P31.56 per month, and from that moment the parties acquired the right to reciprocally demand performance. 13 It
was, to be sure, the duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its enjoyment by the buyer for the
purpose contemplated , 14 in other words, to deliver the house subject of the contract in a reasonably livable state. This it failed to
do.
It sold a house to Agcaoili, and required him to immediately occupy it under pain of cancellation of the sale. Under the
circumstances there can hardly be any doubt that the house contemplated was one that could be occupied for purposes of
residence in reasonable comfort and convenience. There would be no sense to require the awardee to immediately occupy and live
in a shell of a house, a structure consisting only of four walls with openings, and a roof, and to theorize, as the GSIS does, that this
was what was intended by the parties, since the contract did not clearly impose upon it the obligation to deliver a habitable house, is
to advocate an absurdity, the creation of an unfair situation. By any objective interpretation of its terms, the contract can only be
understood as imposing on the GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in return for his undertaking
to pay the stipulated price. Since GSIS did not fulfill that obligation, and was not willing to put the house in habitable state, it cannot
invoke Agcaoili's suspension of payment of amortizations as cause to cancel the contract between them. It is axiomatic that "(i)n
reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with
what is incumbent upon him." 15
Nor may the GSIS succeed in justifying its cancellation of the award to Agcaoili by the claim that the latter had not complied with the
condition of occupying the house within three (3) days. The record shows that Agcaoili did try to fulfill the condition; he did try to
occupy the house but found it to be so uninhabitable that he had to leave it the following day. He did however leave a friend in the
structure, who being homeless and hence willing to accept shelter even of the most rudimentary sort, agreed to stay therein and
look after it. Thus the argument that Agcaoili breached the agreement by failing to occupy the house, and by allowing another
person to stay in it without the consent of the GSIS, must be rejected as devoid of merit.
Finally, the GSIS should not be heard to say that the agreement between it and Agcaoili is silent, or imprecise as to its exact
prestation Blame for the imprecision cannot be imputed to Agcaoili; it was after all the GSIS which caused the contract to come into
being by its written acceptance of Agcaoili's offer to purchase, that offer being contained in a printed form supplied by the GSIS.
Said appellant having caused the ambiguity of which it would now make capital, the question of interpretation arising therefrom,
should be resolved against it.
It will not do, however, to dispose of the controversy by simply declaring that the contract between the parties had not been validly
cancelled and was therefore still in force, and that Agcaoili could not be compelled by the GSIS to pay the stipulated price of the
house and lot subject of the contract until and unless it had first completed construction of the house. This would leave the contract
hanging or in suspended animation, as it were, Agcaoili unwilling to pay unless the house were first completed, and the GSIS averse
to completing construction, which is precisely what has been the state of affairs between the parties for more than twenty (20) years
now. On the other hand, assuming it to be feasible to still finish the construction of the house at this time, to compel the GSIS to do
so so that Agcaoili's prestation to pay the price might in turn be demanded, without modifying the price therefor, would not be quite
fair. The cost to the GSIS of completion of construction at present prices would make the stipulated price disproportionate,
unrealistic.
The situation calls for the exercise by this Court of its equity jurisdiction, to the end that it may render complete justice to both
parties.
As we . . reaffirmed in Air Manila, Inc. vs. Court of Industrial Relations (83 SCRA 579, 589 [1978]). "(E)quity as
the complement of legal jurisdiction seeks to reach and do complete justice where courts of law, through the
inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are
incompetent so to do. Equity regards the spirit of and not the letter, the intent and not the form, the substance
rather than the circumstance, as it is variously expressed by different courts... " 16
In this case, the Court can not require specific performance of the contract in question according to its literal terms, as this would
result in inequity. The prevailing rule is that in decreeing specific performance equity requires 17
... not only that the contract be just and equitable in its provisions, but that the consequences of specific
performance likewise be equitable and just. The general rule is that this equitable relief will not be granted if,
under the circumstances of the case, the result of the specific enforcement of the contract would be harsh,
inequitable, oppressive, or result in an unconscionable advantage to the plaintiff . .
In the exercise of its equity jurisdiction, the Court may adjust the rights of parties in accordance with the circumstances obtaining at
the time of rendition of judgment, when these are significantly different from those existing at the time of generation of those rights.
The Court is not restricted to an adjustment of the rights of the parties as they existed when suit was brought,
but will give relief appropriate to events occuring ending the suit. 18

While equitable jurisdiction is generally to be determined with reference to the situation existing at the time the
suit is filed, the relief to be accorded by the decree is governed by the conditions which are shown to exist at the
time of making thereof, and not by the circumstances attending the inception of the litigation. In making up the
final decree in an equity suit the judge may rightly consider matters arising after suit was brought. Therefore, as
a general rule, equity will administer such relief as the nature, rights, facts and exigencies of the case demand
at the close of the trial or at the time of the making of the decree. 19
That adjustment is entirely consistent with the Civil Law principle that in the exercise of rights a person must act with justice, give
everyone his due, and observe honesty and good faith. 20 Adjustment of rights has been held to be particularly applicable when
there has been a depreciation of currency.
Depreciation of the currency or other medium of payment contracted for has frequently been held to justify the
court in withholding specific performance or at least conditioning it upon payment of the actual value of the
property contracted for. Thus, in an action for the specific performance of a real estate contract, it has been held
that where the currency in which the plaintiff had contracted to pay had greatly depreciated before enforcement
was sought, the relief would be denied unless the complaint would undertake to pay the equitable value of the
land. (Willard & Tayloe [U.S.] 8 Wall 557,19 L. Ed 501; Doughdrill v. Edwards, 59 Ala 424) 21
In determining the precise relief to give, the Court will "balance the equities" or the respective interests of the parties, and take
account of the relative hardship that one relief or another may occasion to them .22
The completion of the unfinished house so that it may be put into habitable condition, as one form of relief to the plaintiff Agcaoili, no
longer appears to be a feasible option in view of the not inconsiderable time that has already elapsed. That would require an
adjustment of the price of the subject of the sale to conform to present prices of construction materials and labor. It is more in
keeping with the realities of the situation, and with equitable norms, to simply require payment for the land on which the house
stands, and for the house itself, in its unfinished state, as of the time of the contract. In fact, this is an alternative relief proposed by
Agcaoili himself, i.e., "that judgment issue . . (o)rdering the defendant (GSIS) to execute a deed of sale that would embody and
provide for a reasonable amortization of payment on the basis of the present actual unfinished and uncompleted condition, worth
and value of the said house. 23
WHEREFORE, the judgment of the Court a quo insofar as it invalidates and sets aside the cancellation by respondent GSIS of the
award in favor of petitioner Agcaoili of Lot No. 26, Block No. (48) 2 of the GSIS low cost housing project at Nangka, Marikina, Rizal,
and orders the former to respect the aforesaid award and to pay damages in the amounts specified, is AFFIRMED as being in
accord with the facts and the law. Said judgments is however modified by deleting the requirement for respondent GSIS "to
complete the house in question so as to make the same habitable," and instead it is hereby ORDERED that the contract between
the parties relative to the property above described be modified by adding to the cost of the land, as of the time of perfection of the
contract, the cost of the house in its unfinished state also as of the time of perfection of the contract, and correspondingly adjusting
the amortizations to be paid by petitioner Agcaoili, the modification to be effected after determination by the Court a quo of the value
of said house on the basis of the agreement of the parties, or if this is not possible by such commissioner or commissioners as the
Court may appoint. No pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Aquino and Medialdea, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26002

October 31, 1969

ABELARDO BAUTISTA and ROBERTO TAN TING, petitioners-appellees,

vs.
FEDERICO O. BORROMEO, INC., HONORABLE CESAR C. CRUZ, Judge of the Municipal Court of Mandaluyong, Rizal and
JESUS BAUTISTA, Deputy Sheriff of Manila as Special Sheriff, respondents-appellants.
Dante O. Tinga and Leopoldo V. Repotente, Jr. for petitioners-appellees.
Modesto S. Mendoza for respondents-appellants.
SANCHEZ, J.:

Respondents-appellants seek to overturn the decision of the Court of First Instance of Rizal of January 6, 1966 granting petitionersappellees' petition for relief from judgment, setting aside the July 23, 1965 decision of the Municipal Court of Mandaluyong, Rizal, in
Civil Case 1365 and ordering a new trial.
The background facts are as follows:
On September 15, 1964, the Ford truck of petitioner Roberto Tan Ting driven by Abelardo Bautista, the other petitioner, and the
Volkswagen delivery panel truck owned by respondent Federico O. Borromeo, Inc. (hereinafter called Borromeo) were involved in a
traffic accident along Epifanio de los Santos Avenue. In said traffic accident, Quintin Delgado, a helper in Borromeo's delivery panel
truck, sustained injuries which resulted in his instantaneous death. Borromeo had to pay Delgado's widow the sum of P4,444
representing the compensation (death benefit) and funeral expenses due Delgado under the Workmen's Compensation Act.
On June 17, 1965, upon the averment that the said vehicular accident was caused by petitioners' negligence, Borromeo started suit
in the Municipal Court of Mandaluyong, Rizal to recover from petitioners the compensation and funeral expenses it paid to the
widow of Quintin Delgado.1
At the scheduled hearing of the case on July 23, 1965, neither petitioners nor their counsel appeared. Borromeo was thus allowed to
present its evidence ex parte. On the same day, July 23, 1965, the municipal court rendered judgment in favor of Borromeo and
against the petitioners in the principal sum of P4,444, and P500 attorney's fees, and costs. Respondents aver that this judgment has
been executed and satisfied.
On August 6, 1965, petitioners received copy of the municipal court's decision.
On August 13, 1965, petitioners moved to set aside the decision. On August 14, 1965, this motion was denied.
On August 16, 1965, copy of this order of denial was sent by registered mail to counsel of petitioners. Said counsel did not receive
this registered mail and the mail matter was returned to the court unclaimed. However, said counsel learned of this denial on
September 2, 1965 allegedly "in the course of his investigation."
Petitioners filed a notice of appeal dated September 2, 1965. They, however, paid the appellate docket fee and deposited their cash
appeal bond only on September 28, 1965. Their appeal was consequently turned down by the municipal court, for the reason that
the deposit of the bond and the payment of the docket fee were done after the lapse of the reglementary period.
Nothing was done by petitioners until October 26, 1965, when they lodged a petition for relief from the inferior court's judgment in
the Court of First Instance of Rizal.2 They there claimed excusable negligence for the failure of petitioners' counsel to appear in the
July 23, 1965 hearing at the municipal court and asserted that they had a good and substantial defense in that "there was no
contractual relationship between the parties, whether express or implied." They sought preliminary injunction, prayed for trial de
novo on the merits. A restraining order was at first issued by the court; but the prayer for preliminary injunction was eventually
denied.
Respondents' answer contended that the petition for relief was filed out of time; that petitioners' counsel's failure to attend the
hearing of July 23, 1965 does not constitute excusable negligence; and that the affidavits attached to the petition do not show good
and substantial defense.
Petitioners thereafter moved for judgment on the pleadings. No objection thereto was interposed by respondents. The lower court
then rendered the judgment mentioned in the first part of this opinion.
A move to reconsider failed. Hence, this appeal.
We vote to reverse the lower court's judgment for the following reasons:
1. The petition for relief from judgment under Rule 38 of the Rules of Court is unavailable to petitioners.
A basic precept is that when another remedy at law is open to a party, he cannot sue out a petition for relief under Rule 38. 3 Thus, a
petition for relief is not a substitute for appeal. It has been held that where a defendant could have appealed but did not appeal
from the decision of the inferior court to the Court of First Instance but instead filed a petition for relief, his petition was inappropriate
as it "would amount to reviving his right to appeal which he had irretrievably lost through the gross inaction of his counsel."4
Here, petitioners learned of the municipal court judgment on August 6, 1965, when they received a copy of its decision. They moved
to set aside that judgment on August 13, 1965. At that time, a petition for relief could not be availed of because the judgment of the
municipal court had not yet become final.5 But, on September 2, 1965, petitioners learned of the court's order of August 14, 1965
denying their motion to set aside. They could have appealed. Because, nothing in the record suggests that the notices to petitioners

to take delivery of the registered envelope containing the inferior court's resolution denying petitioners' motion to set aside the
decision were ever served on said petitioners. On the contrary, Teresita Roxas, secretary of petitioners' counsel, in her affidavit
dated October 23, 1965, Annex E of the petition for relief, categorically denied receipt of any such notice, thus: "That I have not
received any registry notice corresponding to a registered mail at the Manila Post Office containing an order by the Municipal Court
of Mandaluyong, Rizal, dated August 14, 1965."6
But petitioners did not perfect their appeal to the Court of First Instance on time they paid the appellate docket fee and deposited
their appeal bond only on September 28, eleven (11) days late. Clearly, their failure to seasonably appeal was through their own
fault.
And, when they did file a petition for relief on October 26, 1965, it was way beyond the sixty-day period from August 6, 1965, the
time they first learned of the judgment to be set aside, as required by Section 3, Rule 38 of the Rules of Court.
We accordingly, rule that petitioners' petition for relief must fail.
2. Petitioners failed to make out a case of excusable negligence for counsel's non-attendance at the July 23, 1965 hearing.
Their counsel, Atty. Leopoldo V. Repotente, Jr., explains his failure to attend the hearing in this wise "he relied on the assurance
of his associate, Atty. Lucenito N. Tagle, that the latter will attend to the case for him since on that same date he (Atty. Repotente)
had another case before the City Court of Quezon City." In his sworn statement, Atty. Tagle in turn stated that he was unable to
attend the hearing despite his promise to do so because, in his own words, "when I transferred to my new office at A & T Building,
Escolta, Manila, the record of this case was misplaced, mislaid or otherwise lost by my helpers and was not among those turned
over to my possession" and "it was only a few days after the date of hearing on July 23, 1965, that I found the record of this case in
one of the drawers of my table in my former office and it was only then that I realized my failure to attend the hearing on July 23,
1965, ... ."
We cannot view such negligence of petitioners' two attorneys as excusable. There was no plausible reason for Repotente to entrust
the hearing of the case to another lawyer. His lame excuse was that he requested Tagle to attend the hearing of said case for him
because he had another hearing at the City Court of Quezon City. This is unworthy of serious consideration. For, as respondents
aver and this is not denied by petitioners the hearing of July 23, 1965 before the municipal court was set in open court during
the initial date of hearing held on July 1, 1965 after Atty. Repotente consulted his calendar. When Repotente agreed in open court to
set the trial of the case for July 23, 1965, it may very well be presumed that his other case in Quezon City was not yet calendared
for hearing. He could not have, in good faith, agreed to set the case for hearing on the day on which he had another previously
scheduled trial. Further, he failed to notify his clients of the hearing set for July 23, 1965; they also failed to appear thereat.
Certainly, Repotentes' inadvertence cannot be labeled as excusable.
Nor may Atty. Tagle offer as excuse the fact that the record of the case "was misplaced, mislaid or otherwise lost." This is a
stereotyped excuse. It is resorted to by lawyers in order to win new trial of the case and thereby move farther away the day of
reckoning. To be remembered is that the life of each case is in its record. If the record of the case was misplaced, mislaid or lost, he
should have nevertheless attended the scheduled hearing and requested for a postponement by reason thereof. But he did not.
Appropriate it is to recall here that a prudent lawyer keeps a separate record or diary of hearings of cases he handles and of his
professional engagements. A lawyer's schedules of hearings intended as reminder are not noted by the lawyer in his record of
the case. That would be useless for the purpose.
There is then no excusable negligence to which the petition for relief can cling.
3. Even on the merits, petitioners' case must fall.
Borromeo paid the widow of its employee, Quintin Delgado, compensation (death benefit) and funeral expenses for the latter's death
while in the course of employment. This obligation arises from law Section 2 of the Workmen's Compensation Act.7 The same law
in its Section 6 also provides that "[i]n case an employee suffers an injury for which compensation is due under this Act by any other
person besides his employer, it shall be optional with such injured employee either to claim compensation from his employer, under
this Act, or sue such other person for damages, in accordance with law; and in case compensation is claimed and allowed in
accordance with this Act, the employer who paid such compensation or was found liable to pay the same, shall succeed the injured
employee to the right of recovering from such person what he paid: ..."8
It is evident from the foregoing that "if compensation is claimed and awarded, and the employer pays it, the employer becomes
subrogated to and acquires, by operation of law, the worker's rights against the tortfeasor."9
No need then there is to establish any contractual relationship between Quintin Delgado and herein petitioners. Indeed, there is
none. The cause of action of respondent corporation is one which does not spring from a creditor-debtor relationship. It arises by
virtue of its subrogation to the right of Quintin Delgado to sue the guilty party. Such subrogation is sanctioned by the Workmen's
Compensation Law aforesaid. It is as a subrogee to the rights of its deceased employee, Quintin Delgado, that Borromeo filed a suit
against petitioners in the Municipal Court of Mandaluyong, Rizal. 10

FOR THE REASONS GIVEN, the appealed decision of January 6, 1966 under review is hereby reversed and the petition for relief is
hereby dismissed.
Costs against petitioners-appellees. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and Barredo, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21676

February 28, 1969

VICENTE ALDABA, ET AL., petitioners,

vs.
COURT OF APPEALS, CESAR ALDABA, ET AL., respondents.
Rodas and Almeda for petitioners.
Dakila F. Castro and Associates for respondents.
ZALDIVAR, J.:
This is a petition to review the decision of the Court of Appeals in case CA-G.R. No. 27561-R, entitled "Vicente Aldaba, et al.,
plaintiffs-appellants, versus Cesar Aldaba, et al., defendants-appellees", affirming the decision of the Court of First Instance of
Manila in its Civil Case No. 41260.
When Belen Aldaba, a rich woman of Malolos, Bulacan, died on February 25, 1955, she left as her presumptive heirs her surviving
husband Estanislao Bautista, and her brother Cesar Aldaba. Belen Aldaba was childless. Among the properties that she left were
the two lots involved in this case, situated at 427 Maganda Street, Santa Mesa, Manila.
Petitioners Dr. Vicente Aldaba and Jane Aldaba, father and daughter, respectively, lived during the last war in their house in Malate,
Manila. Belen Aldaba used to go to their house to seek the advice and medical assistance of Dr. Vicente Aldaba. When the latter's
house was burned during the liberation of Manila in 1945, Belen Aldaba invited Dr. Aldaba and his daughter, who was then a
student in medicine, to live in one of her two houses standing on the lots in question, and the Aldaba father and daughter accepted
the offer of Belen and they actually lived in one of those two houses until sometime in 1957 when respondent Emmanuel Bautista
filed an ejectment case against them in the city court of Manila. Dr. Vicente Aldaba continued to act as a sort of adviser of Belen and
Jane, after becoming a qualified doctor of medicine, became the personal physician of Belen until the latter's death on February 25,
1955.
On June 24, 1955, the presumptive heirs Estanislao Bautista and Cesar Aldaba, executed a deed of extrajudicial partition of the
properties left by the deceased Belen Aldaba, by virtue of which deed the two lots in question were alloted to Cesar Aldaba.
Subsequently, on August 26, 1957, herein respondents Cesar Aldaba and Emmanuel Bautista, the latter being a grandson of
Estanislao Bautista by his first marriage, executed a deed whereby the two lots that were alloted to Cesar Aldaba were ceded to
Emmanuel Bautista in exchange of the latter's lot situated at San Juan, Rizal. By virtue of the deed of extra-judicial partition and the
deed of exchange, Transfer certificates of Title Nos. 1334 and 1335, respectively, covering lots Nos. 32 and 34 now in question
both in the name of Belen Aldaba, were cancelled by the Register of Deeds of Manila, and Transfer Certificates of Title Nos.
49996 and 49997 in the name of Emmanuel Bautista were issued in lieu thereof.
Emmanuel Bautista then required Dr. Vicente Aldaba to vacate the lots in question and, upon the latter's refusal, filed an ejectment
case against him in the City Court of Manila. Without awaiting the final result of the ejectment case, herein petitioners filed, on
August 22, 1959, a complaint in the Court of First Instance of Manila, docketed as Civil Case No. 41260, against herein respondents
Cesar Aldaba and Emmanuel Bautista and the Register of Deeds of Manila, alleging that they had become the owners of the two
lots in question, and praying that the deed of partition entered into by Estanislao Bautista and Cesar Aldaba be declared null and
void with respect to Lot No. 32, covered by Transfer Certificate of Title No. 1334, and lot No. 34 covered by Transfer Certificate of
Title No 1335; that said lots be declared the property of therein plaintiffs (herein petitioners); and that the Register of Deeds of
Manila be ordered to cancel TCT Nos. 49996 and 49997 in the name of Emmanuel Bautista and in lieu thereof issue two new TCTs
in the name of therein plaintiffs.
After hearing, the court a quo rendered a decision dismissing the complaint, and declaring, among others, that if the deceased
Belen Aldaba intended to convey the lots in question to Vicente Aldaba and Jane Aldaba, by way of donation, the conveyance

should be considered a donation inter vivos, for the validity of which a public instrument was necessary pursuant to Article 749 of
the Civil Code. The dispositive portion of the decision of the trial court reads as follows:
IN VIEW WHEREOF both complaint and counterclaim dismissed; the Court holds Emmanuel Bautista to be the absolute
owner of the property in question, land and improvement, but with the right of plaintiffs to stay until they should have been
reimbursed of P5,000.00 but without any obligation, until such reimbursement, to pay any rental unto defendant
Emmanuel Bautista. No pronouncement as to costs.
From this decision, therein plaintiffs appealed to the Court of Appeals, and the latter court rendered a decision, on June 21, 1963,
raising from P5,000 to P8,000 the amount to be reimbursed to plaintiffs-appellants, but affirming in all other respects the decision of
the lower court. Herein petitioners' motion for reconsideration of the decision having been denied by the Court of Appeals, they
forthwith filed the present petition in this Court.
Before this Court, petitioners now contend that the Court of Appeals erred: (1) in affirming the decision of the Court of First Instance;
(2) in holding that the donation, as found by the Court of First Instance of Manila, was a simple donation inter vivos and not a
donation "con causa onerosa and so it was void for it did not follow the requirements of Article 749 of the Civil Code; (3) in not
holding that the property in question had already been donated to herein petitioners in consideration of the latter's services; (4) in
not declaring petitioners to be the absolute owners of the property in dispute; and (5) in considering testimonies which had been
stricken out.
The errors assigned by petitioners being interrelated, We are going to discuss them together.
Petitioners contend that petitioners Dr. Vicente Aldaba and Jane Aldaba had rendered services to the deceased Belen Aldaba for
more than ten years without receiving any compensation, and so in compensation for their services Belen Aldaba gave them the lots
in dispute including the improvements thereon. It is the stand of petitioners that the property in question was conveyed to them by
way of an onerous donation which is governed by Article 733, and not Article 749, of the Civil Code. Under Article 733 of the Civil
Code an onerous donation does not have to be done by virtue of a public instrument. The petitioners point to the note, Exhibit 6, as
indicating that a donation had been made, which note reads as follows:
June 18, 1953
Jane,
Huag kayong umalis diyan. Talagang iyan ay para sa inyo. Alam nila na iyan ay sa inyo.
Belen A. Bautista.
Petitioners maintain that the note, although it could not transmit title, showed, nevertheless, that a donation had already been made
long before its writing, in consideration of the services rendered before the writing and to be rendered after its writing. And the
donation being with an onerous cause, petitioners maintain that it was valid even if it was done orally. Petitioners further maintain
that if Exhibit 6 labors under some ambiguity, this ambiguity is cured by Exhibit 7, which reads as follows:
June 27, 1956
Dear Nana Tering,
Narito po ang notice tungkol sa amillaramiento na pagbabayaran diyan sa lupa at bahay na
kinatatayuan ninyo. Sa Malolos po ito tinanggap. Ang pagbabayaran po ng Inkong ay bayad na.
Gumagalang,
"Cely."
The addressee, Tering, was the wife of Dr. Vicente Aldaba, and the sender, Cely was the wife of respondent Emmanuel Bautista.
This note, petitioners argue, proves that respondents had recognized the ownership of the petitioners of the house and lot, for,
otherwise, Cely should have sent the notice of real estate tax to respondent Cesar Aldaba, to whom was alloted the property in
question by virtue of the extra-judicial partition.
Respondents, Cesar Aldaba and Emmanuel Bautista, on the other hand, contend that the evidence of the plaintiff does not disclose
clearly that a donation had been made. Respondents point out that the note, Exhibit 6, as worded, is vague, in that it could not be
interpreted as referring to the lots in question, or that which was given therein was given for a valuable consideration. And finally,
respondents contend that if the property had really been given to petitioners, why did they not take any step to transfer the property
in their names?

The Court of Appeals, in its decision, made the following findings and conclusions:
(1) The note Exhibit 6 did not make any reference to the lots in question, nor to the services rendered, or to be rendered,
in favor of Belen. The note was insufficient is a conveyance, and hence could not be considered as evidence of a
donation with onerous cause. This note can be considered, at most, as indicative of the intention to donate.
(2) There is no satisfactory explanation why from 1945 to 1955, no notarial document was executed by Belen in favor of
petitioners who were educated persons. The reason given was "extremada delicadeza" which reason the Court of
Appeals considered as unsatisfactory.
(3) The evidence regarding the value of the services (P53,000.00) rendered by petitioners (father and daughter) to Belen
does not improve the proof regarding the alleged donation. If petitioners believed that the gratuitous use of the property
was not sufficient to compensate them for their services, they could have presented their claims in the intestate
proceedings, which they themselves could have initiated, if none was instituted.
The conclusion of the Court of Appeals, as well as that of the trial court, that there was no onerous donation made by Belen Aldaba
to petitioners is based upon their appreciation of the evidence, and this Court will not disturb the factual findings of those
courts.lawphi1.nt
The question to be resolved in the instant case is: Was there a disposition of the property in question made by the deceased Belen
Aldaba in favor of herein petitioners? The note, Exhibit 6, considered alone, was, as held by the Court of Appeals, confirming the
opinion of the lower court, only an indication of the intention of Belen Aldaba to donate to the petitioners the property occupied by
the latter. We agree with this conclusion of the trial court and the Court of Appeals. The note, in fact, expressed that the property
was really intended for the petitioners, "talagang iyan ay para sa inyo." If the property was only intended for petitioners then, at the
time of its writing, the property had not yet been disposed of in their favor. There is no evidence in the record that such intention was
effectively carried out after the writing of the note. Inasmuch as the mere expression of an intention is not a promise, because a
promise is an undertaking to carry the intention into effect, 1 We cannot, considering Exhibit 6 alone, conclude that the deceased
promised, much less did convey, the property in question to the petitioners. That the note, Exhibit 6, was only an indication of an
intention to give was also the interpretation given by petitioners themselves, when they said in their memorandum, dated February
2, 1960, in the lower court 2 thus:
Legally speaking, there was a contractual relation created between Belen Aldaba and the plaintiff since 1945 whereby the
former would give to the latter the two parcels of land, together with the house standing thereon, upon the rendition of said
services. This fact can be gleaned from the note (Exh. "6", Plaintiffs) which in part says: TALAGANG IYAN AY PARA
SAINYO
We have said that Exhibit 6 expressed only the intention to donate. Let us suppose, for the sake of argument, that previous to the
writing of the note there had already been a disposition of the property in favor of the petitioners. This disposition alone, would not
make the donation a donation for a valuable consideration. We still have to ask: What was the consideration of such disposition?
We do not find in the record that there had been an express agreement between petitioners and Belen Aldaba that the latter would
pay for the services of the former. If there was no express agreement, could it not be at least implied? There could not be an implied
contract for payment because We find in the record that Jane did not expect to be paid for her services. In the memorandum of
counsel for the petitioners in the trial court We find this statement:
For all she did to her aunt she expected not to be paid.3
When a person does not expect to be paid for his services, there cannot be a contract implied in fact to make compensation for said
services.
However, no contract implied in fact to make compensation for personal services performed for another arises unless the
party furnishing the services then expected or had reason to expect the payment or compensation by the other party. To
give rise to an implied contract to pay for services, they must have been rendered by one party in expectation that the
other party would pay for them, and have been accepted by the other party with knowledge of that expectation. (58 Am.
Jur. p. 512 and cases cited therein).
In the same manner when the person rendering the services has renounced his fees, the services are not demandable obligations. 4
Even if it be assumed for the sake of argument that the services of petitioners constituted a demandable debt, We still have to ask
whether in the instant case this was the consideration for which the deceased made the (alleged) disposition of the property to the
petitioners. As we have adverted to, we have not come across in the record even a claim that there was an express agreement
between petitioners and Belen Aldaba that the latter would give the property in question in consideration of the services of
petitioners. All that petitioners could claim regarding this matter was that "it was impliedly understood" between them. 5 How said
agreement was implied and from what facts it was implied, petitioners did not make clear. The question of whether or not what is
relied upon as a consideration had been knowingly accepted by the parties as a consideration, is a question of fact, 6 and the Court

of Appeals has not found in the instant case that the lots in question were given to petitioners in consideration of the services
rendered by them to Belen Aldaba.
We find, therefore, that the conditions to constitute a donation cum causa onerosa are not present in the instant case, and the claim
of petitioners that the two lots in question were donated to them by Belen Aldaba cannot be sustained.
WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against the petitioners. It is so ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Sanchez, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 126297

January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.
x-----------------------x
G.R. No. 126467

January 31, 2007

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR., EMMA AGANA ANDAYA, JESUS
AGANA, and RAYMUND AGANA) and ENRIQUE AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.
x- - - - - - - - - - - - - - - - - - - -- - - - x
G.R. No. 127590

January 31, 2007

MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Hospitals, having undertaken one of mankinds most important and delicate endeavors, must assume the grave responsibility of
pursuing it with appropriate care. The care and service dispensed through this high trust, however technical, complex and esoteric
its character may be, must meet standards of responsibility commensurate with the undertaking to preserve and protect the health,
and indeed, the very lives of those placed in the hospitals keeping.1
Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals Decision2 dated September 6, 1996 in
CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming with modification the Decision3 dated March 17, 1993 of the Regional
Trial Court (RTC), Branch 96, Quezon City in Civil Case No. Q-43322 and nullifying its Order dated September 21, 1993.
The facts, as culled from the records, are:
On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City Hospital) because of difficulty of
bowel movement and bloody anal discharge. After a series of medical examinations, Dr. Miguel Ampil, petitioner in G.R. No.
127590, diagnosed her to be suffering from "cancer of the sigmoid."

On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the Medical City Hospital, performed an anterior resection surgery on
Natividad. He found that the malignancy in her sigmoid area had spread on her left ovary, necessitating the removal of certain
portions of it. Thus, Dr. Ampil obtained the consent of Natividads husband, Enrique Agana, to permit Dr. Juan Fuentes, respondent
in G.R. No. 126467, to perform hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and closed the incision.
However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984, the attending nurses
entered these remarks:
"sponge count lacking 2
"announced to surgeon searched (sic) done but to no avail continue for closure."
On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills, including the doctors fees, amounted to
P60,000.00.
After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes
about it. They told her that the pain was the natural consequence of the surgery. Dr. Ampil then recommended that she consult an
oncologist to examine the cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further treatment. After four months of
consultations and laboratory examinations, Natividad was told she was free of cancer. Hence, she was advised to return to the
Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks thereafter, her daughter found a
piece of gauze protruding from her vagina. Upon being informed about it, Dr. Ampil proceeded to her house where he managed to
extract by hand a piece of gauze measuring 1.5 inches in width. He then assured her that the pains would soon vanish.
Dr. Ampils assurance did not come true. Instead, the pains intensified, prompting Natividad to seek treatment at the Polymedic
General Hospital. While confined there, Dr. Ramon Gutierrez detected the presence of another foreign object in her vagina -- a foulsmelling gauze measuring 1.5 inches in width which badly infected her vaginal vault. A recto-vaginal fistula had formed in her
reproductive organs which forced stool to excrete through the vagina. Another surgical operation was needed to remedy the
damage. Thus, in October 1984, Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City a complaint for damages against
the Professional Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q43322. They alleged that the latter are liable for negligence for leaving two pieces of gauze inside Natividads body and malpractice
for concealing their acts of negligence.
Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an administrative complaint for gross
negligence and malpractice against Dr. Ampil and Dr. Fuentes, docketed as Administrative Case No. 1690. The PRC Board of
Medicine heard the case only with respect to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who was then in the
United States.
On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly substituted by her above-named
children (the Aganas).
On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and Dr. Fuentes liable for
negligence and malpractice, the decretal part of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendants PROFESSIONAL SERVICES, INC., DR.
MIGUEL AMPIL and DR. JUAN FUENTES to pay to the plaintiffs, jointly and severally, except in respect of the award for exemplary
damages and the interest thereon which are the liabilities of defendants Dr. Ampil and Dr. Fuentes only, as follows:
1. As actual damages, the following amounts:
a. The equivalent in Philippine Currency of the total of US$19,900.00 at the rate of P21.60-US$1.00, as
reimbursement of actual expenses incurred in the United States of America;
b. The sum of P4,800.00 as travel taxes of plaintiffs and their physician daughter;

c. The total sum of P45,802.50, representing the cost of hospitalization at Polymedic Hospital, medical fees,
and cost of the saline solution;
2. As moral damages, the sum of P2,000,000.00;
3. As exemplary damages, the sum of P300,000.00;
4. As attorneys fees, the sum of P250,000.00;
5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of the complaint until full payment;
and
6. Costs of suit.
SO ORDERED.
Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals, docketed as CA-G.R. CV No. 42062.
Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of its Decision, which was granted in an
Order dated May 11, 1993. Thereafter, the sheriff levied upon certain properties of Dr. Ampil and sold them for P451,275.00 and
delivered the amount to the Aganas.
Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr. Fuentes to indefinitely suspend any
further execution of the RTC Decision. However, not long thereafter, the Aganas again filed a motion for an alias writ of execution
against the properties of PSI and Dr. Fuentes. On September 21, 1993, the RTC granted the motion and issued the corresponding
writ, prompting Dr. Fuentes to file with the Court of Appeals a petition for certiorari and prohibition, with prayer for preliminary
injunction, docketed as CA-G.R. SP No. 32198. During its pendency, the Court of Appeals issued a Resolution5 dated October 29,
1993 granting Dr. Fuentes prayer for injunctive relief.
On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.
Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision6 in Administrative Case No. 1690 dismissing the
case against Dr. Fuentes. The Board held that the prosecution failed to show that Dr. Fuentes was the one who left the two pieces
of gauze inside Natividads body; and that he concealed such fact from Natividad.
On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R. CV No. 42062 and CA-G.R. SP No.
32198, thus:
WHEREFORE, except for the modification that the case against defendant-appellant Dr. Juan Fuentes is hereby DISMISSED, and
with the pronouncement that defendant-appellant Dr. Miguel Ampil is liable to reimburse defendant-appellant Professional Services,
Inc., whatever amount the latter will pay or had paid to the plaintiffs-appellees, the decision appealed from is hereby AFFIRMED and
the instant appeal DISMISSED.
Concomitant with the above, the petition for certiorari and prohibition filed by herein defendant-appellant Dr. Juan Fuentes in CAG.R. SP No. 32198 is hereby GRANTED and the challenged order of the respondent judge dated September 21, 1993, as well as
the alias writ of execution issued pursuant thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the petitioner in
connection with the writ of preliminary injunction issued by this Court on November 29, 1993 is hereby cancelled.
Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.
SO ORDERED.
Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution7 dated December 19, 1996.
Hence, the instant consolidated petitions.
In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred in holding that: (1) it is estopped from raising the
defense that Dr. Ampil is not its employee; (2) it is solidarily liable with Dr. Ampil; and (3) it is not entitled to its counterclaim against
the Aganas. PSI contends that Dr. Ampil is not its employee, but a mere consultant or independent contractor. As such, he alone
should answer for his negligence.

In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in finding that Dr. Fuentes is not guilty of negligence or
medical malpractice, invoking the doctrine of res ipsa loquitur. They contend that the pieces of gauze are prima facie proofs that the
operating surgeons have been negligent.
Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him liable for negligence and malpractice
sans evidence that he left the two pieces of gauze in Natividads vagina. He pointed to other probable causes, such as: (1) it was Dr.
Fuentes who used gauzes in performing the hysterectomy; (2) the attending nurses failure to properly count the gauzes used during
surgery; and (3) the medical intervention of the American doctors who examined Natividad in the United States of America.
For our resolution are these three vital issues: first, whether the Court of Appeals erred in holding Dr. Ampil liable for negligence and
malpractice; second, whether the Court of Appeals erred in absolving Dr. Fuentes of any liability; and third, whether PSI may be
held solidarily liable for the negligence of Dr. Ampil.
I - G.R. No. 127590
Whether the Court of Appeals Erred in Holding Dr. Ampil
Liable for Negligence and Malpractice.
Dr. Ampil, in an attempt to absolve himself, gears the Courts attention to other possible causes of Natividads detriment. He argues
that the Court should not discount either of the following possibilities: first, Dr. Fuentes left the gauzes in Natividads body after
performing hysterectomy; second, the attending nurses erred in counting the gauzes; and third, the American doctors were the ones
who placed the gauzes in Natividads body.
Dr. Ampils arguments are purely conjectural and without basis. Records show that he did not present any evidence to prove that the
American doctors were the ones who put or left the gauzes in Natividads body. Neither did he submit evidence to rebut the
correctness of the record of operation, particularly the number of gauzes used. As to the alleged negligence of Dr. Fuentes, we are
mindful that Dr. Ampil examined his (Dr. Fuentes) work and found it in order.
The glaring truth is that all the major circumstances, taken together, as specified by the Court of Appeals, directly point to Dr. Ampil
as the negligent party, thus:
First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding of the patient during the surgical
operation.
Second, immediately after the operation, the nurses who assisted in the surgery noted in their report that the sponge
count (was) lacking 2; that such anomaly was announced to surgeon and that a search was done but to no avail
prompting Dr. Ampil to continue for closure x x x.
Third, after the operation, two (2) gauzes were extracted from the same spot of the body of Mrs. Agana where the surgery
was performed.
An operation requiring the placing of sponges in the incision is not complete until the sponges are properly removed, and it is settled
that the leaving of sponges or other foreign substances in the wound after the incision has been closed is at least prima facie
negligence by the operating surgeon.8 To put it simply, such act is considered so inconsistent with due care as to raise an inference
of negligence. There are even legions of authorities to the effect that such act is negligence per se. 9
Of course, the Court is not blind to the reality that there are times when danger to a patients life precludes a surgeon from further
searching missing sponges or foreign objects left in the body. But this does not leave him free from any obligation. Even if it has
been shown that a surgeon was required by the urgent necessities of the case to leave a sponge in his patients abdomen, because
of the dangers attendant upon delay, still, it is his legal duty to so inform his patient within a reasonable time thereafter by advising
her of what he had been compelled to do. This is in order that she might seek relief from the effects of the foreign object left in her
body as her condition might permit. The ruling in Smith v. Zeagler10 is explicit, thus:
The removal of all sponges used is part of a surgical operation, and when a physician or surgeon fails to remove a sponge he has
placed in his patients body that should be removed as part of the operation, he thereby leaves his operation uncompleted and
creates a new condition which imposes upon him the legal duty of calling the new condition to his patients attention, and
endeavoring with the means he has at hand to minimize and avoid untoward results likely to ensue therefrom.
Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even misled her that the pain she was
experiencing was the ordinary consequence of her operation. Had he been more candid, Natividad could have taken the immediate

and appropriate medical remedy to remove the gauzes from her body. To our mind, what was initially an act of negligence by Dr.
Ampil has ripened into a deliberate wrongful act of deceiving his patient.
This is a clear case of medical malpractice or more appropriately, medical negligence. To successfully pursue this kind of case, a
patient must only prove that a health care provider either failed to do something which a reasonably prudent health care provider
would have done, or that he did something that a reasonably prudent provider would not have done; and that failure or action
caused injury to the patient.11 Simply put, the elements are duty, breach, injury and proximate causation. Dr, Ampil, as the lead
surgeon, had the duty to remove all foreign objects, such as gauzes, from Natividads body before closure of the incision. When he
failed to do so, it was his duty to inform Natividad about it. Dr. Ampil breached both duties. Such breach caused injury to Natividad,
necessitating her further examination by American doctors and another surgery. That Dr. Ampils negligence is the proximate
cause12 of Natividads injury could be traced from his act of closing the incision despite the information given by the attending nurses
that two pieces of gauze were still missing. That they were later on extracted from Natividads vagina established the causal link
between Dr. Ampils negligence and the injury. And what further aggravated such injury was his deliberate concealment of the
missing gauzes from the knowledge of Natividad and her family.
II - G.R. No. 126467
Whether the Court of Appeals Erred in Absolving
Dr. Fuentes of any Liability
The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the ground that it is contrary to the doctrine
of res ipsa loquitur. According to them, the fact that the two pieces of gauze were left inside Natividads body is a prima facie
evidence of Dr. Fuentes negligence.
We are not convinced.
Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the occurrence of an injury, taken with the
surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiffs prima facie case,
and present a question of fact for defendant to meet with an explanation.13 Stated differently, where the thing which caused the
injury, without the fault of the injured, is under the exclusive control of the defendant and the injury is such that it should not have
occurred if he, having such control used proper care, it affords reasonable evidence, in the absence of explanation that the injury
arose from the defendants want of care, and the burden of proof is shifted to him to establish that he has observed due care and
diligence.14
From the foregoing statements of the rule, the requisites for the applicability of the doctrine of res ipsa loquitur are: (1) the
occurrence of an injury; (2) the thing which caused the injury was under the control and management of the defendant; (3) the
occurrence was such that in the ordinary course of things, would not have happened if those who had control or management used
proper care; and (4) the absence of explanation by the defendant. Of the foregoing requisites, the most instrumental is the "control
and management of the thing which caused the injury."15
We find the element of "control and management of the thing which caused the injury" to be wanting. Hence, the doctrine of res ipsa
loquitur will not lie.
It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad. He requested the assistance of Dr.
Fuentes only to perform hysterectomy when he (Dr. Ampil) found that the malignancy in her sigmoid area had spread to her left
ovary. Dr. Fuentes performed the surgery and thereafter reported and showed his work to Dr. Ampil. The latter examined it and
finding everything to be in order, allowed Dr. Fuentes to leave the operating room. Dr. Ampil then resumed operating on Natividad.
He was about to finish the procedure when the attending nurses informed him that two pieces of gauze were missing. A "diligent
search" was conducted, but the misplaced gauzes were not found. Dr. Ampil then directed that the incision be closed. During this
entire period, Dr. Fuentes was no longer in the operating room and had, in fact, left the hospital.
Under the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of the surgery room and all personnel
connected with the operation. Their duty is to obey his orders. 16 As stated before, Dr. Ampil was the lead surgeon. In other words,
he was the "Captain of the Ship." That he discharged such role is evident from his following conduct: (1) calling Dr. Fuentes to
perform a hysterectomy; (2) examining the work of Dr. Fuentes and finding it in order; (3) granting Dr. Fuentes permission to leave;
and (4) ordering the closure of the incision. To our mind, it was this act of ordering the closure of the incision notwithstanding that
two pieces of gauze remained unaccounted for, that caused injury to Natividads body. Clearly, the control and management of the
thing which caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.
In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se create or constitute an independent or
separate ground of liability, being a mere evidentiary rule.17 In other words, mere invocation and application of the doctrine does not
dispense with the requirement of proof of negligence. Here, the negligence was proven to have been committed by Dr. Ampil and
not by Dr. Fuentes.

III - G.R. No. 126297

Whether PSI Is Liable for the Negligence of Dr. Ampil
The third issue necessitates a glimpse at the historical development of hospitals and the resulting theories concerning their liability
for the negligence of physicians.
Until the mid-nineteenth century, hospitals were generally charitable institutions, providing medical services to the lowest classes of
society, without regard for a patients ability to pay.18 Those who could afford medical treatment were usually treated at home by
their doctors.19 However, the days of house calls and philanthropic health care are over. The modern health care industry continues
to distance itself from its charitable past and has experienced a significant conversion from a not-for-profit health care to for-profit
hospital businesses. Consequently, significant changes in health law have accompanied the business-related changes in the
hospital industry. One important legal change is an increase in hospital liability for medical malpractice. Many courts now allow
claims for hospital vicarious liability under the theories of respondeat superior, apparent authority, ostensible authority, or agency by
estoppel. 20
In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil Code, which reads:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
A derivative of this provision is Article 2180, the rule governing vicarious liability under the doctrine of respondeat superior, thus:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those of
persons for whom one is responsible.
x x x
x x x
The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks even though the former are not engaged in any business or industry.
x x x
x x x
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence
of a good father of a family to prevent damage.
A prominent civilist commented that professionals engaged by an employer, such as physicians, dentists, and pharmacists, are not
"employees" under this article because the manner in which they perform their work is not within the control of the latter (employer).
In other words, professionals are considered personally liable for the fault or negligence they commit in the discharge of their duties,
and their employer cannot be held liable for such fault or negligence. In the context of the present case, "a hospital cannot be held
liable for the fault or negligence of a physician or surgeon in the treatment or operation of patients."21
The foregoing view is grounded on the traditional notion that the professional status and the very nature of the physicians calling
preclude him from being classed as an agent or employee of a hospital, whenever he acts in a professional capacity. 22 It has been
said that medical practice strictly involves highly developed and specialized knowledge, 23 such that physicians are generally free to
exercise their own skill and judgment in rendering medical services sans interference.24 Hence, when a doctor practices medicine in
a hospital setting, the hospital and its employees are deemed to subserve him in his ministrations to the patient and his actions are
of his own responsibility.25
The case of Schloendorff v. Society of New York Hospital26 was then considered an authority for this view. The "Schloendorff
doctrine" regards a physician, even if employed by a hospital, as an independent contractor because of the skill he exercises and
the lack of control exerted over his work. Under this doctrine, hospitals are exempt from the application of the respondeat superior
principle for fault or negligence committed by physicians in the discharge of their profession.
However, the efficacy of the foregoing doctrine has weakened with the significant developments in medical care. Courts came to
realize that modern hospitals are increasingly taking active role in supplying and regulating medical care to patients. No longer were
a hospitals functions limited to furnishing room, food, facilities for treatment and operation, and attendants for its patients. Thus, in
Bing v. Thunig,27 the New York Court of Appeals deviated from the Schloendorff doctrine, noting that modern hospitals actually do
far more than provide facilities for treatment. Rather, they regularly employ, on a salaried basis, a large staff of physicians, interns,
nurses, administrative and manual workers. They charge patients for medical care and treatment, even collecting for such services

through legal action, if necessary. The court then concluded that there is no reason to exempt hospitals from the universal rule of
respondeat superior.
In our shores, the nature of the relationship between the hospital and the physicians is rendered inconsequential in view of our
categorical pronouncement in Ramos v. Court of Appeals 28 that for purposes of apportioning responsibility in medical negligence
cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians. This Court
held:
"We now discuss the responsibility of the hospital in this particular incident. The unique practice (among private hospitals) of filling
up specialist staff with attending and visiting "consultants," who are allegedly not hospital employees, presents problems in
apportioning responsibility for negligence in medical malpractice cases. However, the difficulty is more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work within
the hospital premises. Doctors who apply for consultant slots, visiting or attending, are required to submit proof of completion of
residency, their educational qualifications, generally, evidence of accreditation by the appropriate board (diplomate), evidence of
fellowship in most cases, and references. These requirements are carefully scrutinized by members of the hospital administration or
by a review committee set up by the hospital who either accept or reject the application. x x x.
After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and patient audits and perform other
tasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting
patients into the hospital. In addition to these, the physicians performance as a specialist is generally evaluated by a peer review
committee on the basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant
remiss in his duties, or a consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer review
committee, is normally politely terminated.
In other words, private hospitals, hire, fire and exercise real control over their attending and visiting consultant staff. While
consultants are not, technically employees, x x x, the control exercised, the hiring, and the right to terminate consultants all fulfill
the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether
such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the
purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians. "
But the Ramos pronouncement is not our only basis in sustaining PSIs liability. Its liability is also anchored upon the agency
principle of apparent authority or agency by estoppel and the doctrine of corporate negligence which have gained acceptance in the
determination of a hospitals liability for negligent acts of health professionals. The present case serves as a perfect platform to test
the applicability of these doctrines, thus, enriching our jurisprudence.
Apparent authority, or what is sometimes referred to as the "holding
out" theory, or doctrine of ostensible agency or agency by estoppel, 29 has its origin from the law of agency. It imposes liability, not as
the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow
misleading the public into believing that the relationship or the authority exists. 30 The concept is essentially one of estoppel and has
been explained in this manner:
"The principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or
which he holds the agent out to the public as possessing. The question in every case is whether the principal has by his voluntary
act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the
particular business, is justified in presuming that such agent has authority to perform the particular act in question. 31
The applicability of apparent authority in the field of hospital liability was upheld long time ago in Irving v. Doctor Hospital of Lake
Worth, Inc.32 There, it was explicitly stated that "there does not appear to be any rational basis for excluding the concept of apparent
authority from the field of hospital liability." Thus, in cases where it can be shown that a hospital, by its actions, has held out a
particular physician as its agent and/or employee and that a patient has accepted treatment from that physician in the reasonable
belief that it is being rendered in behalf of the hospital, then the hospital will be liable for the physicians negligence.
Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of the Civil Code reads:
ART. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority.
In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and specializations of the physicians
associated or accredited by it, including those of Dr. Ampil and Dr. Fuentes. We concur with the Court of Appeals conclusion that it

"is now estopped from passing all the blame to the physicians whose names it proudly paraded in the public directory leading the
public to believe that it vouched for their skill and competence." Indeed, PSIs act is tantamount to holding out to the public that
Medical City Hospital, through its accredited physicians, offers quality health care services. By accrediting Dr. Ampil and Dr. Fuentes
and publicly advertising their qualifications, the hospital created the impression that they were its agents, authorized to perform
medical or surgical services for its patients. As expected, these patients, Natividad being one of them, accepted the services on the
reasonable belief that such were being rendered by the hospital or its employees, agents, or servants. The trial court correctly
pointed out:
x x x regardless of the education and status in life of the patient, he ought not be burdened with the defense of absence of
employer-employee relationship between the hospital and the independent physician whose name and competence are certainly
certified to the general public by the hospitals act of listing him and his specialty in its lobby directory, as in the case herein. The
high costs of todays medical and health care should at least exact on the hospital greater, if not broader, legal responsibility for the
conduct of treatment and surgery within its facility by its accredited physician or surgeon, regardless of whether he is independent or
employed."33
The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are capable of acting only through other
individuals, such as physicians. If these accredited physicians do their job well, the hospital succeeds in its mission of offering
quality medical services and thus profits financially. Logically, where negligence mars the quality of its services, the hospital should
not be allowed to escape liability for the acts of its ostensible agents.
We now proceed to the doctrine of corporate negligence or corporate responsibility.
One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that PSI as owner, operator and
manager of Medical City Hospital, "did not perform the necessary supervision nor exercise diligent efforts in the supervision of Drs.
Ampil and Fuentes and its nursing staff, resident doctors, and medical interns who assisted Drs. Ampil and Fuentes in the
performance of their duties as surgeons."34 Premised on the doctrine of corporate negligence, the trial court held that PSI is directly
liable for such breach of duty.
We agree with the trial court.
Recent years have seen the doctrine of corporate negligence as the judicial answer to the problem of allocating hospitals liability for
the negligent acts of health practitioners, absent facts to support the application of respondeat superior or apparent authority. Its
formulation proceeds from the judiciarys acknowledgment that in these modern times, the duty of providing quality medical service
is no longer the sole prerogative and responsibility of the physician. The modern hospitals have changed structure. Hospitals now
tend to organize a highly professional medical staff whose competence and performance need to be monitored by the hospitals
commensurate with their inherent responsibility to provide quality medical care.35
The doctrine has its genesis in Darling v. Charleston Community Hospital. 36 There, the Supreme Court of Illinois held that "the jury
could have found a hospital negligent, inter alia, in failing to have a sufficient number of trained nurses attending the patient; failing
to require a consultation with or examination by members of the hospital staff; and failing to review the treatment rendered to the
patient." On the basis of Darling, other jurisdictions held that a hospitals corporate negligence extends to permitting a physician
known to be incompetent to practice at the hospital. 37 With the passage of time, more duties were expected from hospitals, among
them: (1) the use of reasonable care in the maintenance of safe and adequate facilities and equipment; (2) the selection and
retention of competent physicians; (3) the overseeing or supervision of all persons who practice medicine within its walls; and (4) the
formulation, adoption and enforcement of adequate rules and policies that ensure quality care for its patients. 38 Thus, in Tucson
Medical Center, Inc. v. Misevich,39 it was held that a hospital, following the doctrine of corporate responsibility, has the duty to see
that it meets the standards of responsibilities for the care of patients. Such duty includes the proper supervision of the members of
its medical staff. And in Bost v. Riley,40 the court concluded that a patient who enters a hospital does so with the reasonable
expectation that it will attempt to cure him. The hospital accordingly has the duty to make a reasonable effort to monitor and oversee
the treatment prescribed and administered by the physicians practicing in its premises.
In the present case, it was duly established that PSI operates the Medical City Hospital for the purpose and under the concept of
providing comprehensive medical services to the public. Accordingly, it has the duty to exercise reasonable care to protect from
harm all patients admitted into its facility for medical treatment. Unfortunately, PSI failed to perform such duty. The findings of the
trial court are convincing, thus:
x x x PSIs liability is traceable to its failure to conduct an investigation of the matter reported in the nota bene of the count nurse.
Such failure established PSIs part in the dark conspiracy of silence and concealment about the gauzes. Ethical considerations, if
not also legal, dictated the holding of an immediate inquiry into the events, if not for the benefit of the patient to whom the duty is
primarily owed, then in the interest of arriving at the truth. The Court cannot accept that the medical and the healing professions,
through their members like defendant surgeons, and their institutions like PSIs hospital facility, can callously turn their backs on and
disregard even a mere probability of mistake or negligence by refusing or failing to investigate a report of such seriousness as the
one in Natividads case.

It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of the Medical City Hospitals staff,
composed of resident doctors, nurses, and interns. As such, it is reasonable to conclude that PSI, as the operator of the hospital,
has actual or constructive knowledge of the procedures carried out, particularly the report of the attending nurses that the two pieces
of gauze were missing. In Fridena v. Evans,41 it was held that a corporation is bound by the knowledge acquired by or notice given
to its agents or officers within the scope of their authority and in reference to a matter to which their authority extends. This means
that the knowledge of any of the staff of Medical City Hospital constitutes knowledge of PSI. Now, the failure of PSI, despite the
attending nurses report, to investigate and inform Natividad regarding the missing gauzes amounts to callous negligence. Not only
did PSI breach its duties to oversee or supervise all persons who practice medicine within its walls, it also failed to take an active
step in fixing the negligence committed. This renders PSI, not only vicariously liable for the negligence of Dr. Ampil under Article
2180 of the Civil Code, but also directly liable for its own negligence under Article 2176. In Fridena, the Supreme Court of Arizona
held:
x x x In recent years, however, the duty of care owed to the patient by the hospital has expanded. The emerging trend is to hold the
hospital responsible where the hospital has failed to monitor and review medical services being provided within its walls. See Kahn
Hospital Malpractice Prevention, 27 De Paul . Rev. 23 (1977).
Among the cases indicative of the emerging trend is Purcell v. Zimbelman, 18 Ariz. App. 75,500 P. 2d 335 (1972). In Purcell, the
hospital argued that it could not be held liable for the malpractice of a medical practitioner because he was an independent
contractor within the hospital. The Court of Appeals pointed out that the hospital had created a professional staff whose competence
and performance was to be monitored and reviewed by the governing body of the hospital, and the court held that a hospital would
be negligent where it had knowledge or reason to believe that a doctor using the facilities was employing a method of treatment or
care which fell below the recognized standard of care.
Subsequent to the Purcell decision, the Arizona Court of Appeals held that a hospital has certain inherent responsibilities regarding
the quality of medical care furnished to patients within its walls and it must meet the standards of responsibility commensurate with
this undertaking. Beeck v. Tucson General Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court has confirmed the rulings
of the Court of Appeals that a hospital has the duty of supervising the competence of the doctors on its staff. x x x.
x x
x
x x x
In the amended complaint, the plaintiffs did plead that the operation was performed at the hospital with its knowledge, aid, and
assistance, and that the negligence of the defendants was the proximate cause of the patients injuries. We find that such general
allegations of negligence, along with the evidence produced at the trial of this case, are sufficient to support the hospitals liability
based on the theory of negligent supervision."
Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be emphasized that PSI, apart from a
general denial of its responsibility, failed to adduce evidence showing that it exercised the diligence of a good father of a family in
the accreditation and supervision of the latter. In neglecting to offer such proof, PSI failed to discharge its burden under the last
paragraph of Article 2180 cited earlier, and, therefore, must be adjudged solidarily liable with Dr. Ampil. Moreover, as we have
discussed, PSI is also directly liable to the Aganas.
One final word. Once a physician undertakes the treatment and care of a patient, the law imposes on him certain obligations. In
order to escape liability, he must possess that reasonable degree of learning, skill and experience required by his profession. At the
same time, he must apply reasonable care and diligence in the exercise of his skill and the application of his knowledge, and exert
his best judgment.
WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of Appeals in CA-G.R. CV No. 42062
and CA-G.R. SP No. 32198.
Costs against petitioners PSI and Dr. Miguel Ampil.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 84698 February 4, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM, BENJAMIN P. PAULINO, ANTONIO M. MAGTALAS,
COL. PEDRO SACRO and LT. M. SORIANO, petitioners,
vs.
COURT OF APPEALS, HON. REGINA ORDOEZ-BENITEZ, in her capacity as Presiding Judge of Branch 47, Regional Trial
Court, Manila, SEGUNDA R. BAUTISTA and ARSENIA D. BAUTISTA, respondents.
Balgos and Perez for petitioners.
Collantes, Ramirez & Associates for private respondents.

PADILLA, J.:
A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while on the second-floor premises of the
Philippine School of Business Administration (PSBA) prompted the parents of the deceased to file suit in the Regional Trial Court of
Manila (Branch 47) presided over by Judge (now Court of Appeals justice) Regina Ordoez-Benitez, for damages against the said
PSBA and its corporate officers. At the time of his death, Carlitos was enrolled in the third year commerce course at the PSBA. It
was established that his assailants were not members of the school's academic community but were elements from outside the
school.
Specifically, the suit impleaded the PSBA and the following school authorities: Juan D. Lim (President), Benjamin P. Paulino (VicePresident), Antonio M. Magtalas (Treasurer/Cashier), Col. Pedro Sacro (Chief of Security) and a Lt. M. Soriano (Assistant Chief of
Security). Substantially, the plaintiffs (now private respondents) sought to adjudge them liable for the victim's untimely demise due to
their alleged negligence, recklessness and lack of security precautions, means and methods before, during and after the attack on
the victim. During the proceedings a quo, Lt. M. Soriano terminated his relationship with the other petitioners by resigning from his
position in the school.
Defendants a quo (now petitioners) sought to have the suit dismissed, alleging that since they are presumably sued under Article
2180 of the Civil Code, the complaint states no cause of action against them, as jurisprudence on the subject is to the effect that
academic institutions, such as the PSBA, are beyond the ambit of the rule in the afore-stated article.
The respondent trial court, however, overruled petitioners' contention and thru an order dated 8 December 1987, denied their motion
to dismiss. A subsequent motion for reconsideration was similarly dealt with by an order dated 25 January 1988. Petitioners then
assailed the trial court's disposition before the respondent appellate court which, in a decision * promulgated on 10 June 1988,
affirmed the trial court's orders. On 22 August 1988, the respondent appellate court resolved to deny the petitioners' motion for
reconsideration. Hence, this petition.
At the outset, it is to be observed that the respondent appellate court primarily anchored its decision on the law of quasi-delicts, as
enunciated in Articles 2176 and 2180 of the Civil Code. 1 Pertinent portions of the appellate court's now assailed ruling state:
Article 2180 (formerly Article 1903) of the Civil Code is an adoption from the old Spanish Civil Code. The
comments of Manresa and learned authorities on its meaning should give way to present day changes. The law
is not fixed and flexible (sic); it must be dynamic. In fact, the greatest value and significance of law as a rule of
conduct in (sic) its flexibility to adopt to changing social conditions and its capacity to meet the new challenges
of progress.
Construed in the light of modern day educational system, Article 2180 cannot be construed in its narrow
concept as held in the old case of Exconde vs. Capuno 2 and Mercado vs. Court of Appeals; 3 hence, the ruling
in the Palisoc 4 case that it should apply to all kinds of educational institutions, academic or vocational.
At any rate, the law holds the teachers and heads of the school staff liable unless they relieve themselves of
such liability pursuant to the last paragraph of Article 2180 by "proving that they observed all the diligence to
prevent damage." This can only be done at a trial on the merits of the case. 5
While we agree with the respondent appellate court that the motion to dismiss the complaint was correctly denied and the complaint
should be tried on the merits, we do not however agree with the premises of the appellate court's ruling.
Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule of in loco parentis. This Court discussed this
doctrine in the afore-cited cases of Exconde, Mendoza, Palisoc and, more recently, in Amadora vs. Court of Appeals. 6 In all such
cases, it had been stressed that the law (Article 2180) plainly provides that the damage should have been caused or inflicted by
pupils or students of he educational institution sought to be held liable for the acts of its pupils or students while in its custody.

However, this material situation does not exist in the present case for, as earlier indicated, the assailants of Carlitos were not
students of the PSBA, for whose acts the school could be made liable.
However, does the appellate court's failure to consider such material facts mean the exculpation of the petitioners from liability? It
does not necessarily follow.
When an academic institution accepts students for enrollment, there is established a contract between them, resulting in bilateral
obligations which both parties are bound to comply with. 7 For its part, the school undertakes to provide the student with an
education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or a profession.
On the other hand, the student covenants to abide by the school's academic requirements and observe its rules and regulations.
Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that
promotes or assists in attaining its primary undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of
physics or higher mathematics or explore the realm of the arts and other sciences when bullets are flying or grenades exploding in
the air or where there looms around the school premises a constant threat to life and limb. Necessarily, the school must ensure that
adequate steps are taken to maintain peace and order within the campus premises and to prevent the breakdown thereof.
Because the circumstances of the present case evince a contractual relation between the PSBA and Carlitos Bautista, the rules on
quasi-delict do not really govern. 8 A perusal of Article 2176 shows that obligations arising from quasi-delicts or tort, also known as
extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied. However, this
impression has not prevented this Court from determining the existence of a tort even when there obtains a contract. In Air France
vs. Carrascoso (124 Phil. 722), the private respondent was awarded damages for his unwarranted expulsion from a first-class seat
aboard the petitioner airline. It is noted, however, that the Court referred to the petitioner-airline's liability as one arising from tort, not
one arising from a contract of carriage. In effect, Air France is authority for the view that liability from tort may exist even if there is a
contract, for the act that breaks the contract may be also a tort. (Austro-America S.S. Co. vs. Thomas, 248 Fed. 231).
This view was not all that revolutionary, for even as early as 1918, this Court was already of a similar mind. In Cangco vs. Manila
Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus:
The field of non-contractual obligation is much broader than that of contractual obligation, comprising, as it
does, the whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to
say, the mere fact that a person is bound to another by contract does not relieve him from extra-contractual
liability to such person. When such a contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes a breach of the contract would have constituted the source of an
extra-contractual obligation had no contract existed between the parties.
Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21, which provides:
Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good custom or
public policy shall compensate the latter for the damage. (emphasis supplied).
Air France penalized the racist policy of the airline which emboldened the petitioner's employee to forcibly oust the private
respondent to cater to the comfort of a white man who allegedly "had a better right to the seat." In Austro-American, supra, the
public embarrassment caused to the passenger was the justification for the Circuit Court of Appeals, (Second Circuit), to award
damages to the latter. From the foregoing, it can be concluded that should the act which breaches a contract be done in bad faith
and be violative of Article 21, then there is a cause to view the act as constituting a quasi-delict.
In the circumstances obtaining in the case at bar, however, there is, as yet, no finding that the contract between the school and
Bautista had been breached thru the former's negligence in providing proper security measures. This would be for the trial court to
determine. And, even if there be a finding of negligence, the same could give rise generally to a breach of contractual obligation
only. Using the test of Cangco, supra, the negligence of the school would not be relevant absent a contract. In fact, that negligence
becomes material only because of the contractual relation between PSBA and Bautista. In other words, a contractual relation is a
condition sine qua non to the school's liability. The negligence of the school cannot exist independently of the contract, unless the
negligence occurs under the circumstances set out in Article 21 of the Civil Code.
This Court is not unmindful of the attendant difficulties posed by the obligation of schools, above-mentioned, for conceptually a
school, like a common carrier, cannot be an insurer of its students against all risks. This is specially true in the populous student
communities of the so-called "university belt" in Manila where there have been reported several incidents ranging from gang wars to
other forms of hooliganism. It would not be equitable to expect of schools to anticipate all types of violent trespass upon their
premises, for notwithstanding the security measures installed, the same may still fail against an individual or group determined to
carry out a nefarious deed inside school premises and environs. Should this be the case, the school may still avoid liability by
proving that the breach of its contractual obligation to the students was not due to its negligence, here statutorily defined to be the
omission of that degree of diligence which is required by the nature of the obligation and corresponding to the circumstances of
persons, time and place. 9

As the proceedings a quo have yet to commence on the substance of the private respondents' complaint, the record is bereft of all
the material facts. Obviously, at this stage, only the trial court can make such a determination from the evidence still to unfold.
WHEREFORE, the foregoing premises considered, the petition is DENIED. The court of origin (RTC, Manila, Br. 47) is hereby
ordered to continue proceedings consistent with this ruling of the Court. Costs against the petitioners.
SO ORDERED.
Melencio-Herrera, Paras, Regalado and Nocon, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-13602

April 6, 1918

LEUNG BEN, plaintiff,

vs.
P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of Manila, defendants.
Thos. D. Aitken and W. A. Armstrong for plaintiff.
Kincaid & Perkins for defendants.
STREET, J.:
This is an application for a writ of certiorari, the purpose of which is to quash an attachment issued from the Court of First Instance
of the City of Manila under circumstances hereinbelow stated.
Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover of
Leung Ben the sum of P15,000 alleged to have been lost by the plaintiff to the defendant in a series of gambling, banking and
percentage games conducted ruing the two or three months prior to the institution of the suit. In his verified complaint the plaintiff
asked for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the property of the defendant, on
the ground that the latter was about to depart from the Philippine islands with intent to defraud his creditors. This attachment was
issued; and acting under the authority thereof, the sheriff attached the sum of P15,000 which had been deposited by the defendant
with the International Banking Corporation.
The defendant thereupon appeared by his attorney and moved the court to quash the attachment. Said motion having dismissed in
the Court of First Instance, the petitioner, Leung Ben, the defendant in that action, presented to this court, upon January 8, 1918 his
petition for the writ of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance of the city of Manila whose
names are mentioned in the caption hereof. The prayer is that the Honorable James A. Ostrand, as the judge having cognizance of
the action in said court be required to certify the record to this court for review and that the order of attachment which had been
issued should be revoked and discharged. with costs. Upon the filing of said petition in this court the usual order was entered
requiring the defendants to show cause why the writ should not issue. The response of the defendants, in the nature of a demurrer,
was filed upon January 21, 1918; and the matter is now heard upon the pleadings thus presented.
The provision of law under which this attachment was issued requires that there should be accuse of action arising upon contract,
express or implied. The contention of the petitioner is that the statutory action to recover money lost at gaming is that the statutory
action to recover money lost at gaming is no such an action as is contemplated in this provision, and he therefore insists that the
original complaint shows on its face that the remedy of attachment is not available in aid thereof; that the Court of First Instance
acted in excess of its jurisdiction in granting the writ of attachment; that the petitioner has no plain, speedy, and adequate remedy by
appeal or otherwise; and that consequently the writ of certiorari supplies the appropriate remedy for his relief.
The case presents the two following questions of law, either of which, if decided unfavorably to the petitioner, will be fatal to his
application:
(1) Supposing that the Court of First Instance has granted an attachment for which there is no statutory authority, can this court
entertain the present petition and grant the desired relief?
(2) Is the statutory obligation to restore money won at gaming an obligation arising from "contract, express or implied?"

We are of the opinion that the answer to the first question should be in the affirmative. Under section 514 of the Code of Civil
Procedure the Supreme Court has original jurisdiction by the writ of certiorari over the proceedings of Courts of First Instance,
wherever said courts have exceeded their jurisdiction and there is no plaint, speedy, and adequate remedy. In the same section, it is
further declared that the proceedings in the Supreme Court in such cases hall be as prescribed for Courts of First Instance in
section 217-221, inclusive, of said Code. This Supreme Court, so far as applicable, the provisions contained in those section to the
same extent as if they had been reproduced verbatim immediately after section 514. Turning to section 217, we find that, in defining
the conditions under which certiorari can be maintained in a Court of First Instance substantially the same language is used as is the
same remedy can be maintained in the Supreme Court of First Instance, substantially the same language is used as is found in
section 514 relative to the conditions under which the same remedy can be maintained in the Supreme Court, namely, when the
inferior tribunal has exceeded its jurisdiction and there is no appeal, nor any plain, speedy and adequate remedy. In using these
expressions the author of the Code of Civil Procedure merely adopted the language which, in American jurisdictions at least, had
long ago reached the stage of stereotyped formula.
In section 220 of the same Code, we have a provision relative to the final proceedings in certiorari, and herein it is stated that the
court shall determine whether the inferior tribunal has regularly pursued its authority it shall give judgment either affirming annulling,
or modifying the proceedings below, as the law requires. The expression, has not regularly pursued its authority as here used, is
suggestive, and we think it should be construed in connection with the other expressions have exceeded their jurisdiction, as used in
section 514, and has exceeded their jurisdiction as used in section 217. Taking the three together, it results in our opinion that any
irregular exercise of juridical power by a Court of First Instance, in excess of its lawful jurisdiction, is remediable by the writ of
certiorari, provided there is no other plain, speedy, and adequate remedy; and in order to make out a case for the granting of the writ
it is not necessary that the court should have acted in the matter without any jurisdiction whatever. Indeed the repeated use of
expression excess of jurisdiction shows that the lawmaker contemplated the situation where a court, having jurisdiction should
irregularly transcend its authority as well as the situation where the court is totally devoid of lawful power.
It may be observed in this connection that the word jurisdiction as used in attachment cases, has reference not only to the authority
of the court to entertain the principal action but also to its authority to issue the attachment, as dependent upon the existence of the
statutory ground. (6 C. J., 89.) This distinction between jurisdiction to issue the attachment as an ancillary remedy incident to the
principal litigation is of importance; as a court's jurisdiction over the main action may be complete, and yet it may lack authority to
grant an attachment as ancillary to such action. This distinction between jurisdiction over the ancillary has been recognized by this
court in connection with actions involving the appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil.
Rep., 355), a receiver had been appointed without legal justification. It was held that the order making the appointment was beyond
the jurisdiction of the court; and though the court admittedly had jurisdiction of the main cause, the order was vacated by this court
upon application a writ of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil. Rep., 735,
Yangco vs. Rohde, 1 Phil. Rep., 404.)
By parity of reasoning it must follow that when a court issues a writ of attachment for which there is no statutory authority, it is acting
irregularly and in excess of its jurisdiction, in the sense necessary to justify the Supreme Court in granting relief by the writ of
certiorari. In applying this proposition it is of course necessary to take account of the difference between a ground of attachment
based on the nature of the action and a ground of attachment based on the acts or the conditions of the defendant. Every complaint
must show a cause of action some sort; and when the statue declares that the attachment may issue in an action arising upon
contract, the express or implied, it announces a criterion which may be determined from an inspection of the language of the
complaint. The determination of this question is purely a matter of law. On the other hand, when the stature declares that an
attachment may be issued when the defendant is about to depart from the Islands, a criterion is announced which is wholly foreign
to the cause of action; and the determination of it may involve a disputed question of fact which must be decided by the court. In
making this determination, the court obviously acts within its powers; and it would be idle to suppose that the writ of certiorari would
be available to reverse the action of a Court of First Instance in determining the sufficiency of the proof on such a disputed point,
and in granting or refusing the attachment accordingly.
We should not be understood, in anything that has been said, as intending to infringe the doctrine enunciated by this court in
Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when properly applied. It was there held that we would not, upon application
for a writ of certiorari, dissolve an interlocutory mandatory injunction that had been issued in a Court of First Instance as an incident
in an action of mandamus. The issuance of an interlocutory injunction depends upon conditions essentially different from those
involved in the issuance of an attachment. The injunction is designed primarily for the prevention of irreparable injury and the use of
the remedy is in a great measure dependent upon the exercise of discretion. Generally, it may be said that the exercise of the
injunctive powers is inherent in judicial authority; and ordinarily it would be impossible to distinguish between the jurisdiction of the
court in the main litigation and its jurisdiction to grant an interlocutory injunction, for the latter is involved in the former. That the writ
of certiorari can not be used to reverse an order denying a motion for a preliminary injunction is of course not to cavil. (Somes vs.
Crossfield and Molina, 8 Phil. Rep., 284.)
But it will be said that the writ of certiorari is not available in this cae, because the petitioner is protected by the attachment bond,
and that he has a plain, speedy, and adequate remedy appeal. This suggestion seems to be sufficiently answered in the case of
Rocha & Co vs. Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there cited. The remedy by
appeal is not sufficiently speedy to meet the exigencies of the case. An attachment is extremely violent, and its abuse may often
result in infliction of damage which could never be repaired by any pecuniary award at the final hearing. To postpone the granting of
the writ in such a case until the final hearing and to compel the petitioner to bring the case here upon appeal merely in order to
correct the action of the trial court in the matter of allowing the attachment would seem both unjust and unnecessary.

Passing to the problem propounded in the second question it may be observed that, upon general principles,. recognize both the
civil and common law, money lost in gaming and voluntarily paid by the loser to the winner can not in the absence of statue, be
recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms of gambling,
contains numerous provisions recognizing the right to recover money lost in gambling or in the playing of certain games (secs. 6, 7,
8, 9, 11). The original complaint in the action in the Court of First Instance is not clear as to the particular section of Act No. 1757
under which the action is brought, but it is alleged that the money was lost at gambling, banking, and percentage game in which the
defendant was banker. It must therefore be assumed that the action is based upon the right of recovery given in Section 7 of said
Act, which declares that an action may be brought against the banker by any person losing money at a banking or percentage
game.
Is this a cause arising upon contract, express or implied, as this term is used in section 412 of the Code of Civil Procedure? To
begin the discussion, the English version of the Code of Civil Procedure is controlling (sec. 15, Admin. Code, ed. of 1917).
Furthermore it is universally admitted to be proper in the interpretation of any statute, to consider its historical antecedents and its
juris prudential sources. The Code of Civil Procedure, as is well known, is an American contribution to Philippine legislation. It
therefore speaks the language of the common-law and for the most part reflects its ideas. When the draftsman of this Code used the
expression contract, express or implied, he used a phrase that has been long current among writers on American and English law;
and it is therefore appropriate to resort to that system of law to discover the appropriate to resort to that system of law to discover
the meaning which the legislator intended to convey by those meaning which the legislator intended to convey by those terms. We
remark in passing that the expression contrato tracito, used in the official translation of the Code of Civil Procedure as the Spanish
equivalent of implied contract, does not appear to render the full sense of the English expression.
The English contract law, so far as relates to simple contracts is planted upon two foundations, which are supplied by two very
different conceptions of legal liability. These two conceptions are revealed in the ideas respectively underlying (1) the common- law
debt and (2) the assumptual promise. In the early and formative stages of the common-law the only simple contract of which the
courts took account was the real contract or contract re, in which the contractual duty imposed by law arises upon the delivery of a
chattle, as in the mutuum, commodatum, depositum, and the like; and the purely consensual agreements of the Roman Law found
no congenial place in the early common law system.
In course of time the idea underlying the contract re was extended so as to include from one person to another under such
circumstances as to constitute a justa cuas debendi. The obligation thereby created was a debt. The constitutive element in this
litigation is found in the fact that the debtor has received something from the creditor, which he is bound by the obligation of law to
return or pay for. From an early day this element was denominated the quid pro quo, an ungainly phrase coined by Mediaeval
Latinity. The quid pro quo was primarily a materials or physical object, and its constituted the recompense or equivalent acquired by
the debtor. Upon the passage of the quid pro quo from one party to the other, the law imposed that real contractual duty peculiar to
the debt. No one conversant with the early history of English law would ever conceive of the debt as an obligation created by
promise. It is the legal duty to pay or deliver a sum certain of money or an ascertainable quantity of ponderable or measurable
chattles.
The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to the debtor at the time of the creation
of the debt, but the term is equally applicable to duties imposed by custom or statute, or by judgment of a court.
The existence of a debt supposes one person to have possession of thing (res) which he owes and hence ought to turn over the
owner. This obligation is the oldest conception of contract with which the common law is familiar; and notwithstanding the centuries
that have rolled over Westminster Hall that conception remains as one of the fundamental bases of the common-law contract.
Near the end of the fifteenth century there was evolved in England a new conception of contractual liability, which embodied the
idea of obligation resulting from promise and which found expression in the common law assumpsit, or parol promise supported by a
consideration. The application of this novel conception had the effect of greatly extending the filed of contractual liability and by this
means rights of action came to be recognized which had been unknown before. The action of assumpsit which was the instrument
for giving effect to this obligation was found to be a useful remedy; and presently this action came to be used for the enforcement of
common-law debts. The result was to give to our contract law the superficial appearance of being based more or less exclusively
upon the notion of the obligation of promise.
An idea is widely entertained to the effect that all simple contracts recognized in the common-law system are referable to a singly
category. They all have their roots, so many of us imagine, in one general notion of obligation; and of course the obligation of
promise is supposed to supply this general notion, being considered a sort of menstruum in which all other forms of contractual
obligation have been dissolved. This a mistake. The idea of contractual duty embodied in the debt which was the first conception of
contract liability revealed in the common law, has remained, although it was detained to be in a measure obscured by the more
modern conception of obligation resulting from promise.
What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain of money or an ascertainable quantity
of ponderable or measurable chattles which is indicated by them debt has ever been recognized, in the common-law system,
as a true contract, regardless, of the source of the duty or the manner in which it is create whether derived from custom, statue or
some consensual transaction depending upon the voluntary acts of the parties. the form of contract known as the debt is of the most
ancient lineage; and when reference is had to historical antecedents, the right of the debt to be classed as a contract cannot be
questioned. Indeed when the new form of engagement consisting of the parol promise supported by a consideration first appeared,

it was looked upon as an upstart and its right to be considered a true contract was questioned. It was long customary to refer to it
exclusively as an assumpsit, agreement, undertaking, or parol promise, in fact anything but a contract. Only in time did the new form
of engagement attain the dignity of being classed among true contract.
The term implied takers us into shadowy domain of those obligations the theoretical classification of which has engaged the
attention of scholars from the time of Gaius until our own day and has been a source of as much difficulty to the civilian as to the
common-law jurist. There we are concerned with those acts which make one person debtor to another without there having
intervened between them any true agreement tending to produce a legal bond (vinculum juris). Of late years some American and
English writers have adopted the term quasi-contract as descriptive of these obligations or some of them; but the expression more
commonly used is implied contract.
Upon examination of these obligations, from the view point of the common-law jurisprudence, it will be found that they fall readily
into two divisions according as they bear an analogy to the common-law debt or to the common law assumpsit. To exhibit the scope
of these different classes of obligations is here impracticable. It is only necessary in this connection to observe that the most
conspicuous division is that which comprises duties in the nature of debt. The characteristic feature of these obligations is that upon
certain states of fact the law imposes an obligation to pay a sum certain of money; and it is characteristic of this obligation that the
money in respect to which the duty is raised is conceived as being equivalent of something taken or detained under circumstances
giving rise to the duty to return or compensate therefore. The proposition that no one shall be allowed to enrich himself unduly at the
expense of another embodies the general principle here lying at the basis of obligation. The right to recover money improperly paid
(repeticion de lo indebido) is also recognized as belong to this class of duties.
It will observed that according to the Civil Code obligations are supposed to be derived either from (1) the law, (2) contracts and
quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort ob lame or negligence is present. This enumeration of
sources of obligations and the obligation imposed by law are different types. The learned Italian jurist, Jorge Giorgi, criticises this
assumption and says that the classification embodied in the code is theoretically erroneous. His conclusion is that one or the other
of these categories should have been suppressed and merged in the other. (Giorgi, Teoria de las Obligaciones, Spanish ed., vol. 5
arts. 5, 7, 9.) The validity of this criticism is, we thin, self-evident; and it is of interest to note that the common law makes no
distinction between the two sources of liability. The obligations which in the Code are indicated as quasi-contracts, as well as those
arising ex lege, are in the common la system, merged into the category of obligations imposed by law, and all are denominated
implied contracts.
Many refinements, more or less illusory, have been attempted by various writers in distinguishing different sorts of implied contracts,
as for example, the contract implied as of fact and the contract implied as of law. No explanation of these distinctions will be here
attempted. Suffice it to say that the term contract, express or implied, is used to by common-law jurists to include all purely personal
obligations other than those which have their source in delict, or tort. As to these it may be said that, generally speaking, the law
does not impose a contractual duty upon a wrongdoer to compensate for injury done. It is true that in certain situations where a
wrongdoer unjustly acquired something at the expense of another, the law imposes on him a duty to surrender his unjust
acquisitions, and the injured party may here elect to sue upon this contractual duty instead of suing upon the tort; but even here the
distinction between the two liabilities, in contract and in tort, is never lost to sight; and it is always recognized that the liability arising
out of the tort is delictual and not of a contractual or quasi-contractual nature.
In the case now under consideration the duty of the defendant to refund the money which he won from the plaintiff at gaming is a
duty imposed by statute. It therefore arises ex lege. Furthermore, it is a duty to return a certain sum which had passed from the
plaintiff to the defendant. By all the criteria which the common law supplies, this a duty in the nature of debt and is properly classified
as an implied contract. It is well- settled by the English authorities that money lost in gambling or by lottery, if recoverable at all, can
be recovered by the loser in an action of indebitatus assumpsit for money had and received. (Clarke vs. Johnson. Lofft, 759; Mason
vs. Waite, 17 Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This means that in the common law the duty to return money won in this
way is an implied contract, or quasi-contract.
It is no argument to say in reply to this that the obligation here recognized is called an implied contract merely because the remedy
commonly used in suing upon ordinary contract can be here used, or that the law adopted the fiction of promise in order to bring the
obligation within the scope of the action of assumpsit. Such statements fail to express the true import of the phenomenon. Before
the remedy was the idea; and the use of the remedy could not have been approved if it had not been for historical antecedents
which made the recognition of this remedy at one logical and proper. Furthermore, it should not be forgotten that the question is not
how this duty but what sort of obligation did the author of the Code of Civil Procedure intend to describe when he sued the term
implied contract in section 412.
In what has been said we have assumed that the obligation which is at the foundation of the original action in the court below is not
a quasi-contract, when judge by the principles of the civil law. A few observations will show that this assumption is not by any means
free from doubt. The obligation in question certainly does not fall under the definition of either of the two-quasi- contracts which are
made the subject of special treatment in the Civil Code, for its does not arise from a licit act as contemplated in article 1895. The
obligation is clearly a creation of the positive law a circumstance which brings it within the purview of article 1090, in relation with
article, 1089; and it is also derived from an illicit act, namely, the playing of a prohibited game. It is thus seen that the provisions of
the Civil Code which might be consulted with a view to the correct theoretical classification of this obligation are unsatisfactory and
confusing.

The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1) the obligation incident to the officious
management of the affairs of other person (gestion de negocios ajenos) and (2) the recovery of what has been improperly paid
(cabro de lo indebido). That the authors of the Civil Code selected these two obligations for special treatment does not signify an
intention to deny the possibility of the existence of other quasi-contractual obligations. As is well said by the commentator Manresa.
The number of the quasi-contracts may be indefinite as may be the number of lawful facts, the generations of the said
obligations; but the Code, just as we shall see further on, in the impracticableness of enumerating or including them all in
a methodical and orderly classification, has concerned itself with two only namely, the management of the affairs of
other person and the recovery of things improperly paid without attempting by this to exclude the others. (Manresa, 2d
ed., vol. 12, p. 549.)
It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence of more than a thousand years,
should have arbitrarily assumed to limit the quasi-contract to two obligations. The author from whom we have just quoted further
observes that the two obligations in question were selected for special treatment in the Code not only because they were the most
conspicuous of the quasi-contracts, but because they had not been the subject of consideration in other parts of the Code. (Opus
citat., 550.)
It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide range. The Italian jurist, Jorge Giorgi,
to whom we have already referred, considers under this head, among other obligations, the following: payments made upon a future
consideration which is not realized or upon an existing consideration which fails; payments wrongfully made upon a consideration
which is contrary to law, or opposed to public policy; and payments made upon a vicious consideration or obtained by illicit means
(Giorgi, Teoria de las Obligaciones, vol. 5, art. 130.)
Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in the application of articles 1798, 180`,
and 1305 of the Civil Code. The first two of these articles relate to gambling contracts, while article 1305 treats of the nullity of
contracts proceeding from a vicious or illicit consideration. Taking all these provisions together, it must be apparent that the
obligation to return money lost at play has a decided affinity to contractual obligations; and we believe that it could, without violence
to the doctrines of the civil law, be held that such obligations is an innominate quasi-contract. It is, however, unnecessary to place
the decision on this ground.
From what has been said it follows that in our opinion the cause of action stated in the complaints in the court below is based on a
contract, express or implied and is therefore of such nature that the court had authority to issue writ of attachment. The application
for the writ of certiorari must therefore be denied and the proceedings dismissed. So ordered.
Arellano, C.J., Torres, Johnson and Carson, JJ., concur.

Separate Opinions
MALCOLM, J., concurring:
As I finished reading the learned and interesting decision of the majority, the impression which remained was that the court was
enticed by the nice and unusual points presented to make a hard case out of an easy one and unfortunately t do violence to the
principles of certiorari. The simple questions are : Di the Court of First Instance of city of Manila exceed its jurisdiction in granting an
attachments against the property of the defendant, now plaintiff? Has this defendant, now become the plaintiff, any other plain,
speedy and adequate remedy? The answer are found in the decision of thinks court, in Herrera vs. Barretto and Joaquin ([1913], 25
Phil., 245), from which I quote the following:
It has been repeatedly held by this court that a writ of certiorari will not be issued unless it clearly appears that the court to
which it is to be directed acted without or in excess of jurisdiction. It will not be issued to cure errors in the proceedings or
to correct erroneous conclusions of law or of fact. If the court has jurisdiction. It will not be issued to cure errors in the
proceedings to correct jurisdiction of the subject matter and f the person, decisions upon all question pertaining to the
cause are decisions within its jurisdiction and, however irregular or erroneous they may be, cannot be corrected by
certiorari. The Code of Civil Procedure giving Courts of First Instance general jurisdiction in actions for mandamus, it goes
without saying that the Court of First Instance had jurisdiction in the present case to resolve every question arising in such
an action and t decide every question presented to it which pertained to the cause. It has already been held by this court,
that while it is a power to be exercised only in extreme case, a Court of First Instance has power to issue a mandatory
injunction t stand until the final determination of the action in which it is issued. While the issuance of the mandatory
injunction in this particular case may have been irregular and erroneous, a question concerning which we express no
opinion, nevertheless its issuance was within the jurisdiction of the court and its action is not reveiwable on certiorari. It is
not sufficient to say that it was issued wrongfully and without sufficient grounds and in the absence of the other party. The
question is, Did the court act with jurisdiction?

It has been urged that the court exceeded its jurisdiction in requiring the municipal president t issue the license, for the
reason that he was not the proper person to issue it and that, if he was the proper person, he had the right to exercise a
discretion as to whom the license should be issued. We do not believe that either of these questions goes to the
jurisdiction of the court to act. One of the fundamental question in a mandamus against a public officer is whether or not
that officer has the right to exercise discretion in the performance of the act which the plaintiff asks him to perform. It is
one of the essential determinations of the cause. To claim that the resolution of that question may deprive the court of
jurisdiction is to assert a novel proposition. It is equivalent to the contention that a court has jurisdiction if he decides right
but no jurisdiction if he decides wrong. It may be stated generally that it is never necessary to decide the fundamental
questions of a cause to determine whether the court has jurisdiction. The question of jurisdiction is preliminary and never
touches the merits of the case. The determination of the fundamental questions of a cause are merely the exercise of a
jurisdiction already conceded. In the case at bar no one denies the power, authority or jurisdiction of the Court of First
Instance to take cognizance of an action for mandamus and to decide very question which arises in that cause and
pertains thereto. The contention that the decision of one of those question, if wrong, destroys jurisdiction involves an
evident contradiction.
Jurisdiction is the authority to hear and determine a cause the right to act in a case. Since it is the power to hear and
determine, it does not depend either upon the regularity of the exercise of that power or upon the rightfulness of the
decision made. Jurisdiction should therefore be distinguished from the exercise of jurisdiction. The authority to decide a
case at all, and not the decision rendered therein, is what makes up jurisdiction. Where there is jurisdiction of the person
and subject matter, as we have said before, the decision of all other questions arising in the case an exercise of that
jurisdiction.
Then follows an elaborate citation and discussion of American authorities, including a decision of the United States Supreme Court
and of the applicable Philippine cases. The decision continues"
The reasons givens in these cases last cited for the allowance of the writ of prohibition are applicable only to the class of
cases with which the decision deal and do not in any way militate against the general proposition herein asserted. Those
which relate to election contest are based upon the principle that those proceedings, are special in their nature and must
be strictly followed, a material departure from the statute resulting a loss, or in an excess of jurisdiction. The cases relating
to receivers are based, in a measure, upon the principle the appointment of a receiver being governed by the statute; and
in part upon the theory that the appointment of a receiver in an improper case is in substance a bankruptcy proceeding,
the taking of which is expressly prohibited by law. The case relative to the allowance of alimony pendente lite when the
answer denies the marriage is more difficult to distinguish. The reasons in support of the doctrine laid down in that case
are given the opinion in full and they seem to place the particular case to which they refer in a class by itself.
It is not alight things that the lawmakers have abolished writs of error and with them certiorari and prohibition, in so far as
they were methods by which the mere errors of an inferior curt could be corrected. As instruments to that end they no
longer exist. Their place is no taken by the appeal. So long as the inferior court retains jurisdiction its errors can be
corrected only by that method. The office of the writ of certiorari has been reduced to the correction of defects of
jurisdiction solely and cannot legally be used for any other purpose. It is truly an extra ordinary remedy and in this
jurisdiction, its use is restricted to truly extraordinary cases cases in which the action of the inferior court is wholly void,
where any further steps in the case would result in a waste of time and money and would produce no result whatever;
where the parties, or their privies, would be utterly deceived; where a final judgment or decree would be nought but a
snare and a delusion, deciding nothing, protecting nobody, a juridical pretension, a recorded falsehood, a standing
menace. It is only to avoid such result as these that a writ of certiorari is issuable; and even here an appeal will lie if the
aggrieved party prefers to prosecute it.
A full and thorough examination of all the decided cases in this court touching the question of certiorari and prohibition
fully supports the proposition already stated that, where a Court of First Instance has jurisdiction of the subject matter and
of the person, its decision of any question pertaining to the cause, however, erroneous, cannot be reviewed by certiorari,
but must be corrected by appeal.
I see no reason to override the decision in Herrera vs. Barretto and Joaquin (supra). Accordingly, I can do no better than to make
the language of Justice Moreland my own. applying these principles, it is self-evident that this court should no entertain the present
petition and should not grant the desired relief.

FISHER, J., dissenting:

I am in full accord with the view that the remedy of certiorari may be invoked in such cases as this, but I am constrained to dissent
from the opinion of the majority as regards the meaning of the term implied contract.
Section 412 of the code of Civil Procedure in connection with section 424, authorizes the preliminary attachment of the property of
the defendant: "(1) In an action for the recovery of money or damages on a cause of action arising upon contract, express or

implied, when the defendant is about to depart from the Philippine Islands, with intent to defraud his creditors; (2) . . .; (3) . . .; (4) . .
.; (5) When the defendant has removed or disposed of his property, or is about to do so, with intent to defraud his creditors."
It is evident that the terms of paragraph five of the article cited are much broader than those of the first paragraph. The fifth
paragraph is not limited to action arising from contract, but is by its terms applicable to actions brought for the purpose of enforcing
extra-contractual rights as well as contract rights. The limitation upon cases falling under paragraph five is to be found, not in the
character of the obligation for the enforcement for which the action is brought, but in the terms of article 4265, which requires that
the affidavit show that the amount due the plaintiff . . . is as much as the sum for which the order is granted.
That is to say, when application is made for a preliminary attachment upon the ground that the plaintiff is about to dispose of his
property with intent to defraud his creditors thus bringing the case within the terms of paragraph five of the section it is not
necessary to show that the obligation in suit is contractual in its origin, but is sufficient to show that the breach of the obligation, as
shown by the facts stated in the complaint and affidavit, imposes upon the defendant the obligation to pay a specific and definite
sum. For example, if it is alleged in the complaint that the defendant by negligence, has caused the destruction by fire of a building
belonging to plaintiff, and that such building was worth a certain sum of money, these facts would show a definite basis upon which
to authorize the granting of the writ. But if it were averred that the defendant has published a libel concerning the plaintiff, to the
injury of his feeling and reputation, there is no definite basis upon which to grant an attachment, because the amount of the damage
suffered, being necessarily uncertain and indeterminate, cannot be ascertained definitely until the trail has been completed.
But it appears that the legislature although it has seen fit to authorize a preliminary attachment in aid of action of all kinds when the
defendant is concealing his property with intent to defraud his creditors, has provided is about to depart from the country with intent
to defraud his creditos, the writ will issue only when the action in aid of which it is sought arises from a contract express or implied. If
an attachment were permitted upon facts bringing the application with the first paragraph of the section in support of action of any
kind, whether the obligation sued upon is contractual or not, then paragraph five would by construction be made absolutely identical
with paragraph one, and this would be in effect equivalent to the complete eliminated of the last two lines of the first paragraph. It is
a rule of statutory construction that effect should be given to all parts of the statue, if possible. I can see no reason why the
legislature should have limited cases falling within the firs paragraph to action arising from contract and have refrained from
imposing this limitation with respect to cases falling within the terms of the fifth paragraph, but this should have no effect upon us in
applying the law. Whether there be a good reason for it or not the distinction exists.
Had the phrase express or implied not been used to qualify contract, there would be no doubt whatever with regard to the meaning
of the word. In the Spanish Civil law contract are always consensual, and it would be impossible to define as a contract the judicial
relation existing between a person who has lost money at gaming and the winner of such money, simple because the law imposes
upon the winner the obligation of making restitution. An obligation of this kind, far from being consensual in its origin, arises against
the will of the debtor. To call such a relation a contract is, from the standpoint of the civil law, a contradiction in terms.
But is said that as the phase express or implied has been used to qualify the word contract and these words are found in statue
which speaks the language of the common law, this implies the introduction into our law of the concept of the implied contract of the
English common-law, a concept which embraces a certain class of obligation originating ex lege, which have been arbitrarily
classified as contracts, so that they might be enforced by one of the formal actions of the common law which legal tradition and
practice has reserved for the enforcement of contract. I cannot concur in this reasoning. I believe that when a technical juridical term
of substantive law is used in the adjective law of these islands, we should seek its meaning in our own substantive law rather than in
the law of America or of England. The code of Civil Procedure was not enacted to establish rules of substantive law, but upon the
assumption of the existence of these rules.
In the case of Cayce vs. Curtis (Dallam's Decisions Texas Reports, 403), it appears that the legislature, at a time when that State
still retained to a large extent the Spanish substantive civil law, enacted a statue in which the word bonds is used. In litigation
involving the construction of that statute, one of the parties contended that the work bond should be given the technical meaning
which it had in the English Common Law. The court rejected this contention saying
On the first point it is urged by counsel for the appellant that the word bond used in the statute being a common law term, we must
refer to the common law for its legal signification; and that by that law no instrument is a bond which is not under seal. The truth of
the proposition that sealing is an absolute requisite to the validity of a bond at common law is readily admitted; but the applicability
of that rule of the case under consideration is not perceived. This bond was taken at a time when the common law afforded no rule
of decision or practice in this country, and consequently that law cannot be legitimately resorted to, even for the purpose for which it
is invoked by the counsel for the appellant, unless it be shown that the civil law had not term of similar import for we regard it as a
correct rule of construction, that where technical terms are used in a statute they are to be referred for their signification to terms f
similar import in the system of laws which prevails in the country where the statues is passed, and not to another system which is
entirely foreign t the whole system of municipal regulations by which that country is governed. (Martin's Reports, vol. 3, 185; 7 Martin
[N. S.], 162.)"
Consequently, I believe that in the interpretation of phase "contract, express or implied," we should apply the rules of our own
substantive law. The phrase in itself offers no difficulty. The concept of the contract, under the Civil Code, as a legal relation of
exclusively consensual origin, offers no difficulty. Nor is any difficulty encountered in the gramatical sense of the words express and
"implied". Express according to the New International Dictionary is that which is directly and distinctly stated; expressed, not merely
implied or left to interference. Therefore, a contract entered into by means of letters, in which the offer and the acceptance have

been manifested by appropriate words, would be an "express contract." The word "imply" according to the same dictionary, is to
involve in substance or essence, or by fair inference, or by construction of law, when not expressly stated in words or signs; to
contain by implication to include virtually.
Therefore, if I enter a tailor shop and order a suit of clothes, although nothing is said regarding payment, it is an inference, both
logical and legal, from my act that is my intention to pay the reasonable value of the garments. The contract is implied, therefore, is
that in which the consent of the parties is implied.
Manresa, commenting upon article 1262 of the Civil Code, says:
The essence of consent is the agreement of the parties concerning that which is to constitute the contract . . . . The forms
of this agreement may vary according to whether it is expressed verbally or in writing, by words or by acts. Leaving the
other differences for consideration hereafter, we will only refer now to those which exist between express consent and
implied consent . . . . It is unquestionable that implied consent manifested by act or conduct, produces a contract. . . .
If it were necessary to have recourse to the English common law for the purpose of ascertaining the meaning of the phrase under
consideration, we could find many decisions which gave it the same meaning as that for which I contend.
An implied contract is where one party receives benefits from another party, under such circumstances that the law
presume a promise on the part of the party benefited to pay a reasonable price for the same. (Jones vs. Tucker [Del.], 84
Atlantic, 1012.)
It is true that English courts have extended the concept of the term contract to include certain obligations arising ex lege without
consent, express or implied. True contracts created by implied consent are designated in the English common law as contracts
implied in the fact, while the so-called contracts in which the consent is a fiction of law are called contracts implied by law. But is
evident that the latter are not real contracts. They have been called contract arbitrarily by the courts of England, and those of the
Untied States in which the English common law is in force, in order that certain actions arising ex lege may be enforced by the
action of assumpsit. In the rigid formulism of the English common law the substantive right had to be accommodated to the form of
action. As is stated in the monograph on the action of assumpsit in Ruling Case Law. (volume 2, 743)
In theory it wan action to recover for the nonperformance f simple contracts, and the formula and proceedings were
constructed and carried on accordingly. . . . From the reign of Elizabeth this action has been extended to almost every
case where an obligation arises from natural reason, . . . and it is now maintained in many cases which its principles do
not comprehend and where fictions and intendments are resorted to, to fit the actual cause of action to the theory of the
remedy. It is thus sanctioned where there has been no . . . real contract, but where some duty is deemed sufficient to
justify the court in imputing the promise to perform its, and hence in bending the transaction to the form of action.
In the ancient English common law procedure the form of the action was regarded as being much more important than the
substantive right to be enforced. If no form of action was found in which the facts would fit, so much the worse for the facts! to avoid
the injustices to which this condition of affairs gave rise, the judges invented those fictions which permitted them to preserve the
appearance of conservatism and change the law without expressly admitting that they were doing so. The indispensable averment,
that they were doing so. The indispensable avernment without which the action of assumpsit would not lie, was that the defendant
promised to pay plaintiff the amount demanded. (Sector vs. Holmes, 17 Vs., 566.) In true contracts, whether express or implied, this
promise in fact exists. In obligations arising ex lege there is no such promise, and therefore the action of assumpsit could not be
maintained, and therefore the action of assumpsit could not be maintained, although by reason of its relative simplicity it was one of
the most favored forms of action. In order to permit the litigant to make use of this form of action for the enforcement of ascertain
classes of obligations arising ex lege, the judges invented the fiction of the promise of the defendant to pay the amount of the
obligation, and as this fictitious promise give the appearance of consensuality to the legal relations of the parties, the name of
implied contract is given to that class of extra-contractual obligations enforcible by the action of assumpsit.
Now, it is not be supposed that it was the intention of the Legislature in making use in the first paragraph of article 412 of the phrase
contract, express or implied to corrupt the logical simplicity of our concept of obligations by importing into our law the antiquated
fictions of the mediaeval English common law. If one of the concepts of the term "implied contract" in the English common law,
namely, that in which consent is presume from the conduct of the debtor, harmonizes with the concept of the contract in our law,
why should we reject that meaning and hold that the Legislature intended to use this phrase in the foreign and illogical sense of a
contract arising without consent? This is a civil law country. why should we be compelled to study the fictions of the ancient English
common law, in order to be informed as to the meaning of the word contract in the law of the Philippine Islands? Much more
reasonable to my mind was the conclusion of the Texas court, under similar circumstances, to the effect to be referred for their
signification to terms of similar import in the system of laws which prevails in the country where the statue is passed." (Cayce vs.
Curtis, supra.)
My conclusion is that the phase contract, express or implied should be interpreted in the grammatical sense of the words and limited
to true contracts, consensual obligations arising from consent, whether expressed in words, writing or signs, or presumed from
conduct. As it is evident that the defendant in the present case never promised, him in the gambling game in question, his obligation
to restor the amounts won, imposed by the law, is no contractual, but purely extra-contractual and therefore the action brought not

being one arising upon contract express or implied, the plaintiff is not entitled to a preliminary attachment upon the averment that the
defendant is about to depart from the Philippine Islands with with intent t defraud his creditors, no averment being made in the
compliant or in the affidavit that the defendant has removed or disposed of his property, or is about to depart with intent to defraud
his creditors, so as to bring the case within the terms of the fifth paragraph of section 412.
I am unable to agree with the contention of the application (Brief, p. 39) here that the phase in question should be interpreted in
such a way as to include all obligations, whether arising from consent or ex lege, because that is equivalent to eliminating all
distinction between the first and the fifth paragraphs by practically striking out the first two lines of paragraph one. The Legislature
has deliberately established this distinction, and while we may be unable to see any reason why it should have been made, it is our
duty to apply and interpret the law, and we are not authorized under the guise of interpretation to virtually repeal part of the statute.
Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the first place, quasi- contracts are
"lawful and purely voluntary acts by which the authors thereof become obligated in favor of a third person. . . ." The act which gave
rise to the obligation ex lege relied upon by the plaintiff in the court below is illicit an unlawful gambling game. In the second
place, the first paragraph of section 412 of the Code of Civil Procedure does not authorize an attachment in actions arising out of
quasi contracts, but only in actions arising out of contract, express or implied.
I am therefore of the opinion that the court below was without jurisdiction to issue that writ of attachment and that the writ should be
declared null and void.
Avancea, J., concurs.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 170498

January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner,

vs.
ABSOLUTE MANAGEMENT CORPORATION, Respondent.
DECISION
BRION, J.:
We resolve petitioner Metropolitan Bank & Trust Company's (Metro bank's) petition for review on certiorari 1 seeking the reversal of
the decision2 dated August 25, 2005 and the resolution3 dated November 17, 2005 of the Court of Appeals (CA) in CA-G.R. SP No.
86336. The assailed decision affirmed the order4 dated May 7, 2004 of the Regional Trial Court (RTC) of Quezon City, Branch 80.
The RTC had denied the admission of Metrobank's Fourth-Party Complaint5 against the Estate of Jose L. Chua for being a money
claim that falls under Section 5, Rule 86 of the Rules of Court; the claim should have been filed in the pending judicial settlement of
Chuas estate before the RTC of Pasay City. The CA affirmed the RTCs order based on the same ground.
Factual Antecedents
On October 5, 2000, Sherwood Holdings Corporation, Inc. (SHCI) filed a complaint for sum of money against Absolute Management
Corporation (AMC). The complaint was docketed as Civil Case No. Q-00-42105 and was assigned to the RTC of Quezon City,
Branch 80.6
SHCI alleged in its complaint that it made advance payments to AMC for the purchase of 27,000 pieces of plywood and 16,500
plyboards in the sum of P12,277,500.00, covered by Metrobank Check Nos. 1407668502, 140768507, 140768530, 140768531,
140768532, 140768533 and 140768534. These checks were all crossed, and were all made payable to AMC. They were given to
Chua, AMCs General Manager, in 1998.7
Chua died in 1999, 8 and a special proceeding for the settlement of his estate was commenced before the RTC of Pasay City. This
proceeding was pending at the time AMC filed its answer with counterclaims and third-party complaint.9
SHCI made demands on AMC, after Chuas death, for allegedly undelivered items worth P8,331,700.00. According to AMC, these
transactions could not be found in its records. Upon investigation, AMC discovered that in 1998, Chua received from SHCI 18
Metrobank checks worth P31,807,500.00. These were all payable to AMC and were crossed or "for payees account only." 10

In its answer with counterclaims and third-party complaint,11 AMC averred that it had no knowledge of Chuas transactions with
SHCI and it did not receive any money from the latter. AMC also asked the RTC to hold Metrobank liable for the subject checks in
case it is adjudged liable to SHCI.
Metrobank filed a motion for bill of particulars,12 seeking to clarify certain ambiguous statements in AMCs answer. The RTC granted
the motion but AMC failed to submit the required bill of particulars. Hence, Metrobank filed a motion to strike out the third-party
complaint.13
In the meantime, Metrobank filed a motion to dismiss14 against AMC on the ground that the latter engaged in prohibited forum
shopping. According to Metrobank, AMCs claim against it is the same claim that it raised against Chuas estate in Special
Proceedings No. 99-0023 before the RTC of Pasay City, Branch 112. The RTC subsequently denied this motion.15
The RTC of Quezon City opted to defer consideration16 of Metrobanks motion to strike out third-party complaint17 and it instead
granted AMCs motion for leave to serve written interrogatories on the third-party defendant.18 While Metrobank filed its answer to
the written interrogatories, AMC was again directed by the RTC, in an order19 dated August 13, 2003, to submit its bill of particulars.
Instead, AMC filed a motion for reconsideration20 which was denied in an order21 dated October 28, 2003. AMC still did not file its bill
of particulars. The RTC, on the other hand, did not act on Metrobanks motion to strike out AMCs third-party complaint.22
In its answer23 dated December 1, 2003, Metrobank admitted that it deposited the checks in question to the account of Ayala
Lumber and Hardware, a sole proprietorship Chua owned and managed. The deposit was allegedly done with the knowledge and
consent of AMC. According to
Metrobank, Chua then gave the assurance that the arrangement for the handling of the checks carried AMCs consent. Chua also
submitted documents showing his position and interest in AMC. These documents, as well as AMCs admission in its answer that it
allowed Chua to manage AMC with a relative free hand, show that it knew of Chuas arrangement with Metrobank. Further, Chuas
records show that the proceeds of the checks were remitted to AMC which cannot therefore now claim that it did not receive these
proceeds.
Metrobank also raised the defense of estoppel. According to Metrobank, AMC had knowledge of its arrangements with Chua for
several years. Despite this arrangement, AMC did not object to nor did it call the attention of Metrobank about Chuas alleged lack of
authority to deposit the checks in Ayala Lumber and Hardwares account. At this point, AMC is already estopped from questioning
Chuas authority to deposit these checks in Ayala Lumber and Hardwares account.
Lastly, Metrobank asserted that AMC gave Chua unbridled control in managing AMCs affairs. This measure of control amounted to
gross negligence that was the proximate cause of the loss that AMC must now bear.
Subsequently, Metrobank filed a motion for leave to admit fourth-party complaint24 against Chuas estate. It alleged that Chuas
estate should reimburse Metrobank in case it would be held liable in the third-party complaint filed against it by AMC.
The RTCs Ruling
In an order25 dated May 7, 2004, the RTC denied Metrobanks motion. It likewise denied Metrobanks motion for reconsideration in
an order26 dated July 7, 2004.
The RTC categorized Metrobanks allegation in the fourth-party complaint as a "cobro de lo indebido"27 a kind of quasi-contract
that mandates recovery of what has been improperly paid. Quasi-contracts fall within the concept of implied contracts that must be
included in the claims required to be filed with the judicial settlement of the deceaseds estate under Section 5, Rule 86 of the Rules
of Court. As such claim, it should have been filed in Special Proceedings No. 99-0023, not before the RTC as a fourth-party
complaint. The RTC, acting in the exercise of its general jurisdiction, does not have the authority to adjudicate the fourth-party
complaint. As a trial court hearing an ordinary action, it cannot resolve matters pertaining to special proceedings because the latter
is subject to specific rules.
Metrobank responded to the RTC ruling by filing a petition for certiorari 28 under Rule 65 before the CA.
The CAs Ruling
The CA affirmed the RTCs ruling that Metrobanks fourth-party complaint should have been filed in Special Proceedings No. 990023.29 According to the CA, the relief that Metrobank prayed for was based on a quasi-contract and was a money claim
categorized as an implied contract that should be filed under Section 5, Rule 86 of the Rules of Court.
Based on the statutory construction principle of lex specialis derogat generali, the CA held that Section 5, Rule 86 of the Rules of
Court is a special provision that should prevail over the general provisions of Section 11, Rule 6 of the Rules of Court. The latter

applies to money claims in ordinary actions while a money claim against a person already deceased falls under the settlement of his
estate that is governed by the rules on special proceedings. If at all, rules for ordinary actions only apply suppletorily to special
proceedings.
The Present Petition
In its present petition for review on certiorari,30 Metrobank asserts that it should be allowed to file a fourth-party complaint against
Chuas estate in the proceedings before the RTC; its fourth-party complaint was filed merely to enforce its right to be reimbursed by
Chuas estate in case Metrobank is held liable to AMC. Hence, Section 11, Rule 6 of the Rules of Court should apply.
AMC, in its comment,31 maintains the line that the CA and the RTC rulings should be followed, i.e., that Metrobanks claim is a
quasi-contract that should be filed as a claim under Section 5, Rule 86 of the Rules of Court.
AMC also challenges the form of Metrobanks petition for failure to comply with Section 4, Rule 45 of the Rules of Court. This
provision requires petitions filed before the Supreme Court to be accompanied by "such material portions of the record as would
support the petition."
According to AMC, the petitions annexes are mostly Metrobanks pleadings and court issuances. It did not append all relevant AMC
pleadings before the RTC and the CA. For this reason, the petition should have been dismissed outright.
Issues
The parties arguments, properly joined, present to us the following issues:
1) Whether the petition for review on certiorari filed by Metrobank before the Supreme Court complies with Section 4, Rule
45 of the Rules of Court; and
2) Whether Metrobanks fourth-party complaint against Chuas estate should be allowed.
The Courts Ruling
The Present Petition Complies With Section 4, Rule 45 of the Rules of Court
AMC posits that Metrobanks failure to append relevant AMC pleadings submitted to the RTC and to the CA violated Section 4, Rule
45 of the Rules of Court,32 and is a sufficient ground to dismiss the petition under Section 5, Rule 45 of the Rules of Court. 33
We disagree with AMCs position.
In F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc., 34 Online Networks International, Inc. similarly assailed
F.A.T. Kee Computer Systems, Inc.s failure to attach the transcript of stenographic notes (TSN) of the RTC proceedings, and
claimed this omission to be a violation of Section 4, Rule 45 of the Rules of Court that warranted the petitions dismissal. The Court
held that the defect was not fatal, as the TSN of the proceedings before the RTC forms part of the records of the case. Thus, there
was no incurable omission that warranted the outright dismissal of the petition.
The Court significantly pointed out in F.A.T. Kee that the requirement in Section 4, Rule 45 of the Rules of Court is not meant to be
an absolute rule whose violation would automatically lead to the petitions dismissal. 35 The Rules of Court has not been intended to
be totally rigid. In fact, the Rules of Court provides that the Supreme Court "may require or allow the filing of such pleadings, briefs,
memoranda or documents as it may deem necessary within such periods and under such conditions as it may consider
appropriate";36 and "[i]f the petition is given due course, the Supreme Court may require the elevation of the complete record of the
case or specified parts thereof within fifteen (15) days from notice." 37 These provisions are in keeping with the overriding standard
that procedural rules should be liberally construed to promote their objective and to assist the parties in obtaining a just, speedy and
inexpensive determination of every action or proceeding.38
Under this guiding principle, we do not see Metrobanks omission to be a fatal one that should warrant the petitions outright
dismissal. To be sure, the omission to submit the adverse partys pleadings in a petition before the Court is not a commendable
practice as it may lead to an unduly biased narration of facts and arguments that masks the real issues before the Court. Such
skewed presentation could lead to the waste of the Courts time in sifting through the maze of the parties narrations of facts and
arguments and is a danger the Rules of Court seeks to avoid.
Our examination of Metrobanks petition shows that it contains AMCs opposition to its motion to admit fourth-party complaint among
its annexes. The rest of the pleadings have been subsequently submitted as attachments in Metrobanks Reply. A reading of these

pleadings shows that their arguments are the same as those stated in the orders of the trial court and the Court of Appeals. Thus,
even if Metrobanks petition did not contain some of AMCs pleadings, the Court still had the benefit of a clear narration of facts and
arguments according to both parties perspectives. In this broader view, the mischief that the Rules of Court seeks to avoid has not
really been present. If at all, the omission is not a grievous one that the spirit of liberality cannot address.
The Merits of the Main Issue
The main issue poses to us two essential points that must be addressed. First, are quasi-contracts included in claims that should be
filed pursuant to Rule 86, Section 5 of the Rules of Court? Second, if so, is Metrobanks claim against the Estate of Jose Chua
based on a quasi-contract?
Quasi-contracts are included in
claims that should be filed under Rule
86, Section 5 of the Rules of Court
In Maclan v. Garcia,39 Gabriel Maclan filed a civil case to recover from Ruben Garcia the necessary expenses he spent as
possessor of a piece of land. Garcia acquired the land as an heir of its previous owner. He set up the defense that this claim should
have been filed in the special proceedings to settle the estate of his predecessor. Maclan, on the other hand, contended that his
claim arises from law and not from contract, express or implied. Thus, it need not be filed in the settlement of the estate of Garcias
predecessor, as mandated by Section 5, Rule 87 of the Rules of Court (now Section 5, Rule 86).
The Court held under these facts that a claim for necessary expenses spent as previous possessor of the land is a kind of quasicontract. Citing Leung Ben v. OBrien,40 it explained that the term "implied contracts," as used in our remedial law, originated from
the common law where obligations derived from quasi-contracts and from law are both considered as implied contracts. Thus, the
term quasi-contract is included in the concept "implied contracts" as used in the Rules of Court. Accordingly, liabilities of the
deceased arising from quasi-contracts should be filed as claims in the settlement of his estate, as provided in Section 5, Rule 86 of
the Rules of Court.41
Metrobanks fourth-party complaint is
based on quasi-contract
Both the RTC and the CA described Metrobanks claim against Chuas estate as one based on quasi-contract. A quasi-contract
involves a juridical relation that the law creates on the basis of certain voluntary, unilateral and lawful acts of a person, to avoid
unjust enrichment.42 The Civil Code provides an enumeration of quasi-contracts,43 but the list is not exhaustive and merely provides
examples.44
According to the CA, Metrobanks fourth-party complaint falls under the quasi-contracts enunciated in Article 2154 of the Civil
Code.45 Article 2154 embodies the concept "solutio indebiti" which arises when something is delivered through mistake to a person
who has no right to demand it. It obligates the latter to return what has been received through mistake. 46
Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites: first, that something has been unduly
delivered through mistake; and second, that something was received when there was no right to demand it. 47
In its fourth-party complaint, Metrobank claims that Chuas estate should reimburse it if it becomes liable on the checks that it
deposited to Ayala Lumber and Hardwares account upon Chuas instructions.
This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a mistake when it deposited the AMC checks
to Ayala Lumber and Hardwares account; because of Chuas control over AMCs operations, Metrobank assumed that the checks
payable to AMC could be deposited to Ayala Lumber and Hardwares account. Second, Ayala Lumber and Hardware had no right to
demand and receive the checks that were deposited to its account; despite Chuas control over AMC and Ayala Lumber and
Hardware, the two entities are distinct, and checks exclusively and expressly payable to one cannot be deposited in the account of
the other. This disjunct created an obligation on the part of Ayala Lumber and Hardware, through its sole proprietor, Chua, to return
the amount of these checks to Metrobank.
The Court notes, however, that its description of Metrobanks fourth-party complaint as a claimclosely analogous to solutio indebiti is
only to determine the validity of the lower courts orders denying it. It is not an adjudication determining the liability of Chuas estate
against Metrobank. The appropriate trial court should still determine whether Metrobank has a lawful claim against Chuas estate
based on quasi-contract.1wphi1
Metrobanks fourth-party complaint,
as a contingent claim, falls within the
claims that should be filed under

Section 5, Rule 86 of the Rules of

Court
A distinctive character of Metrobanks fourth-party complaint is its contingent nature the claim depends on the possibility that
Metrobank would be adjudged liable to AMC, a future event that may or may not happen. This characteristic unmistakably marks the
complaint as a contingent one that must be included in the claims falling under the terms of Section 5, Rule 86 of the Rules of Court:
Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money against the decedent,
arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and
expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited
in the notice. [italics ours]
Specific provisions of Section 5, Rule
86 of the Rules of Court prevail over
general provisions of Section 11, Rule
6 of the Rules of Court
Metrobank argues that Section 11, Rule 6 of the Rules of Court should apply because it impleaded Chuas estate for reimbursement
in the same transaction upon which it has been sued by AMC. On this point, the Court supports the conclusion of the CA, to wit:
Notably, a comparison of the respective provisions of Section 11, Rule 6 and Section 5, Rule 86 of the Rules of Court readily shows
that Section 11, Rule 6 applies to ordinary civil actions while Section 5, Rule 86 specifically applies to money claims against the
estate. The specific provisions of Section 5, Rule 86 x x x must therefore prevail over the general provisions of Section 11, Rule 6. 48
We read with approval the CAs use of the statutory construction principle of lex specialis derogat generali, leading to the conclusion
that the specific provisions of Section 5, Rule 86 of the Rules of Court should prevail over the general provisions of Section 11, Rule
6 of the Rules of Court; the settlement of the estate of deceased persons (where claims against the deceased should be filed) is
primarily governed by the rules on special proceedings, while the rules provided for ordinary claims, including Section 11, Rule 6
ofthe Rules of Court, merely apply suppletorily.49
In sum, on all counts in the considerations material to the issues posed, the resolution points to the affirmation of the assailed CA
decision and resolution. Metrobank's claim in its fourth-party complaint against Chua's estate is based on quasi-contract. It is also a
contingent claim that depends on another event. Both belong to the category of claims against a deceased person that should be
filed under Section 5, Rule 86 of the Rules of Comi and, as such, should have been so filed in Special Proceedings No. 99-0023.
WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The decision of the Court of Appeals dated
August 25, 2005, holding that the Regional Trial Court of Quezon City, Branch 80, did not commit grave abuse of discretion in
denying Metropolitan Bank & Trust Company's motion for leave to admit fourth-party complaint Is
AFFIRMED. Costs against Metropolitan Bank & Trust Company.
SO ORDERED.
ARTURO D. BRION
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11028

April 17, 1959

LAO CHIT, plaintiff-appellee,

vs.
SECURITY BANK and TRUST CO. and CONSOLIDATED INVESTMENT, INC., defendants-appellants.
Nicetas A. Suanes for appellee.
Augusto S. Francisco for appellant Security Bank and Trust Co.
Jesus S. Nava for appellant Consolidated Investments, Inc.

CONCEPCION, J.:
In May, 1949, the consolidated Investments, Inc., hereafter referred to as the lessor, leased to Domingo T. Dikit part of the lobby, on
the ground floor of the Consolidated Building, at Plaza Goiti, Manila, to be used as offices of the proposed Bank of Manila, then
being organized by said Dikit and Jose Silva. Pursuant to the lease contract between the parties (Exhibits 2, 2-A and 2-B), the
lessee undertook to construct, at the expense thereof, such walls, partitions and other improvements as may be necessary to make
the leased premises suitable for banking purposes, and such partitions and improvements "shall become the property" of the lessor
"upon the termination and/or rescission" of said contract. It appears that, pursuant to another contract. It appears that, pursuant to
another entered into June, 1949, between Dikit and Silva on the one hand, and plaintiff Lao Chit, on the other (Exhibit A-1, and A-2
and A-3), the latter furnished the materials and the work for said walls, partitions and improvements, at a total cost of P59,365,
payable "as soon as the Bank of Manila opens for business, and is given a permit by the Central Bank." This permit however, was
never issued. The proposed Bank of Manila did not open for business, and rentals due under said lease contract, at the rate of
P5,000 a month, beginning from October, 1949, were not paid. On December 3, 1949, the lessor instituted Civil Case No. 9708 of
the Municipal Court of Manila against Dikit, for unlawful detainer. After appropriate proceedings, said court rendered judgement on
March 27, 1950, sentencing Dikit.
. . . to vacate the premises described in the complaint, and to pay the plaintiff the sum of P10,000.00, under the first cause
of action, corresponding rentals due from October to November, 1949, plus the sum of P227.80, under the second cause
of action, for electric consumption up to November 30, 1949; plus the rents that will become due from December 1, 1949,
at the rate P5,000.00 per month until the date said defendant finally vacates and surrenders possession to the plaintiff and
costs of this suit. (Exhibit 3.)
Dikit appealed from this decision to the Court of First Instance of Manila, where the case was docketed as Civil Case No. 11214 of
said court. He likewise, applied, in the Supreme Court in Case G.R. No. L-3621, entitled "Domingo Dikit vs. Hon Ramon Icasiano"
for a writ of certiorari against the municipal judge who had rendered the aforementioned decision in the ejectment case. Said
cases No. 11214 and L-3621 were soon dismissed, however, upon agreement of the parties, dated May 22, 1951, whereby Dikit,
among other things, relinquished whatever rights have to the possession of the leased premises and disclaimed all rights to and
over any and all improvements introduced therein while he was in possession thereof.
Prior to said decision, but after the commencement of the said Case No. 9708 Lao Chit had filed Civil Case No. 10178 of the Court
of First Instance of Manila, against Dikit and Silva, for the recovery of what was due from them by reason of the aforementioned
improvements introduced by Lao Chit. On June 30, 1953, judgement was rendered in said Case No. 10178 the dispositive part of
which reads as follows:
WHEREFORE, judgement is hereby rendered in favor of the plaintiff and against the defendants, sentencing the latter to
pay the former, jointly and severally, the sum of P59,365.00, which is the total of the claim under the second, third and
fourth causes of action, the same to be paid within 15 days from notice, with legal interest from the date of the filing of the
complaint until its full payment; and in the event the defendants fail to pay within the period of grace herein fixed, the
fixtures herein referred to (which by express agreement of the parties shall remain the plaintiff's property until they are
fully paid for) shall be returned to the plaintiff. The defendants shall also pay jointly and severally the plaintiff by way of
damages an amount equivalent to 12% of the aforementioned sum of P59,365.00. The defendants shall likewise pay the
plaintiff, jointly and severally, another sum equivalent to 25% of the amounts claimed in the first and sixth causes of
action, besides amount claimed in the first and sixth causes of action, besides an amount equivalent to six (6%) of the
sums due and payable under the second and third causes of action as attorney's fees, with costs against them. (Exhibit
A.)
In due course, the corresponding writ of execution (Exhibits D-1 and D-3) of this judgment was subsequently issued. Later on it was
returned by the sheriff unsatisfied, with the statement that neither Dikit nor Silva had any property registered in their respective
names, and that the whereabouts of Silva was unknown (Exhibits D-2 and D-4). Meanwhile, or on September 10, 1953, Lao Chit
brought the present action against the Security Bank and Trust Company (Hereafter referred to as the Bank), to which the lessor
had, since July 1, 1951, leased the premises in question (after it had been vacated by Silva), together with the fixtures and
improvements introduced therein by Lao Chit. In its complaint, Lao Chit demanded payment of P1,000 a month, by way of rental for
the use of said fixtures and improvements by the Bank, in addition to expenses of litigation, attorney's fees and costs. In its answer,
the Bank alleged that it held and used said improvements pursuant to its contract of lease with the lessor and that it had paid the
rentals due and complied with its other obligations under said contract, and set up a counterclaim for damages. Soon thereafter, or
on November 5, 1953, Lao Chit demanded payment of the aforementioned sum of P59,365, plus P1,000 a month from June, 1951,
from the lessor, which did not heed the demand, whereupon the complaint herein was, on December 18, 1953, amended to include
said lessor as one of the defendants. The latter alleged, in its answer, that the improvements in question were introduced at the
initiative and expense of Dikit and Silva, as lessees of the premises above referred to, and that, as permanent fixtures, said
improvements form an integral part of the Consolidated Investments Building, and belong to the lessor and owner thereof, not to
plaintiff herein, who has no contractual or juridical relation with the lessor. The lessor, likewise, sought to recover, by way of
counterclaim, the sum of P50,000, as damages for its inclusion as defendant herein, aside from attorney's fees and costs. In due
course, the Court of First Instance of Manila rendered judgment on December 28, 1955, the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered, sentencing the defendant, Consolidated Investments, Inc., to pay to the
plaintiff the value of the permanent improvements in the sum of P59,365.00, and, together with the defendant, Security

Bank and Trust Company, to pay, jointly and severally, for the use of the permanent improvements, at the rate of
P1,000.00 monthly from June, 1951 to July 31, 1954, and thereafter, until January, 1955, by the defendant, Consolidated
Investments, Inc., alone, at the same rate, and in both instances, plus legal interest until full payment thereof; in addition,
the defendant, Consolidated Investments, Inc., is further ordered to pay to the plaintiff the amount equivalent to 80% of
whatever amount is due from it, as reimbursement for plaintiff's litigation expenses, including attorney's contingent fees,
aside from moral, nominal, moderate and exemplary damages in the amount of P2,000.00, and the costs of suit.
Defendants' counterclaim are hereby both dismissed for lack of merits and in view of the above conclusion of the Court.
Their respective motions for reconsideration and new trial having been denied, the defendants have appealed from this decision.
It is apparent to us that the lower court erred in rendering judgment against the Bank. This defendant had occupied and used the
premises in question, including the partitions, fixtures and other improvements made therein by Lao Chit, pursuant to a contract of
lease entered into with lessor, the right of which to enter into said contract is not disputed. Moreover, the Bank had paid the rentals
and fulfilled its other obligations under said contract. Again, it cannot be denied that the improvements introduced by Lao Chit
became property of the lessor, not only because such improvements are permanent in nature and cannot be removed without
impairing the building to which they were attached, but, also, because the contract of lease between Dikit and Silva on the hand,
and the lessor, on the other hand, provided explicitly that the latter shall own those improvements "upon the expiration and/or
rescission" of said contract, and the same has already been resolved. Although Lao Chit was not a party to said contract, this
stipulation is binding upon him, he having introduced said improvements pursuant to his contract with Dikit, from whom he derived,
therefore, his right to enter the building and make the improvements. In short, insofar as the construction thereof, Lao Chit was, visa-vis the lessor, a mere agent or representative of Dikit and, as such, was privy to the undertakings of Dikit under his contract of
lease with the lessor.
The lower court held the latter liable to Lao Chit upon the ground that Lao Chit was a builder in good faith, under the provisions of
the Old Civil Code, and under the theory of undue enrichment.
As regards the first ground, Article 361 of the Civil Code of Spain, on which the lower court relied, provides:
The owner of land on which anything has been built, sown, or planted, in good faith, shall be entitled to appropriate the
thing so built, sown, or planted, upon paying the compensation mentioned in Articles 453 and 454, or to compel the
person who has built or planted to pay him the value of the land, and the person who sowed thereon to pay the proper
rent thereof.
It is well settled, however, that this provisions refers to one who builds upon a land which he believes to be his property (Alburo vs.
Villanueva, 7 Phil., 277; Cortes vs. Ramon, 46 Phil., 184; Rivera vs. Trinidad, 48 Phil., 396; Fojas vs. Velasco, 51 Phil., 520;
Montinola vs. Bantug, 71 Phil., 449-450; Lopez Inc. vs. Philippines & Eastern Trading Co., Inc., 98 Phil., 348; 52 Off. Gaz., 1452).
Neither Lao Chit, nor Dikit, claimed the Consolidated Investments Building as his own. Dikit was a mere lessee and Lao Chit was his
agent, as such, in the construction of the improvements under consideration. In any event, the Spanish text of said Article 361,
which is the original, reads:
El dueo del terreno en que se edificare, sembrare o plantare de buena fe, tendra derecho a hacer suya la obra, siembra
o plantacion, previa la indemnizacion establecida en los articulos 453 y 454, o a obligar al que edifico o planto a pagar el
precio del terreno, y al que sembro, la renta correspondiente. (Emphasis supplied.)
Clearly this provision is limited in its application to "buildings" constructed on another's land or "terreno", not to partitions, railings,
counters, shelves and other fixtures made in a building belonging to the owner of the land. Although the verb "edificar" in Spanish is
roughly synonymous with "build" in English, the latter is broader in its connotation than the former. Literally, "edificar" is to undertake
the construction of an edifice, such as a fort, castle, house, church, market, tower, stadium, barrack, stable or other similar structure.
Upon the other hand, one may build a house, as well as a fence, partition, window, door, or even a desk or chair. It is apparent,
therefore, that Lao Chit is not entitled to the benefit of said Article 361.
The lower court, moreover, said:
. . . convincing evidence abounds, to wit: that the improvements were made in the presence of, and with the knowledge
and consent, and even under the personal supervision, on the part of the duly authorized representative of the defendant,
Consolidated Investments, Inc., which owns the building. Thus, it may even be said that it was the defendant,
Consolidated Investments Inc., which had acted in bad faith. (Record on Appeal of Consolidated Investments, Inc., p. 56.)
and quoted, in support thereof, the second paragraph of Article 364 of the Spanish Civil Code, reading:
Bad faith on the part of the owner is deemed to exist whenever the act has been done in his presence, with his knowledge
and tolerance, and without opposition on his part.

The foregoing view is, likewise, untenable. To begin with, this Article 364, involves a person who builds, plants or sows upon a land
not knowing that it belongs to another. Inasmuch as, there is no contractual relation between them, their rights are governed by law,
not by contract.
Secondly, under his contract of lease with the lessor, Dikit had a legal right to make the improvements in question and the lessor
was legally bound to permit Dikit and his agent Lao Chit to enter the leased premises and construct said improvements. Surely,
compliance with this valid contractual obligation does not, and cannot, constitute bad faith on the part of the lessor. Upon the other
hand, the lessor could not legally object to, or obstruct, the work done by Lao Chit, without being chargeable with bad faith in the
performance of said contractual obligation with Dikit.
In order to justify the application of the principle that no one should be permitted to unjustly enrich himself at the expense of another,
His Honor the Trial Judge cited Article 356 of the Civil Code of Spain, which provides:
He who receives fruits is obliged to pay any expenses which may have been incurred by another in the production,
gathering, and preservation thereof.
We agree with the lessor that this Article is not in point, for:
(a) Said provision is part of Section I, Chapter II, Title II, Book II, of the Spanish Civil Code, which section regulates the "right of
accession with respect to the products of property," and the work done and the improvements introduced by Lao Chit are not
"products" of the lessor's property.
(b) Said Article 356 refers to "expenses" of production, gathering and preservation" of fruits received by the owner of the property,
not to improvements, whereas the claim of Lao Chit is based upon "improvements" introduced, not "expenses" incurred by him for
the "production, gathering and preservation" of fruits. In the language of Manresa:
. . . el Codigo exige el propietario pague al tercer poseedor que fue de la cosa los gastos de produccion, y en su caso los
de recoleccion y conservacion. El propietario no puede excusarse alegando la mala fe del tercero, porque sea de buena o
de mala fe, lo cierto es que este ha hecho un gasto, no solo util para el propietario, sino necesario, y sin el cual el
propietario no hubiera obtenido frutos de su fundo, resultando ademas que, de no mediar indemnizacion, se consagraria
el injusto principio de que uno puede enriquecerse a costa y con dao de otro. Para afirmarse por completo en esta
opinion debe concordarse el articulo que comentamos con los 452 a 456, relativos a los efectos de la posesion de buena
y mala fe, y que no examinamos ahora porque el asunto se trata luego con mas detalles.
Los gastos de produccion y demas, para que puedan conceptuarse reembolsables por el propietario en el caso que
suponemos, deben tener dos caracteres: primero, que esten dedicados a la produccion anual; es decir, que no se trata
en este supuesto de las bonificaciones generales del fundo. Semejantes bonificaciones entran en la categoria de las
mejoras, que se regulan en otro lugar del Codigo (al tratar de la posesion), y segundo, que no sean superfluos, excesivos
o de puro lujo, sino que deben ser hechos en aquella medida natural que la condicion del cultivo o trabajo de que se trata
exige. (3 Manresa [6th ed.], 196; Emphasis supplied.)
(c) The right to recover under the principle of undue enrichment is justifiable under Article 1887 of the Spanish Civil Code, reading:
Quasi contracts are licit and purely voluntary acts which create an obligation on the part of the actor in favor of a third
person, and, at times, a reciprocal obligation between the parties concerned.
Its counterpart in the Civil Code of the Philippines is Article 2142, which we quote:
Certain lawful, voluntary and unilateral acts 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.
The former is part of Title XVI, Book IV of the Spanish Civil Code, entitled "obligations incurred without contract", whereas the latter
is included in Title XVII, Book IV of the Civil Code of the Philippines, regulating "extra-contractual obligations" or obligations beyond,
outside of, or outside the scope of, a contract. The construction of the improvements in question was not a "purely voluntary act" or
"unilateral act" of Lao Chit. He introduced them in a compliance with a bilateral "obligation" he undertook under his contract with
Dikit. The right of Dikit to enter into such contract, in turn, sprang from his lease contract with the lessor. As a privy to Dikit's rights
under this contract, insofar as said improvements are concerned, Lao Chit's title thereto, as against the lessor, is governed,
therefore, by such contract of lease, not by any quasi-contract, or by the principles of equity, as distinguished from law, contracts or
quasi-contracts.
(d) For the principle of undue enrichment to apply, there must be "enrichment" and the same must be "undue" or "unjust".

In the case at bar, Dikit failed to pay the agreed monthly rental of P5,000 from October, 1949. Up to July 1, 1951, when the
premises in question were leased to the Bank, the rentals due from Dikit aggregated, therefore, P105,000. Thus, despite the fact
that the lessor had become the owner of the improvements in question, worth P59,365.00, is still suffered a loss of over P45,000.00.
Such "loss" negates the idea of "enrichment". Neither may the latter be deemed to have taken place in the sense that said
improvements had increased the productive capacity of the leased premises, for, despite said improvements, the Bank agreed to
pay, beginning from July 1, 1951, only P4,000 a month, or P1,000 a month less than the rental stipulated with Dikit.
Regardless of the foregoing, Lao Chit had no reason to believe and he does not claim to have acted under the belief that Dikit
owned the leased premises. In fact, the circumstances surrounding the case are such as to leave the room for doubt that Lao Chit
knew that Dikit was not the owner of said property and that the same belonged to the lessor. Besides, Lao Chit should have known
that, as Dikit's agent, in the construction of the improvements, he (Lao Chit) was subject to the limitations imposed upon Dikit by his
contract with the lessor and that the improvements in question became property of the owner of the building, not only by operation of
law, as accessions to said building, but, also, for specific stipulation in the contract of lease between Dikit and the lessor. Inasmuch
as the acquisition of said improvements by the owner of the building and lessor is ordained by law and provided for by said contract,
which is admittedly valid, the resulting enrichment if any by said owner and lessor, is neither "undue" nor "unjustly".
Upon the other hand, he had been reasonably vigilant, Lao Chit could have demanded from Dikit a mortgage, or a bond, or some
other security, for the protection of his rights, yet he (Lao Chit) did not do so. Should the lessor be required to pay Lao Chit what he
is entitled to recover from Dikit, but which he (Lao Chit) cannot due to his oversight, carelessness or negligence collect from
Dikit, the effect would be to relieve Lao Chit of the consequences of his own inadvertence or negligence, and hold the lessor
responsible therefor. This would be neither fair, nor just, nor equitable.
Lastly, the lower court declared that the improvements in question belong to Lao Chit, because it had been so held in Case No.
10718 instituted by him against Dikit and Silva. Obviously, however, the proceedings in that case and the decision therein rendered
are not binding upon the lessor, the same being neither a party in said case, nor a successor to the interest of the defendants
therein. Besides, the aforementioned finding is not borne out by Lao Chit's contract with Dikit and Silva (Exhibits A-1, A-2, A-2-a and
A-3). Indeed, even if Dikit and Silva had agreed with Lao Chit and they had no such agreement that he would own the
improvements until payment of the price thereof, the stipulation would be, neither valid, nor binding upon the lessor, for Dikit and
Silva had no authority whatsoever to waive the statutory right of accession of the lessor to and over said improvements (Arts. 353
and 358, Civil Code of Spain; Arts. 440 and 445, Civil Code of the Philippines).
Wherefore, the decision appealed from is hereby reversed and another one shall be entered dismissing the complaint, with costs
against plaintiff-appellee Lao Chit. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador and Endencia, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-48006

July 8, 1942

FAUSTO BARREDO, petitioner,

vs.
SEVERINO GARCIA and TIMOTEA ALMARIO, respondents.
Celedonio P. Gloria and Antonio Barredo for petitioner.
Jose G. Advincula for respondents.
BOCOBO, J.:
This case comes up from the Court of Appeals which held the petitioner herein, Fausto Barredo, liable in damages for the death of
Faustino Garcia caused by the negligence of Pedro Fontanilla, a taxi driver employed by said Fausto Barredo.
At about half past one in the morning of May 3, 1936, on the road between Malabon and Navotas, Province of Rizal, there was a
head-on collision between a taxi of the Malate Taxicab driven by Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The
carretela was overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries from which he died two days
later. A criminal action was filed against Fontanilla in the Court of First Instance of Rizal, and he was convicted and sentenced to an
indeterminate sentence of one year and one day to two years of prision correccional. The court in the criminal case granted the
petition that the right to bring a separate civil action be reserved. The Court of Appeals affirmed the sentence of the lower court in
the criminal case. Severino Garcia and Timotea Almario, parents of the deceased on March 7, 1939, brought an action in the Court

of First Instance of Manila against Fausto Barredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla.
On July 8, 1939, the Court of First Instance of Manila awarded damages in favor of the plaintiffs for P2,000 plus legal interest from
the date of the complaint. This decision was modified by the Court of Appeals by reducing the damages to P1,000 with legal interest
from the time the action was instituted. It is undisputed that Fontanilla 's negligence was the cause of the mishap, as he was driving
on the wrong side of the road, and at high speed. As to Barredo's responsibility, the Court of Appeals found:
... It is admitted that defendant is Fontanilla's employer. There is proof that he exercised the diligence of a good father of a
family to prevent damage. (See p. 22, appellant's brief.) In fact it is shown he was careless in employing Fontanilla who
had been caught several times for violation of the Automobile Law and speeding (Exhibit A) violation which appeared in
the records of the Bureau of Public Works available to be public and to himself. Therefore, he must indemnify plaintiffs
under the provisions of article 1903 of the Civil Code.
The main theory of the defense is that the liability of Fausto Barredo is governed by the Revised Penal Code; hence, his liability is
only subsidiary, and as there has been no civil action against Pedro Fontanilla, the person criminally liable, Barredo cannot be held
responsible in the case. The petitioner's brief states on page 10:
... The Court of Appeals holds that the petitioner is being sued for his failure to exercise all the diligence of a good father
of a family in the selection and supervision of Pedro Fontanilla to prevent damages suffered by the respondents. In other
words, The Court of Appeals insists on applying in the case article 1903 of the Civil Code. Article 1903 of the Civil Code is
found in Chapter II, Title 16, Book IV of the Civil Code. This fact makes said article to a civil liability arising from a crime as
in the case at bar simply because Chapter II of Title 16 of Book IV of the Civil Code, in the precise words of article 1903 of
the Civil Code itself, is applicable only to "those (obligations) arising from wrongful or negligent acts or commission not
punishable by law.
The gist of the decision of the Court of Appeals is expressed thus:
... We cannot agree to the defendant's contention. The liability sought to be imposed upon him in this action is not a civil
obligation arising from a felony or a misdemeanor (the crime of Pedro Fontanilla,), but an obligation imposed in article
1903 of the Civil Code by reason of his negligence in the selection or supervision of his servant or employee.
The pivotal question in this case is whether the plaintiffs may bring this separate civil action against Fausto Barredo, thus making
him primarily and directly, responsible under article 1903 of the Civil Code as an employer of Pedro Fontanilla. The defendant
maintains that Fontanilla's negligence being punishable by the Penal Code, his (defendant's) liability as an employer is only
subsidiary, according to said Penal code, but Fontanilla has not been sued in a civil action and his property has not been exhausted.
To decide the main issue, we must cut through the tangle that has, in the minds of many confused and jumbled together delitos and
cuasi delitos, or crimes under the Penal Code and fault or negligence under articles 1902-1910 of the Civil Code. This should be
done, because justice may be lost in a labyrinth, unless principles and remedies are distinctly envisaged. Fortunately, we are aided
in our inquiry by the luminous presentation of the perplexing subject by renown jurists and we are likewise guided by the decisions
of this Court in previous cases as well as by the solemn clarity of the consideration in several sentences of the Supreme Tribunal of
Spain.
Authorities support the proposition that a quasi-delict or "culpa aquiliana " is a separate legal institution under the Civil Code with a
substantivity all its own, and individuality that is entirely apart and independent from delict or crime. Upon this principle and on the
wording and spirit article 1903 of the Civil Code, the primary and direct responsibility of employers may be safely anchored.
The pertinent provisions of the Civil Code and Revised Penal Code are as follows:
CIVIL CODE
ART. 1089 Obligations arise from law, from contracts and quasi-contracts, and from acts and omissions which are
unlawful or in which any kind of fault or negligence intervenes.
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ART. 1092. Civil obligations arising from felonies or misdemeanors shall be governed by the provisions of the Penal
Code.
ART. 1093. Those which are derived from acts or omissions in which fault or negligence, not punishable by law,
intervenes shall be subject to the provisions of Chapter II, Title XVI of this book.
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ART 1902. Any person who by an act or omission causes damage to another by his fault or negligence shall be liable for
the damage so done.
ART. 1903. The obligation imposed by the next preceding article is enforcible, not only for personal acts and omissions,
but also for those of persons for whom another is responsible.
The father and in, case of his death or incapacity, the mother, are liable for any damages caused by the minor children
who live with them.
Guardians are liable for damages done by minors or incapacitated persons subject to their authority and living with them.
Owners or directors of an establishment or business are equally liable for any damages caused by their employees while
engaged in the branch of the service in which employed, or on occasion of the performance of their duties.
The State is subject to the same liability when it acts through a special agent, but not if the damage shall have been
caused by the official upon whom properly devolved the duty of doing the act performed, in which case the provisions of
the next preceding article shall be applicable.
Finally, teachers or directors of arts trades are liable for any damages caused by their pupils or apprentices while they are
under their custody.
The liability imposed by this article shall cease in case the persons mentioned therein prove that they are exercised all the
diligence of a good father of a family to prevent the damage.
ART. 1904. Any person who pays for damage caused by his employees may recover from the latter what he may have
paid.
REVISED PENAL CODE
ART. 100. Civil liability of a person guilty of felony. Every person criminally liable for a felony is also civilly liable.
ART. 101. Rules regarding civil liability in certain cases. The exemption from criminal liability established in
subdivisions 1, 2, 3, 5, and 6 of article 12 and in subdivision 4 of article 11 of this Code does not include exemption from
civil liability, which shall be enforced to the following rules:
First. In cases of subdivision, 1, 2 and 3 of article 12 the civil liability for acts committed by any imbecile or insane person,
and by a person under nine years of age, or by one over nine but under fifteen years of age, who has acted without
discernment shall devolve upon those having such person under their legal authority or control, unless it appears that
there was no fault or negligence on their part.
Should there be no person having such insane, imbecile or minor under his authority, legal guardianship, or control, or if
such person be insolvent, said insane, imbecile, or minor shall respond with their own property, excepting property
exempt from execution, in accordance with the civil law.
Second. In cases falling within subdivision 4 of article 11, the person for whose benefit the harm has been prevented shall
be civilly liable in proportion to the benefit which they may have received.
The courts shall determine, in their sound discretion, the proportionate amount for which each one shall be liable.
When the respective shares can not be equitably determined, even approximately, or when the liability also attaches to the
Government, or to the majority of the inhabitants of the town, and, in all events, whenever the damage has been caused with the
consent of the authorities or their agents, indemnification shall be made in the manner prescribed by special laws or regulations.
Third. In cases falling within subdivisions 5 and 6 of article 12, the persons using violence or causing the fear shall be primarily liable
and secondarily, or, if there be no such persons, those doing the act shall be liable, saving always to the latter that part of their
property exempt from execution.
ART. 102. Subsidiary civil liability of innkeepers, tavern keepers and proprietors of establishment. In default of persons
criminally liable, innkeepers, tavern keepers, and any other persons or corporation shall be civilly liable for crimes
committed in their establishments, in all cases where a violation of municipal ordinances or some general or special police
regulation shall have been committed by them or their employees.

Innkeepers are also subsidiarily liable for the restitution of goods taken by robbery or theft within their houses lodging
therein, or the person, or for the payment of the value thereof, provided that such guests shall have notified in advance
the innkeeper himself, or the person representing him, of the deposit of such goods within the inn; and shall furthermore
have followed the directions which such innkeeper or his representative may have given them with respect to the care of
and vigilance over such goods. No liability shall attach in case of robbery with violence against or intimidation against or
intimidation of persons unless committed by the innkeeper's employees.
ART. 103. Subsidiary civil liability of other persons. The subsidiary liability established in the next preceding article shall
also apply to employers, teachers, persons, and corporations engaged in any kind of industry for felonies committed by
their servants, pupils, workmen, apprentices, or employees in the discharge of their duties.
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ART. 365. Imprudence and negligence. Any person who, by reckless imprudence, shall commit any act which, had it
been intentional, would constitute a grave felony, shall suffer the penalty of arresto mayor in its maximum period to prision
correccional in its minimum period; if it would have constituted a less grave felony, the penalty of arresto mayor in its
minimum and medium periods shall be imposed.
Any person who, by simple imprudence or negligence, shall commit an act which would otherwise constitute a grave
felony, shall suffer the penalty of arresto mayor in its medium and maximum periods; if it would have constituted a less
serious felony, the penalty of arresto mayor in its minimum period shall be imposed."
It will thus be seen that while the terms of articles 1902 of the Civil Code seem to be broad enough to cover the driver's negligence
in the instant case, nevertheless article 1093 limits cuasi-delitos to acts or omissions "not punishable by law." But inasmuch as
article 365 of the Revised Penal Code punishes not only reckless but even simple imprudence or negligence, the fault or negligence
under article 1902 of the Civil Code has apparently been crowded out. It is this overlapping that makes the "confusion worse
confounded." However, a closer study shows that such a concurrence of scope in regard to negligent acts does not destroy the
distinction between the civil liability arising from a crime and the responsibility for cuasi-delitos or culpa extra-contractual. The same
negligent act causing damages may produce civil liability arising from a crime under article 100 of the Revised Penal Code, or
create an action for cuasi-delito or culpa extra-contractual under articles 1902-1910 of the Civil Code.
The individuality of cuasi-delito or culpa extra-contractual looms clear and unmistakable. This legal institution is of ancient lineage,
one of its early ancestors being the Lex Aquilia in the Roman Law. In fact, in Spanish legal terminology, this responsibility is often
referred to as culpa aquiliana. The Partidas also contributed to the genealogy of the present fault or negligence under the Civil
Code; for instance, Law 6, Title 15, of Partida 7, says: "Tenudo es de fazer emienda, porque, como quier que el non fizo a
sabiendas en dao al otro, pero acaescio por su culpa."
The distinctive nature of cuasi-delitos survives in the Civil Code. According to article 1089, one of the five sources of obligations is
this legal institution of cuasi-delito or culpa extra-contractual: "los actos . . . en que intervenga cualquier genero de culpa o
negligencia." Then article 1093 provides that this kind of obligation shall be governed by Chapter II of Title XVI of Book IV, meaning
articles 1902-0910. This portion of the Civil Code is exclusively devoted to the legal institution of culpa aquiliana.
Some of the differences between crimes under the Penal Code and the culpa aquiliana or cuasi-delito under the Civil Code are:
1. That crimes affect the public interest, while cuasi-delitos are only of private concern.
2. That, consequently, the Penal Code punishes or corrects the criminal act, while the Civil Code, by means of indemnification,
merely repairs the damage.
3. That delicts are not as broad as quasi-delicts, because the former are punished only if there is a penal law clearly covering them,
while the latter, cuasi-delitos, include all acts in which "any king of fault or negligence intervenes." However, it should be noted that
not all violations of the penal law produce civil responsibility, such as begging in contravention of ordinances, violation of the game
laws, infraction of the rules of traffic when nobody is hurt. (See Colin and Capitant, "Curso Elemental de Derecho Civil," Vol. 3, p.
728.)
Let us now ascertain what some jurists say on the separate existence of quasi-delicts and the employer's primary and direct liability
under article 1903 of the Civil Code.
Dorado Montero in his essay on "Responsibilidad" in the "Enciclopedia Juridica Espaola" (Vol. XXVII, p. 414) says:
El concepto juridico de la responsabilidad civil abarca diversos aspectos y comprende a diferentes personas. Asi, existe
una responsabilidad civil propiamente dicha, que en ningun casl lleva aparejada responsabilidad criminal alguna, y otra
que es consecuencia indeclinable de la penal que nace de todo delito o falta."

The juridical concept of civil responsibility has various aspects and comprises different persons. Thus, there is a civil
responsibility, properly speaking, which in no case carries with it any criminal responsibility, and another which is a
necessary consequence of the penal liability as a result of every felony or misdemeanor."
Maura, an outstanding authority, was consulted on the following case: There had been a collision between two trains belonging
respectively to the Ferrocarril Cantabrico and the Ferrocarril del Norte. An employee of the latter had been prosecuted in a criminal
case, in which the company had been made a party as subsidiarily responsible in civil damages. The employee had been acquitted
in the criminal case, and the employer, the Ferrocarril del Norte, had also been exonerated. The question asked was whether the
Ferrocarril Cantabrico could still bring a civil action for damages against the Ferrocarril del Norte. Maura's opinion was in the
affirmative, stating in part (Maura, Dictamenes, Vol. 6, pp. 511-513):
Quedando las cosas asi, a proposito de la realidad pura y neta de los hechos, todavia menos parece sostenible que
exista cosa juzgada acerca de la obligacion civil de indemnizar los quebrantos y menoscabos inferidos por el choque de
los trenes. El titulo en que se funda la accion para demandar el resarcimiento, no puede confundirse con las
responsabilidades civiles nacidas de delito, siquiera exista en este, sea el cual sea, una culpa rodeada de notas
agravatorias que motivan sanciones penales, mas o menos severas. La lesion causada por delito o falta en los derechos
civiles, requiere restituciones, reparaciones o indemnizaciones, que cual la pena misma ataen al orden publico; por tal
motivo vienen encomendadas, de ordinario, al Ministerio Fiscal; y claro es que si por esta via se enmiendan los
quebrantos y menoscabos, el agraviado excusa procurar el ya conseguido desagravio; pero esta eventual coincidencia
de los efectos, no borra la diversidad originaria de las acciones civiles para pedir indemnizacion.
Estas, para el caso actual (prescindiendo de culpas contractuales, que no vendrian a cuento y que tiene otro regimen),
dimanan, segun el articulo 1902 del Codigo Civil, de toda accion u omision, causante de daos o perjuicios, en que
intervenga culpa o negligencia. Es trivial que acciones semejantes son ejercitadas ante los Tribunales de lo civil
cotidianamente, sin que la Justicia punitiva tenga que mezclarse en los asuntos. Los articulos 18 al 21 y 121 al 128 del
Codigo Penal, atentos al espiritu y a los fines sociales y politicos del mismo, desenvuelven y ordenan la materia de
responsabilidades civiles nacidas de delito, en terminos separados del regimen por ley comun de la culpa que se
denomina aquiliana, por alusion a precedentes legislativos del Corpus Juris. Seria intempestivo un paralelo entre aquellas
ordenaciones, y la de la obligacion de indemnizar a titulo de culpa civil; pero viene al caso y es necesaria una de las
diferenciaciones que en el tal paralelo se notarian.
Los articulos 20 y 21 del Codigo Penal, despues de distribuir a su modo las responsabilidades civiles, entre los que sean
por diversos conceptos culpables del delito o falta, las hacen extensivas a las empresas y los establecimientos al servicio
de los cuales estan los delincuentes; pero con caracter subsidiario, o sea, segun el texto literal, en defecto de los que
sean responsables criminalmente. No coincide en ello el Codigo Civil, cuyo articulo 1903, dice; La obligacion que impone
el articulo anterior es exigible, no solo por los actos y omisiones propios, sino por los de aquellas personas de quienes se
debe responder; personas en la enumeracion de las cuales figuran los dependientes y empleados de los
establecimientos o empresas, sea por actos del servicio, sea con ocasion de sus funciones. Por esto acontece, y se
observa en la jurisprudencia, que las empresas, despues de intervenir en las causas criminales con el caracter
subsidiario de su responsabilidad civil por razon del delito, son demandadas y condenadas directa y aisladamente,
cuando se trata de la obligacion, ante los tribunales civiles.
Siendo como se ve, diverso el titulo de esta obligacion, y formando verdadero postulado de nuestro regimen judicial la
separacion entre justicia punitiva y tribunales de lo civil, de suerte que tienen unos y otros normas de fondo en distintos
cuerpos legales, y diferentes modos de proceder, habiendose, por aadidura, abstenido de asistir al juicio criminal la
Compaia del Ferrocarril Cantabrico, que se reservo ejercitar sus acciones, parece innegable que la de indemnizacion
por los daos y perjuicios que le irrogo el choque, no estuvo sub judice ante el Tribunal del Jurado, ni fue sentenciada,
sino que permanecio intacta, al pronunciarse el fallo de 21 de marzo. Aun cuando el veredicto no hubiese sido de
inculpabilidad, mostrose mas arriba, que tal accion quedaba legitimamente reservada para despues del proceso; pero al
declararse que no existio delito, ni responsabilidad dimanada de delito, materia unica sobre que tenian jurisdiccion
aquellos juzgadores, se redobla el motivo para la obligacion civil ex lege, y se patentiza mas y mas que la accion para
pedir su cumplimiento permanece incolume, extraa a la cosa juzgada.
As things are, apropos of the reality pure and simple of the facts, it seems less tenable that there should be res judicata
with regard to the civil obligation for damages on account of the losses caused by the collision of the trains. The title upon
which the action for reparation is based cannot be confused with the civil responsibilities born of a crime, because there
exists in the latter, whatever each nature, a culpa surrounded with aggravating aspects which give rise to penal measures
that are more or less severe. The injury caused by a felony or misdemeanor upon civil rights requires restitutions,
reparations, or indemnifications which, like the penalty itself, affect public order; for this reason, they are ordinarily
entrusted to the office of the prosecuting attorney; and it is clear that if by this means the losses and damages are
repaired, the injured party no longer desires to seek another relief; but this coincidence of effects does not eliminate the
peculiar nature of civil actions to ask for indemnity.
Such civil actions in the present case (without referring to contractual faults which are not pertinent and belong to another
scope) are derived, according to article 1902 of the Civil Code, from every act or omission causing losses and damages in
which culpa or negligence intervenes. It is unimportant that such actions are every day filed before the civil courts without

the criminal courts interfering therewith. Articles 18 to 21 and 121 to 128 of the Penal Code, bearing in mind the spirit and
the social and political purposes of that Code, develop and regulate the matter of civil responsibilities arising from a crime,
separately from the regime under common law, of culpa which is known as aquiliana, in accordance with legislative
precedent of the Corpus Juris. It would be unwarranted to make a detailed comparison between the former provisions and
that regarding the obligation to indemnify on account of civil culpa; but it is pertinent and necessary to point out to one of
such differences.
Articles 20 and 21 of the Penal Code, after distriburing in their own way the civil responsibilities among those who, for
different reasons, are guilty of felony or misdemeanor, make such civil responsibilities applicable to enterprises and
establishments for which the guilty parties render service, but with subsidiary character, that is to say, according to the
wording of the Penal Code, in default of those who are criminally responsible. In this regard, the Civil Code does not
coincide because article 1903 says: "The obligation imposed by the next preceding article is demandable, not only for
personal acts and omissions, but also for those of persons for whom another is responsible." Among the persons
enumerated are the subordinates and employees of establishments or enterprises, either for acts during their service or
on the occasion of their functions. It is for this reason that it happens, and it is so observed in judicial decisions, that the
companies or enterprises, after taking part in the criminal cases because of their subsidiary civil responsibility by reason
of the crime, are sued and sentenced directly and separately with regard to the obligation, before the civil courts.
Seeing that the title of this obligation is different, and the separation between punitive justice and the civil courts being a
true postulate of our judicial system, so that they have different fundamental norms in different codes, as well as different
modes of procedure, and inasmuch as the Compaa del Ferrocarril Cantabrico has abstained from taking part in the
criminal case and has reserved the right to exercise its actions, it seems undeniable that the action for indemnification for
the losses and damages caused to it by the collision was not sub judice before the Tribunal del Jurado, nor was it the
subject of a sentence, but it remained intact when the decision of March 21 was rendered. Even if the verdict had not
been that of acquittal, it has already been shown that such action had been legitimately reserved till after the criminal
prosecution; but because of the declaration of the non-existence of the felony and the non-existence of the responsibility
arising from the crime, which was the sole subject matter upon which the Tribunal del Jurado had jurisdiction, there is
greater reason for the civil obligation ex lege, and it becomes clearer that the action for its enforcement remain intact and
is not res judicata.
Laurent, a jurist who has written a monumental work on the French Civil Code, on which the Spanish Civil Code is largely based and
whose provisions on cuasi-delito or culpa extra-contractual are similar to those of the Spanish Civil Code, says, referring to article
1384 of the French Civil Code which corresponds to article 1903, Spanish Civil Code:
The action can be brought directly against the person responsible (for another), without including the author of the act.
The action against the principal is accessory in the sense that it implies the existence of a prejudicial act committed by the
employee, but it is not subsidiary in the sense that it can not be instituted till after the judgment against the author of the
act or at least, that it is subsidiary to the principal action; the action for responsibility (of the employer) is in itself a principal
action. (Laurent, Principles of French Civil Law, Spanish translation, Vol. 20, pp. 734-735.)
Amandi, in his "Cuestionario del Codigo Civil Reformado" (Vol. 4, pp. 429, 430), declares that the responsibility of the employer is
principal and not subsidiary. He writes:
Cuestion 1. La responsabilidad declarada en el articulo 1903 por las acciones u omisiones de aquellas personas por las
que se debe responder, es subsidiaria? es principal? Para contestar a esta pregunta es necesario saber, en primer lugar,
en que se funda el precepto legal. Es que realmente se impone una responsabilidad por una falta ajena? Asi parece a
primera vista; pero semejante afirmacion seria contraria a la justicia y a la maxima universal, segun la que las faltas son
personales, y cada uno responde de aquellas que le son imputables. La responsabilidad de que tratamos se impone con
ocasion de un delito o culpa, pero no por causa de ellos, sino por causa del causi delito, esto es, de la imprudencia o de
la negligencia del padre, del tutor, del dueo o director del establecimiento, del maestro, etc. Cuando cualquiera de las
personas que enumera el articulo citado (menores de edad, incapacitados, dependientes, aprendices) causan un dao, la
ley presume que el padre, el tutor, el maestro, etc., han cometido una falta de negligencia para prevenir o evitar el dao.
Esta falta es la que la ley castiga. No hay, pues, responsabilidad por un hecho ajeno, sino en la apariencia; en realidad la
responsabilidad se exige por un hecho propio. La idea de que esa responsabilidad sea subsidiaria es, por lo tanto,
completamente inadmisible.
Question No. 1. Is the responsibility declared in article 1903 for the acts or omissions of those persons for who one is
responsible, subsidiary or principal? In order to answer this question it is necessary to know, in the first place, on what the
legal provision is based. Is it true that there is a responsibility for the fault of another person? It seems so at first sight; but
such assertion would be contrary to justice and to the universal maxim that all faults are personal, and that everyone is
liable for those faults that can be imputed to him. The responsibility in question is imposed on the occasion of a crime or
fault, but not because of the same, but because of the cuasi-delito, that is to say, the imprudence or negligence of the
father, guardian, proprietor or manager of the establishment, of the teacher, etc. Whenever anyone of the persons
enumerated in the article referred to (minors, incapacitated persons, employees, apprentices) causes any damage, the
law presumes that the father, guardian, teacher, etc. have committed an act of negligence in not preventing or avoiding
the damage. It is this fault that is condemned by the law. It is, therefore, only apparent that there is a responsibility for the

act of another; in reality the responsibility exacted is for one's own act. The idea that such responsibility is subsidiary is,
therefore, completely inadmissible.
Oyuelos, in his "Digesto: Principios, Doctrina y Jurisprudencia, Referentes al Codigo Civil Espaol," says in Vol. VII, p. 743:
Es decir, no responde de hechos ajenos, porque se responde solo de su propia culpa, doctrina del articulo 1902; mas por
excepcion, se responde de la ajena respecto de aquellas personas con las que media algun nexo o vinculo, que motiva o
razona la responsabilidad. Esta responsabilidad, es directa o es subsidiaria? En el orden penal, el Codigo de esta clase
distingue entre menores e incapacitados y los demas, declarando directa la primera (articulo 19) y subsidiaria la segunda
(articulos 20 y 21); pero en el orden civil, en el caso del articulo 1903, ha de entenderse directa, por el tenor del articulo
que impone la responsabilidad precisamente "por los actos de aquellas personas de quienes se deba responder."
That is to say, one is not responsible for the acts of others, because one is liable only for his own faults, this being the
doctrine of article 1902; but, by exception, one is liable for the acts of those persons with whom there is a bond or tie
which gives rise to the responsibility. Is this responsibility direct or subsidiary? In the order of the penal law, the Penal
Code distinguishes between minors and incapacitated persons on the one hand, and other persons on the other,
declaring that the responsibility for the former is direct (article 19), and for the latter, subsidiary (articles 20 and 21); but in
the scheme of the civil law, in the case of article 1903, the responsibility should be understood as direct, according to the
tenor of that articles, for precisely it imposes responsibility "for the acts of those persons for whom one should be
responsible."
Coming now to the sentences of the Supreme Tribunal of Spain, that court has upheld the principles above set forth: that a quasidelict or culpa extra-contractual is a separate and distinct legal institution, independent from the civil responsibility arising from
criminal liability, and that an employer is, under article 1903 of the Civil Code, primarily and directly responsible for the negligent
acts of his employee.
One of the most important of those Spanish decisions is that of October 21, 1910. In that case, Ramon Lafuente died as the result of
having been run over by a street car owned by the "compaia Electric Madrilea de Traccion." The conductor was prosecuted in a
criminal case but he was acquitted. Thereupon, the widow filed a civil action against the street car company, paying for damages in
the amount of 15,000 pesetas. The lower court awarded damages; so the company appealed to the Supreme Tribunal, alleging
violation of articles 1902 and 1903 of the Civil Code because by final judgment the non-existence of fault or negligence had been
declared. The Supreme Court of Spain dismissed the appeal, saying:
Considerando que el primer motivo del recurso se funda en el equivocado supuesto de que el Tribunal a quo, al condonar
a la compaia Electrica Madrilea al pago del dao causado con la muerte de Ramon La fuente Izquierdo, desconoce el
valor y efectos juridicos de la sentencia absolutoria deictada en la causa criminal que se siguio por el mismo hecho,
cuando es lo cierto que de este han conocido las dos jurisdicciones bajo diferentes as pectos, y como la de lo criminal
declrao dentro de los limites de su competencia que el hecho de que se trata no era constitutivo de delito por no haber
mediado descuido o negligencia graves, lo que no excluye, siendo este el unico fundamento del fallo absolutorio, el
concurso de la culpa o negligencia no califacadas, fuente de obligaciones civiles segun el articulo 1902 del Codigo, y que
alcanzan, segun el 1903, netre otras perosnas, a los Directores de establecimientos o empresas por los daos causados
por sus dependientes en determinadas condiciones, es manifesto que la de lo civil, al conocer del mismo hehco baho
este ultimo aspecto y al condenar a la compaia recurrente a la indemnizacion del dao causado por uno de sus
empleados, lejos de infringer los mencionados textos, en relacion con el articulo 116 de la Ley de Enjuciamiento Criminal,
se ha atenido estrictamente a ellos, sin invadir atribuciones ajenas a su jurisdiccion propia, ni contrariar en lo mas minimo
el fallo recaido en la causa.
Considering that the first ground of the appeal is based on the mistaken supposition that the trial court, in sentencing the
Compaia Madrilea to the payment of the damage caused by the death of Ramon Lafuente Izquierdo, disregards the
value and juridical effects of the sentence of acquittal rendered in the criminal case instituted on account of the same act,
when it is a fact that the two jurisdictions had taken cognizance of the same act in its different aspects, and as the criminal
jurisdiction declared within the limits of its authority that the act in question did not constitute a felony because there was
no grave carelessness or negligence, and this being the only basis of acquittal, it does no exclude the co-existence of
fault or negligence which is not qualified, and is a source of civil obligations according to article 1902 of the Civil Code,
affecting, in accordance with article 1903, among other persons, the managers of establishments or enterprises by reason
of the damages caused by employees under certain conditions, it is manifest that the civil jurisdiccion in taking cognizance
of the same act in this latter aspect and in ordering the company, appellant herein, to pay an indemnity for the damage
caused by one of its employees, far from violating said legal provisions, in relation with article 116 of the Law of Criminal
Procedure, strictly followed the same, without invading attributes which are beyond its own jurisdiction, and without in any
way contradicting the decision in that cause. (Emphasis supplied.)
It will be noted, as to the case just cited:
First. That the conductor was not sued in a civil case, either separately or with the street car company. This is precisely what
happens in the present case: the driver, Fontanilla, has not been sued in a civil action, either alone or with his employer.

Second. That the conductor had been acquitted of grave criminal negligence, but the Supreme Tribunal of Spain said that this did
not exclude the co-existence of fault or negligence, which is not qualified, on the part of the conductor, under article 1902 of the Civil
Code. In the present case, the taxi driver was found guilty of criminal negligence, so that if he had even sued for his civil
responsibility arising from the crime, he would have been held primarily liable for civil damages, and Barredo would have been held
subsidiarily liable for the same. But the plaintiffs are directly suing Barredo, on his primary responsibility because of his own
presumed negligence which he did not overcome under article 1903. Thus, there were two liabilities of Barredo: first, the
subsidiary one because of the civil liability of the taxi driver arising from the latter's criminal negligence; and, second, Barredo's
primary liability as an employer under article 1903. The plaintiffs were free to choose which course to take, and they preferred the
second remedy. In so doing, they were acting within their rights. It might be observed in passing, that the plaintiff choose the more
expeditious and effective method of relief, because Fontanilla was either in prison, or had just been released, and besides, he was
probably without property which might be seized in enforcing any judgment against him for damages.
Third. That inasmuch as in the above sentence of October 21, 1910, the employer was held liable civilly, notwithstanding the
acquittal of the employee (the conductor) in a previous criminal case, with greater reason should Barredo, the employer in the case
at bar, be held liable for damages in a civil suit filed against him because his taxi driver had been convicted. The degree of
negligence of the conductor in the Spanish case cited was less than that of the taxi driver, Fontanilla, because the former was
acquitted in the previous criminal case while the latter was found guilty of criminal negligence and was sentenced to an
indeterminate sentence of one year and one day to two years of prision correccional.
(See also Sentence of February 19, 1902, which is similar to the one above quoted.)
In the Sentence of the Supreme Court of Spain, dated February 14, 1919, an action was brought against a railroad company for
damages because the station agent, employed by the company, had unjustly and fraudulently, refused to deliver certain articles
consigned to the plaintiff. The Supreme Court of Spain held that this action was properly under article 1902 of the Civil Code, the
court saying:
Considerando que la sentencia discutida reconoce, en virtud de los hechos que consigna con relacion a las pruebas del
pleito: 1., que las expediciones facturadas por la compaia ferroviaria a la consignacion del actor de las vasijas vacias
que en su demanda relacionan tenian como fin el que este las devolviera a sus remitentes con vinos y alcoholes; 2., que
llegadas a su destino tales mercanias no se quisieron entregar a dicho consignatario por el jefe de la estacion sin motivo
justificado y con intencion dolosa, y 3., que la falta de entrega de estas expediciones al tiempo de reclamarlas el
demandante le originaron daos y perjuicios en cantidad de bastante importancia como expendedor al por mayor que era
de vinos y alcoholes por las ganancias que dejo de obtener al verse privado de servir los pedidos que se le habian hecho
por los remitentes en los envases:
Considerando que sobre esta base hay necesidad de estimar los cuatro motivos que integran este recurso, porque la
demanda inicial del pleito a que se contrae no contiene accion que nazca del incumplimiento del contrato de transporte,
toda vez que no se funda en el retraso de la llegada de las mercancias ni de ningun otro vinculo contractual entre las
partes contendientes, careciendo, por tanto, de aplicacion el articulo 371 del Codigo de Comercio, en que principalmente
descansa el fallo recurrido, sino que se limita a pedir la reparaction de los daos y perjuicios producidos en el patrimonio
del actor por la injustificada y dolosa negativa del porteador a la entrega de las mercancias a su nombre consignadas,
segun lo reconoce la sentencia, y cuya responsabilidad esta claramente sancionada en el articulo 1902 del Codigo Civil,
que obliga por el siguiente a la Compaia demandada como ligada con el causante de aquellos por relaciones de
caracter economico y de jurarquia administrativa.
Considering that the sentence, in question recognizes, in virtue of the facts which it declares, in relation to the evidence in
the case: (1) that the invoice issued by the railroad company in favor of the plaintiff contemplated that the empty
receptacles referred to in the complaint should be returned to the consignors with wines and liquors; (2) that when the
said merchandise reached their destination, their delivery to the consignee was refused by the station agent without
justification and with fraudulent intent, and (3) that the lack of delivery of these goods when they were demanded by the
plaintiff caused him losses and damages of considerable importance, as he was a wholesale vendor of wines and liquors
and he failed to realize the profits when he was unable to fill the orders sent to him by the consignors of the receptacles:
Considering that upon this basis there is need of upholding the four assignments of error, as the original complaint did not
contain any cause of action arising from non-fulfillment of a contract of transportation, because the action was not based
on the delay of the goods nor on any contractual relation between the parties litigant and, therefore, article 371 of the
Code of Commerce, on which the decision appealed from is based, is not applicable; but it limits to asking for reparation
for losses and damages produced on the patrimony of the plaintiff on account of the unjustified and fraudulent refusal of
the carrier to deliver the goods consigned to the plaintiff as stated by the sentence, and the carrier's responsibility is
clearly laid down in article 1902 of the Civil Code which binds, in virtue of the next article, the defendant company,
because the latter is connected with the person who caused the damage by relations of economic character and by
administrative hierarchy. (Emphasis supplied.)
The above case is pertinent because it shows that the same act may come under both the Penal Code and the Civil Code. In that
case, the action of the agent was unjustified and fraudulent and therefore could have been the subject of a criminal action. And yet,

it was held to be also a proper subject of a civil action under article 1902 of the Civil Code. It is also to be noted that it was the
employer and not the employee who was being sued.
Let us now examine the cases previously decided by this Court.
In the leading case of Rakes vs. Atlantic Gulf and Pacific Co. (7 Phil., 359, 362-365 [year 1907]), the trial court awarded damages to
the plaintiff, a laborer of the defendant, because the latter had negligently failed to repair a tramway in consequence of which the
rails slid off while iron was being transported, and caught the plaintiff whose leg was broken. This Court held:
It is contended by the defendant, as its first defense to the action that the necessary conclusion from these collated laws
is that the remedy for injuries through negligence lies only in a criminal action in which the official criminally responsible
must be made primarily liable and his employer held only subsidiarily to him. According to this theory the plaintiff should
have procured the arrest of the representative of the company accountable for not repairing the track, and on his
prosecution a suitable fine should have been imposed, payable primarily by him and secondarily by his employer.
This reasoning misconceived the plan of the Spanish codes upon this subject. Article 1093 of the Civil Code makes
obligations arising from faults or negligence not punished by the law, subject to the provisions of Chapter II of Title XVI.
Section 1902 of that chapter reads:
"A person who by an act or omission causes damage to another when there is fault or negligence shall be
obliged to repair the damage so done.
"SEC. 1903. The obligation imposed by the preceeding article is demandable, not only for personal acts and
omissions, but also for those of the persons for whom they should be responsible.
"The father, and on his death or incapacity, the mother, is liable for the damages caused by the minors who live
with them.
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"Owners or directors of an establishment or enterprise are equally liable for the damages caused by their
employees in the service of the branches in which the latter may be employed or in the performance of their
duties.
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"The liability referred to in this article shall cease when the persons mentioned therein prove that they employed
all the diligence of a good father of a family to avoid the damage."
As an answer to the argument urged in this particular action it may be sufficient to point out that nowhere in our general
statutes is the employer penalized for failure to provide or maintain safe appliances for his workmen. His obligation
therefore is one 'not punished by the laws' and falls under civil rather than criminal jurisprudence. But the answer may be
a broader one. We should be reluctant, under any conditions, to adopt a forced construction of these scientific codes,
such as is proposed by the defendant, that would rob some of these articles of effect, would shut out litigants against their
will from the civil courts, would make the assertion of their rights dependent upon the selection for prosecution of the
proper criminal offender, and render recovery doubtful by reason of the strict rules of proof prevailing in criminal actions.
Even if these articles had always stood alone, such a construction would be unnecessary, but clear light is thrown upon
their meaning by the provisions of the Law of Criminal Procedure of Spain (Ley de Enjuiciamiento Criminal), which,
though never in actual force in these Islands, was formerly given a suppletory or explanatory effect. Under article 111 of
this law, both classes of action, civil and criminal, might be prosecuted jointly or separately, but while the penal action was
pending the civil was suspended. According to article 112, the penal action once started, the civil remedy should be
sought therewith, unless it had been waived by the party injured or been expressly reserved by him for civil proceedings
for the future. If the civil action alone was prosecuted, arising out of a crime that could be enforced only on private
complaint, the penal action thereunder should be extinguished. These provisions are in harmony with those of articles 23
and 133 of our Penal Code on the same subject.
An examination of this topic might be carried much further, but the citation of these articles suffices to show that the civil
liability was not intended to be merged in the criminal nor even to be suspended thereby, except as expressly provided in
the law. Where an individual is civilly liable for a negligent act or omission, it is not required that the injured party should
seek out a third person criminally liable whose prosecution must be a condition precedent to the enforcement of the civil
right.

Under article 20 of the Penal Code the responsibility of an employer may be regarded as subsidiary in respect of criminal
actions against his employees only while they are in process of prosecution, or in so far as they determine the existence
of the criminal act from which liability arises, and his obligation under the civil law and its enforcement in the civil courts is
not barred thereby unless by the election of the injured person. Inasmuch as no criminal proceeding had been instituted,
growing our of the accident in question, the provisions of the Penal Code can not affect this action. This construction
renders it unnecessary to finally determine here whether this subsidiary civil liability in penal actions has survived the laws
that fully regulated it or has been abrogated by the American civil and criminal procedure now in force in the Philippines.
The difficulty in construing the articles of the code above cited in this case appears from the briefs before us to have
arisen from the interpretation of the words of article 1093, "fault or negligence not punished by law," as applied to the
comprehensive definition of offenses in articles 568 and 590 of the Penal Code. It has been shown that the liability of an
employer arising out of his relation to his employee who is the offender is not to be regarded as derived from negligence
punished by the law, within the meaning of articles 1902 and 1093. More than this, however, it cannot be said to fall within
the class of acts unpunished by the law, the consequence of which are regulated by articles 1902 and 1903 of the Civil
Code. The acts to which these articles are applicable are understood to be those not growing out of pre-existing duties of
the parties to one another. But where relations already formed give rise to duties, whether springing from contract or quasi
contract, then breaches of those duties are subject to articles 1101, 1103, and 1104 of the same code. A typical
application of this distinction may be found in the consequences of a railway accident due to defective machinery supplied
by the employer. His liability to his employee would arise out of the contract of employment, that to the passengers out of
the contract for passage, while that to the injured bystander would originate in the negligent act itself.
In Manzanares vs. Moreta, 38 Phil., 821 (year 1918), the mother of the 8 of 9-year-old child Salvador Bona brought a civil action
against Moreta to recover damages resulting from the death of the child, who had been run over by an automobile driven and
managed by the defendant. The trial court rendered judgment requiring the defendant to pay the plaintiff the sum of P1,000 as
indemnity: This Court in affirming the judgment, said in part:
If it were true that the defendant, in coming from the southern part of Solana Street, had to stop his auto before crossing
Real Street, because he had met vehicles which were going along the latter street or were coming from the opposite
direction along Solana Street, it is to be believed that, when he again started to run his auto across said Real Street and
to continue its way along Solana Street northward, he should have adjusted the speed of the auto which he was operating
until he had fully crossed Real Street and had completely reached a clear way on Solana Street. But, as the child was run
over by the auto precisely at the entrance of Solana Street, this accident could not have occurred if the auto had been
running at a slow speed, aside from the fact that the defendant, at the moment of crossing Real Street and entering
Solana Street, in a northward direction, could have seen the child in the act of crossing the latter street from the sidewalk
on the right to that on the left, and if the accident had occurred in such a way that after the automobile had run over the
body of the child, and the child's body had already been stretched out on the ground, the automobile still moved along a
distance of about 2 meters, this circumstance shows the fact that the automobile entered Solana Street from Real Street,
at a high speed without the defendant having blown the horn. If these precautions had been taken by the defendant, the
deplorable accident which caused the death of the child would not have occurred.
It will be noticed that the defendant in the above case could have been prosecuted in a criminal case because his negligence
causing the death of the child was punishable by the Penal Code. Here is therefore a clear instance of the same act of negligence
being a proper subject-matter either of a criminal action with its consequent civil liability arising from a crime or of an entirely
separate and independent civil action for fault or negligence under article 1902 of the Civil Code. Thus, in this jurisdiction, the
separate individually of a cuasi-delito or culpa aquiliana under the Civil Code has been fully and clearly recognized, even with regard
to a negligent act for which the wrongdoer could have been prosecuted and convicted in a criminal case and for which, after such a
conviction, he could have been sued for this civil liability arising from his crime.
Years later (in 1930) this Court had another occasion to apply the same doctrine. In Bernal and Enverso vs. House and Tacloban
Electric & Ice Plant, Ltd., 54 Phil., 327, the parents of the five-year-old child, Purificacion Bernal, brought a civil action to recover
damages for the child's death as a result of burns caused by the fault and negligence of the defendants. On the evening of April 10,
1925, the Good Friday procession was held in Tacloban, Leyte. Fortunata Enverso with her daughter Purificacion Bernal had come
from another municipality to attend the same. After the procession the mother and the daughter with two others were passing along
Gran Capitan Street in front of the offices of the Tacloban Electric & Ice Plant, Ltd., owned by defendants J. V. House, when an
automobile appeared from the opposite direction. The little girl, who was slightly ahead of the rest, was so frightened by the
automobile that she turned to run, but unfortunately she fell into the street gutter where hot water from the electric plant was flowing.
The child died that same night from the burns. The trial courts dismissed the action because of the contributory negligence of the
plaintiffs. But this Court held, on appeal, that there was no contributory negligence, and allowed the parents P1,000 in damages
from J. V. House who at the time of the tragic occurrence was the holder of the franchise for the electric plant. This Court said in
part:
Although the trial judge made the findings of fact hereinbefore outlined, he nevertheless was led to order the dismissal of
the action because of the contributory negligence of the plaintiffs. It is from this point that a majority of the court depart
from the stand taken by the trial judge. The mother and her child had a perfect right to be on the principal street of
Tacloban, Leyte, on the evening when the religious procession was held. There was nothing abnormal in allowing the
child to run along a few paces in advance of the mother. No one could foresee the coincidence of an automobile
appearing and of a frightened child running and falling into a ditch filled with hot water. The doctrine announced in the

much debated case of Rakes vs. Atlantic Gulf and Pacific Co. ([1907]), 7 Phil., 359), still rule. Article 1902 of the Civil
Code must again be enforced. The contributory negligence of the child and her mother, if any, does not operate as a bar
to recovery, but in its strictest sense could only result in reduction of the damages.
It is most significant that in the case just cited, this Court specifically applied article 1902 of the Civil Code. It is thus that although J.
V. House could have been criminally prosecuted for reckless or simple negligence and not only punished but also made civilly liable
because of his criminal negligence, nevertheless this Court awarded damages in an independent civil action for fault or negligence
under article 1902 of the Civil Code.
In Bahia vs. Litonjua and Leynes (30 Phil., 624 [year 1915), the action was for damages for the death of the plaintiff's daughter
alleged to have been caused by the negligence of the servant in driving an automobile over the child. It appeared that the cause of
the mishap was a defect in the steering gear. The defendant Leynes had rented the automobile from the International Garage of
Manila, to be used by him in carrying passengers during the fiesta of Tuy, Batangas. Leynes was ordered by the lower court to pay
P1,000 as damages to the plaintiff. On appeal this Court reversed the judgment as to Leynes on the ground that he had shown that
the exercised the care of a good father of a family, thus overcoming the presumption of negligence under article 1903. This Court
said:
As to selection, the defendant has clearly shown that he exercised the care and diligence of a good father of a family. He
obtained the machine from a reputable garage and it was, so far as appeared, in good condition. The workmen were
likewise selected from a standard garage, were duly licensed by the Government in their particular calling, and apparently
thoroughly competent. The machine had been used but a few hours when the accident occurred and it is clear from the
evidence that the defendant had no notice, either actual or constructive, of the defective condition of the steering gear.
The legal aspect of the case was discussed by this Court thus:
Article 1903 of the Civil Code not only establishes liability in cases of negligence, but also provides when the liability shall
cease. It says:
"The liability referred to in this article shall cease when the persons mentioned therein prove that they employed
all the diligence of a good father of a family to avoid the damage."
From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or employee
there instantly arises a presumption of law that there was negligence on the part of the matter or employer either in the
selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that presumption is
juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if the employer shows
to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good father of
a family, the presumption is overcome and he is relieve from liability.
This theory bases the responsibility of the master ultimately on his own negligence and not on that of his servant.
The doctrine of the case just cited was followed by this Court in Cerf vs. Medel (33 Phil., 37 [year 1915]). In the latter case, the
complaint alleged that the defendant's servant had so negligently driven an automobile, which was operated by defendant as a
public vehicle, that said automobile struck and damaged the plaintiff's motorcycle. This Court, applying article 1903 and following the
rule in Bahia vs. Litonjua and Leynes, said in part (p. 41) that:
The master is liable for the negligent acts of his servant where he is the owner or director of a business or enterprise and
the negligent acts are committed while the servant is engaged in his master's employment as such owner.
Another case which followed the decision in Bahia vs. Litonjua and Leynes was Cuison vs. Norton & Harrison Co., 55 Phil., 18 (year
1930). The latter case was an action for damages brought by Cuison for the death of his seven-year-old son Moises. The little boy
was on his way to school with his sister Marciana. Some large pieces of lumber fell from a truck and pinned the boy underneath,
instantly killing him. Two youths, Telesforo Binoya and Francisco Bautista, who were working for Ora, an employee of defendant
Norton & Harrison Co., pleaded guilty to the crime of homicide through reckless negligence and were sentenced accordingly. This
Court, applying articles 1902 and 1903, held:
The basis of civil law liability is not respondent superior but the relationship of pater familias. This theory bases the liability
of the master ultimately on his own negligence and not on that of his servant. (Bahia vs. Litonjua and Leynes [1915], 30
Phil., 624; Cangco vs. Manila Railroad Co. [1918], 38 Phil., 768.)
In Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil., 517 (year 1930) the plaintiff brought an action for damages
for the demolition of its wharf, which had been struck by the steamer Helen C belonging to the defendant. This Court held (p. 526):

The evidence shows that Captain Lasa at the time the plaintiff's wharf collapsed was a duly licensed captain, authorized to
navigate and direct a vessel of any tonnage, and that the appellee contracted his services because of his reputation as a
captain, according to F. C. Cadwallader. This being so, we are of the opinion that the presumption of liability against the
defendant has been overcome by the exercise of the care and diligence of a good father of a family in selecting Captain
Lasa, in accordance with the doctrines laid down by this court in the cases cited above, and the defendant is therefore
absolved from all liability.
It is, therefore, seen that the defendant's theory about his secondary liability is negatived by the six cases above set forth. He is, on
the authority of these cases, primarily and directly responsible in damages under article 1903, in relation to article 1902, of the Civil
Code.
Let us now take up the Philippine decisions relied upon by the defendant. We study first, City of Manila vs. Manila Electric Co., 52
Phil., 586 (year 1928). A collision between a truck of the City of Manila and a street car of the Manila Electric Co. took place on June
8, 1925. The truck was damaged in the amount of P1,788.27. Sixto Eustaquio, the motorman, was prosecuted for the crime of
damage to property and slight injuries through reckless imprudence. He was found guilty and sentenced to pay a fine of P900, to
indemnify the City of Manila for P1,788.27, with subsidiary imprisonment in case of insolvency. Unable to collect the indemnity from
Eustaquio, the City of Manila filed an action against the Manila Electric Company to obtain payment, claiming that the defendant
was subsidiarily liable. The main defense was that the defendant had exercised the diligence of a good father of a family to prevent
the damage. The lower court rendered judgment in favor of the plaintiff. This Court held, in part, that this case was governed by the
Penal Code, saying:
With this preliminary point out of the way, there is no escaping the conclusion that the provisions of the Penal Code
govern. The Penal Code in easily understandable language authorizes the determination of subsidiary liability. The Civil
Code negatives its application by providing that civil obligations arising from crimes or misdemeanors shall be governed
by the provisions of the Penal Code. The conviction of the motorman was a misdemeanor falling under article 604 of the
Penal Code. The act of the motorman was not a wrongful or negligent act or omission not punishable by law. Accordingly,
the civil obligation connected up with the Penal Code and not with article 1903 of the Civil Code. In other words, the Penal
Code affirms its jurisdiction while the Civil Code negatives its jurisdiction. This is a case of criminal negligence out of
which civil liability arises and not a case of civil negligence.
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Our deduction, therefore, is that the case relates to the Penal Code and not to the Civil Code. Indeed, as pointed out by
the trial judge, any different ruling would permit the master to escape scot-free by simply alleging and proving that the
master had exercised all diligence in the selection and training of its servants to prevent the damage. That would be a
good defense to a strictly civil action, but might or might not be to a civil action either as a part of or predicated on
conviction for a crime or misdemeanor. (By way of parenthesis, it may be said further that the statements here made are
offered to meet the argument advanced during our deliberations to the effect that article 0902 of the Civil Code should be
disregarded and codal articles 1093 and 1903 applied.)
It is not clear how the above case could support the defendant's proposition, because the Court of Appeals based its decision in the
present case on the defendant's primary responsibility under article 1903 of the Civil Code and not on his subsidiary liability arising
from Fontanilla's criminal negligence. In other words, the case of City of Manila vs. Manila Electric Co., supra, is predicated on an
entirely different theory, which is the subsidiary liability of an employer arising from a criminal act of his employee, whereas the
foundation of the decision of the Court of Appeals in the present case is the employer's primary liability under article 1903 of the
Civil Code. We have already seen that this is a proper and independent remedy.
Arambulo vs. Manila Electric Co. (55 Phil., 75), is another case invoked by the defendant. A motorman in the employ of the Manila
Electric Company had been convicted o homicide by simple negligence and sentenced, among other things, to pay the heirs of the
deceased the sum of P1,000. An action was then brought to enforce the subsidiary liability of the defendant as employer under the
Penal Code. The defendant attempted to show that it had exercised the diligence of a good father of a family in selecting the
motorman, and therefore claimed exemption from civil liability. But this Court held:
In view of the foregoing considerations, we are of opinion and so hold, (1) that the exemption from civil liability established
in article 1903 of the Civil Code for all who have acted with the diligence of a good father of a family, is not applicable to
the subsidiary civil liability provided in article 20 of the Penal Code.
The above case is also extraneous to the theory of the defendant in the instant case, because the action there had for its purpose
the enforcement of the defendant's subsidiary liability under the Penal Code, while in the case at bar, the plaintiff's cause of action is
based on the defendant's primary and direct responsibility under article 1903 of the Civil Code. In fact, the above case destroys the
defendant's contention because that decision illustrates the principle that the employer's primary responsibility under article 1903 of
the Civil Code is different in character from his subsidiary liability under the Penal Code.

In trying to apply the two cases just referred to, counsel for the defendant has failed to recognize the distinction between civil liability
arising from a crime, which is governed by the Penal Code, and the responsibility for cuasi-delito or culpa aquiliana under the Civil
Code, and has likewise failed to give the importance to the latter type of civil action.
The defendant-petitioner also cites Francisco vs. Onrubia (46 Phil., 327). That case need not be set forth. Suffice it to say that the
question involved was also civil liability arising from a crime. Hence, it is as inapplicable as the two cases above discussed.
The foregoing authorities clearly demonstrate the separate individuality of cuasi-delitos or culpa aquiliana under the Civil Code.
Specifically they show that there is a distinction between civil liability arising from criminal negligence (governed by the Penal Code)
and responsibility for fault or negligence under articles 1902 to 1910 of the Civil Code, and that the same negligent act may produce
either a civil liability arising from a crime under the Penal Code, or a separate responsibility for fault or negligence under articles
1902 to 1910 of the Civil Code. Still more concretely, the authorities above cited render it inescapable to conclude that the employer
in this case the defendant-petitioner is primarily and directly liable under article 1903 of the Civil Code.
The legal provisions, authors, and cases already invoked should ordinarily be sufficient to dispose of this case. But inasmuch as we
are announcing doctrines that have been little understood in the past, it might not be inappropriate to indicate their foundations.
Firstly, the Revised Penal Code in article 365 punishes not only reckless but also simple negligence. If we were to hold that articles
1902 to 1910 of the Civil Code refer only to fault or negligence not punished by law, according to the literal import of article 1093 of
the Civil Code, the legal institution of culpa aquiliana would have very little scope and application in actual life. Death or injury to
persons and damage to property through any degree of negligence even the slightest would have to be indemnified only
through the principle of civil liability arising from a crime. In such a state of affairs, what sphere would remain for cuasi-delito or culpa
aquiliana? We are loath to impute to the lawmaker any intention to bring about a situation so absurd and anomalous. Nor are we, in
the interpretation of the laws, disposed to uphold the letter that killeth rather than the spirit that giveth life. We will not use the literal
meaning of the law to smother and render almost lifeless a principle of such ancient origin and such full-grown development as
culpa aquiliana or cuasi-delito, which is conserved and made enduring in articles 1902 to 1910 of the Spanish Civil Code.
Secondly, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt is required, while in a civil case,
preponderance of evidence is sufficient to make the defendant pay in damages. There are numerous cases of criminal negligence
which can not be shown beyond reasonable doubt, but can be proved by a preponderance of evidence. In such cases, the
defendant can and should be made responsible in a civil action under articles 1902 to 1910 of the Civil Code. Otherwise, there
would be many instances of unvindicated civil wrongs. Ubi jus ibi remedium.
Thirdly, to hold that there is only one way to make defendant's liability effective, and that is, to sue the driver and exhaust his (the
latter's) property first, would be tantamount to compelling the plaintiff to follow a devious and cumbersome method of obtaining relief.
True, there is such a remedy under our laws, but there is also a more expeditious way, which is based on the primary and direct
responsibility of the defendant under article 1903 of the Civil Code. Our view of the law is more likely to facilitate remedy for civil
wrongs, because the procedure indicated by the defendant is wasteful and productive of delay, it being a matter of common
knowledge that professional drivers of taxis and similar public conveyance usually do not have sufficient means with which to pay
damages. Why, then, should the plaintiff be required in all cases to go through this roundabout, unnecessary, and probably useless
procedure? In construing the laws, courts have endeavored to shorten and facilitate the pathways of right and justice.
At this juncture, it should be said that the primary and direct responsibility of employers and their presumed negligence are
principles calculated to protect society. Workmen and employees should be carefully chosen and supervised in order to avoid injury
to the public. It is the masters or employers who principally reap the profits resulting from the services of these servants and
employees. It is but right that they should guarantee the latter's careful conduct for the personnel and patrimonial safety of others.
As Theilhard has said, "they should reproach themselves, at least, some for their weakness, others for their poor selection and all
for their negligence." And according to Manresa, "It is much more equitable and just that such responsibility should fall upon the
principal or director who could have chosen a careful and prudent employee, and not upon the injured person who could not
exercise such selection and who used such employee because of his confidence in the principal or director." (Vol. 12, p. 622, 2nd
Ed.) Many jurists also base this primary responsibility of the employer on the principle of representation of the principal by the agent.
Thus, Oyuelos says in the work already cited (Vol. 7, p. 747) that before third persons the employer and employee "vienen a ser
como una sola personalidad, por refundicion de la del dependiente en la de quien le emplea y utiliza." ("become as one personality
by the merging of the person of the employee in that of him who employs and utilizes him.") All these observations acquire a
peculiar force and significance when it comes to motor accidents, and there is need of stressing and accentuating the responsibility
of owners of motor vehicles.
Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil Code on this subject, which has given
rise to the overlapping or concurrence of spheres already discussed, and for lack of understanding of the character and efficacy of
the action for culpa aquiliana, there has grown up a common practice to seek damages only by virtue of the civil responsibility
arising from a crime, forgetting that there is another remedy, which is by invoking articles 1902-1910 of the Civil Code. Although this
habitual method is allowed by our laws, it has nevertheless rendered practically useless and nugatory the more expeditious and
effective remedy based on culpa aquiliana or culpa extra-contractual. In the present case, we are asked to help perpetuate this
usual course. But we believe it is high time we pointed out to the harm done by such practice and to restore the principle of
responsibility for fault or negligence under articles 1902 et seq. of the Civil Code to its full rigor. It is high time we caused the stream
of quasi-delict or culpa aquiliana to flow on its own natural channel, so that its waters may no longer be diverted into that of a crime

under the Penal Code. This will, it is believed, make for the better safeguarding of private rights because it re-establishes an ancient
and additional remedy, and for the further reason that an independent civil action, not depending on the issues, limitations and
results of a criminal prosecution, and entirely directed by the party wronged or his counsel, is more likely to secure adequate and
efficacious redress.
In view of the foregoing, the judgment of the Court of Appeals should be and is hereby affirmed, with costs against the defendantpetitioner.
Yulo, C.J., Moran, Ozaeta and Paras, JJ., concur.
Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 159270. August 22, 2005
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioners,
vs.
HON. COURT OF APPEALS, RODRIGO ARNAIZ, REGINA LATAGAN, RICARDO GENERALAO and PAMPANGA SUGAR
DEVELOPMENT COMPANY, INC., CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 47699 affirming, with
modification, the decision of the Regional Trial Court (RTC) of Manila in Civil Case No. 93-64803.
The Antecedents
Pampanga Sugar Development Company, Inc. (PASUDECO) transports sugarcane from Mabalacat and Magalang, Pampanga.
When the Mount Pinatubo eruption of 1991 heavily damaged the national bridges along Abacan-Angeles and Sapang Maragul via
Magalang, Pampanga, it requested permission from the Toll Regulatory Board (TRB) for its trucks to enter and pass through the
North Luzon Expressway (NLEX) via Dau-Sta. Ines from Mabalacat, and via Angeles from Magalang, and exit at San Fernando
going to its milling factory.2 The TRB furnished the Philippine National Construction Corporation (PNCC) (the franchisee that
operates and maintains the toll facilities in the North and South Luzon Toll Expressways) with a copy of the said request for it to
comment thereon.3
On November 5, 1991, TRB and PASUDECO entered into a Memorandum of Agreement 4 (MOA), where the latter was allowed to
enter and pass through the NLEX on the following terms and conditions:
1. PASUDECO trucks should move in convoy;
2. Said trucks will stay on the right lane;
3. A vehicle with blinking lights should be assigned at the rear end of the convoy with a sign which should read as follows: Caution:
CONVOY AHEAD!!!;
4. Tollway safety measures should be properly observed;
5. Accidents or damages to the toll facilities arising out of any activity related to this approval shall be the responsibility of
PASUDECO;
6. PASUDECO shall be responsible in towing their stalled trucks immediately to avoid any inconvenience to the other motorists;
7. This request will be in force only while the national bridges along Abacan-Angeles and Sapang Maragul via Magalang remain
impassable.

PASUDECO furnished the PNCC with a copy of the MOA.5 In a Letter6 dated October 22, 1992, the PNCC informed PASUDECO
that it interposed no objection to the MOA.
At around 2:30 a.m. on January 23, 1993, Alex Sendin, the PNCC security supervisor, and his co-employees Eduardo Ducusin and
Vicente Pascual were patrolling Km. 72 going north of the NLEX. They saw a pile of sugarcane in the middle portion of the north and
southbound lanes of the road.7 They placed lit cans with diesel oil in the north and southbound lanes, including lane dividers with
reflectorized markings, to warn motorists of the obstruction. Sendin, Ducusin and Pascual proceeded to the PASUDECO office,
believing that the pile of sugarcane belonged to it since it was the only milling company in the area. They requested for a payloader
or grader to clear the area. However, Engineer Oscar Mallari, PASUDECOs equipment supervisor and transportation
superintendent, told them that no equipment operator was available as it was still very early. 8 Nonetheless, Mallari told them that he
would send someone to clear the affected area. Thereafter, Sendin and company went back to Km. 72 and manned the traffic. At
around 4:00 a.m., five (5) PASUDECO men arrived, and started clearing the highway of the sugarcane. They stacked the sugarcane
at the side of the road. The men left the area at around 5:40 a.m., leaving a few flattened sugarcanes scattered on the road. As the
bulk of the sugarcanes had been piled and transferred along the roadside, Sendin thought there was no longer a need to man the
traffic. As dawn was already approaching, Sendin and company removed the lighted cans and lane dividers. 9 Sendin went to his
office in Sta. Rita, Guiguinto, Bulacan, and made the necessary report. 10
At about 6:30 a.m., Rodrigo S. Arnaiz, a certified mechanic and marketing manager of JETTY Marketing, Inc.,11 was driving his twodoor Toyota Corolla with plate number FAG 961 along the NLEX at about 65 kilometers per hour. 12 He was with his sister Regina
Latagan, and his friend Ricardo Generalao; they were on their way to Baguio to attend their grandmothers first death anniversary.13
As the vehicle ran over the scattered sugarcane, it flew out of control and turned turtle several times. The accident threw the car
about fifteen paces away from the scattered sugarcane.
Police Investigator Demetrio Arcilla investigated the matter and saw black and white sugarcanes on the road, on both lanes, which
appeared to be flattened.14
On March 4, 1993, Arnaiz, Latagan and Generalao filed a complaint15 for damages against PASUDECO and PNCC in the RTC of
Manila, Branch 16. The case was docketed as Civil Case No. 93-64803. They alleged, inter alia, that through its negligence, PNCC
failed to keep and maintain the NLEX safe for motorists when it allowed PASUDECO trucks with uncovered and unsecured
sugarcane to pass through it; that PASUDECO negligently spilled sugarcanes on the NLEX, and PNCC failed to put up emergency
devices to sufficiently warn approaching motorists of the existence of such spillage; and that the combined gross negligence of
PASUDECO and PNCC was the direct and proximate cause of the injuries sustained by Latagan and the damage to Arnaizs car.
They prayed, thus:
WHEREFORE, it is respectfully prayed that, after due hearing, judgment be rendered for the plaintiffs, ordering the defendants
jointly and severally:
(a) To pay unto plaintiff Rodrigo Arnaiz the sum of P100,000.00 representing the value of his car which was totally wrecked;
(b) to pay unto plaintiff Regina Latagan the sum of P100,000.00 by way of reimbursement for medical expenses, the sum of
P50,000.00 by way of moral damages, and the sum of P30,000.00 by way of exemplary damages;
(c) To pay unto plaintiffs Rodrigo Arnaiz and Ricardo Generalao the sum of P5,000.00 by way of reimbursement for medical
expenses; and
(d) To pay unto the plaintiffs the sum of P30,000.00 by way of attorneys fees; plus the costs of suit.
Plaintiffs pray for other reliefs which the Honorable Court may find due them in the premises. 16
In its Answer,17 PNCC admitted that it was under contract to manage the North Luzon Expressway, to keep it safe for motorists. It
averred that the mishap was due to the "unreasonable speed" at which Arnaizs car was running, causing it to turn turtle when it
passed over some pieces of flattened sugarcane. It claimed that the proximate cause of the mishap was PASUDECOs gross
negligence in spilling the sugarcane, and its failure to clear and mop up the area completely. It also alleged that Arnaiz was guilty of
contributory negligence in driving his car at such speed.
The PNCC interposed a compulsory counterclaim 18 against the plaintiffs and cross-claim19 against its co-defendant PASUDECO.
PASUDECO adduced evidence that aside from it, there were other sugarcane mills in the area, like the ARCAM Sugar Central
(formerly known as Pampanga Sugar Mills) and the Central Azucarrera de Tarlac; 20 it was only through the expressway that a
vehicle could access these three (3) sugar centrals;21 and PASUDECO was obligated to clear spillages whether the planters truck
which caused the spillage was bound for PASUDECO, ARCAM or Central Azucarera.22

On rebuttal, PNCC adduced evidence that only planters trucks with "PSD" markings were allowed to use the tollway; 23 that all such
trucks would surely enter the PASUDECO compound. Thus, the truck which spilled sugarcane in January 1993 in Km. 72 was on its
way to the PASUDECO compound.24
On November 11, 1994, the RTC rendered its decision25 in favor of Latagan, dismissing that of Arnaiz and Generalao for
insufficiency of evidence. The case as against the PNCC was, likewise, dismissed. The decretal portion of the decision reads:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
I. ORDERING defendant PASUDECO:
1. To pay plaintiff Regina Latagan:
a. P25,000 = for actual damages
b. P15,000 = for moral damages
c. P10,000 = for attorneys fees
P50,000
2. To pay costs of suit.
II. The case is DISMISSED as to defendant PNCC. No pronouncement as to costs. Its counterclaim is, likewise, DISMISSED.
III. The claims for damages of plaintiffs Rodrigo Arnaiz and Ricardo Generalao are hereby DISMISSED for insufficiency of evidence.
SO ORDERED.26
Both the plaintiffs Arnaiz, Latagan and Generalao and defendant PASUDECO appealed the decision to the CA. Since the plaintiffs
failed to file their brief, the CA dismissed their appeal.27
Resolving PASUDECOs appeal, the CA rendered judgment on April 29, 2003, affirming the RTC decision with modification. The
appellate court ruled that Arnaiz was negligent in driving his car, but that such negligence was merely contributory to the cause of
the mishap, i.e., PASUDECOs failure to properly supervise its men in clearing the affected area. Its supervisor, Mallari, admitted
that he was at his house while their men were clearing Km. 72. Thus, the appellate court held both PASUDECO and PNCC, jointly
and severally, liable to Latagan. The decretal portion of the decision reads:
WHEREFORE, premises considered, the assailed DECISION is hereby MODIFIED and judgment is hereby rendered declaring
PASUDECO and PNCC, jointly and solidarily, liable:
1. To pay plaintiff Regina Latagan:
a. P25,000 = for actual damages
b. P15,000 = for moral damages
c. P10,000 = for attorneys fees
2. To pay costs of suit.
SO ORDERED. 28
The PNCC, now the petitioner, filed a petition for review on certiorari under Rule 45 of the Revised Rules of Court, alleging that:
THE HONORABLE COURT OF APPEALS ERRED IN MODIFYING THE DECISION OF THE TRIAL COURT AND MAKING
PETITIONER PNCC, JOINTLY AND [SOLIDARILY], LIABLE WITH PRIVATE RESPONDENT PASUDECO. 29

The petitioner asserts that the trial court was correct when it held that PASUDECO should be held liable for the mishap, since it had
assumed such responsibility based on the MOA between it and the TRB. The petitioner relies on the trial courts finding that only
PASUDECO was given a permit to pass through the route.
The petitioner insists that the respondents failed to prove that it was negligent in the operation and maintenance of the NLEX. It
maintains that it had done its part in clearing the expressway of sugarcane piles, and that there were no more piles of sugarcane
along the road when its men left Km. 72; only a few scattered sugarcanes flattened by the passing motorists were left. Any liability
arising from any mishap related to the spilled sugarcanes should be borne by PASUDECO, in accordance with the MOA which
provides that "accidents or damages to the toll facilities arising out of any activity related to this approval shall be the responsibility of
PASUDECO."
The petitioner also argues that the respondents should bear the consequences of their own fault or negligence, and that the
proximate and immediate cause of the mishap in question was respondent Arnaizs reckless imprudence or gross negligence.
The Court notes that the issues raised in the petition are factual in nature. Under Rule 45 of the Rules of Court, only questions of
law may be raised in this Court, and while there are exceptions to the rule, no such exception is present in this case. On this ground
alone, the petition is destined to fail. The Court, however, has reviewed the records of the case, and finds that the petition is bereft
of merit.
The petitioner is the grantee of a franchise, giving it the right, privilege and authority to construct, operate and maintain toll facilities
covering the expressways, collectively known as the NLEX.30 Concomitant thereto is its right to collect toll fees for the use of the
said expressways and its obligation to keep it safe for motorists.
There are three elements of a quasi-delict: (a) damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some
other person for whose acts he must respond; and (c) the connection of cause and effect between the fault or negligence of the
defendant and the damages incurred by the plaintiff.31 Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do. 32 It also refers to the
conduct which creates undue risk of harm to another, the failure to observe that degree of care, precaution and vigilance that the
circumstance justly demand, whereby that other person suffers injury.33 The Court declared the test by which to determine the
existence of negligence in Picart v. Smith,34 viz:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the defendant in doing
the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by reference
to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by that.
The test for determining whether a person is negligent in doing an act whereby injury or damage results to the person or property of
another is this: could a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the person
injured as a reasonable consequence of the course actually pursued? If so, the law imposes a duty on the actor to refrain from that
course or to take precautions to guard against its mischievous results, and the failure to do so constitutes negligence. Reasonable
foresight of harm, followed by the ignoring of the admonition born of this provision, is always necessary before negligence can be
held to exist.35
In the case at bar, it is clear that the petitioner failed to exercise the requisite diligence in maintaining the NLEX safe for motorists.
The lighted cans and lane dividers on the highway were removed even as flattened sugarcanes lay scattered on the ground. 36 The
highway was still wet from the juice and sap of the flattened sugarcanes. 37 The petitioner should have foreseen that the wet
condition of the highway would endanger motorists passing by at night or in the wee hours of the morning.
The petitioner cannot escape liability under the MOA between PASUDECO and TRB, since respondent Latagan was not a party
thereto. We agree with the following ruling of the CA:
Both defendants, appellant PASUDECO and appellee PNCC, should be held liable. PNCC, in charge of the maintenance of the
expressway, has been negligent in the performance of its duties. The obligation of PNCC should not be relegated to, by virtue of a
private agreement, to other parties.

PNCC declared the area free from obstruction since there were no piles of sugarcane, but evidence shows there were still pieces of
sugarcane stalks left flattened by motorists. There must be an observance of that degree of care, precaution, and vigilance which
the situation demands. There should have been sufficient warning devices considering that there were scattered sugarcane stalks
still left along the tollway.
The records show, and as admitted by the parties, that Arnaizs car ran over scattered sugarcanes spilled from a hauler truck.38
Moreover, the MOA refers to accidents or damages to the toll facilities. It does not cover damages to property or injuries caused to
motorists on the NLEX who are not privies to the MOA.
PASUDECOs negligence in transporting sugarcanes without proper harness/straps, and that of PNCC in removing the emergency
warning devices, were two successive negligent acts which were the direct and proximate cause of Latagans injuries. As such,
PASUDECO and PNCC are jointly and severally liable. As the Court held in the vintage case of Sabido v. Custodio:39
According to the great weight of authority, where the concurrent or successive negligent acts or omission of two or more persons,
although acting independently of each other, are, in combination, the direct and proximate cause of a single injury to a third person
and it is impossible to determine in what proportion each contributed to the injury, either is responsible for the whole injury, even
though his act alone might not have caused the entire injury, or the same damage might have resulted from the acts of the other
tort-feasor. ...
In Far Eastern Shipping Company v. Court of Appeals,40 the Court declared that the liability of joint tortfeasors is joint and solidary,
to wit:
It may be said, as a general rule, that negligence in order to render a person liable need not be the sole cause of an injury. It is
sufficient that his negligence, concurring with one or more efficient causes other than plaintiff's, is the proximate cause of the injury.
Accordingly, where several causes combine to produce injuries, a person is not relieved from liability because he is responsible for
only one of them, it being sufficient that the negligence of the person charged with injury is an efficient cause without which the
injury would not have resulted to as great an extent, and that such cause is not attributable to the person injured. It is no defense to
one of the concurrent tortfeasors that the injury would not have resulted from his negligence alone, without the negligence or
wrongful acts of the other concurrent tortfeasors. Where several causes producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened, the injury may be attributed to all or any of the causes and recovery may
be had against any or all of the responsible persons although under the circumstances of the case, it may appear that one of them
was more culpable, and that the duty owed by them to the injured person was not the same. No actor's negligence ceases to be a
proximate cause merely because it does not exceed the negligence of other actors. Each wrongdoer is responsible for the entire
result and is liable as though his acts were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is solidary since both of them are liable for the total damage. Where
the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in combination
with the direct and proximate cause of a single injury to a third person, it is impossible to determine in what proportion each
contributed to the injury and either of them is responsible for the whole injury. Where their concurring negligence resulted in injury or
damage to a third party, they become joint tortfeasors and are solidarily liable for the resulting damage under Article 2194 of the
Civil Code.
Thus, with PASUDECOs and the petitioners successive negligent acts, they are joint tortfeasors who are solidarily liable for the
resulting damage under Article 2194 of the New Civil Code.41
Anent respondent Arnaizs negligence in driving his car, both the trial court and the CA agreed that it was only contributory, and
considered the same in mitigating the award of damages in his favor as provided under Article 2179 42 of the New Civil Code.
Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which
falls below the standard to which he is required to conform for his own protection.43 Even the petitioner itself described Arnaizs
negligence as contributory. In its Answer to the complaint filed with the trial court, the petitioner asserted that "the direct and
proximate cause of the accident was the gross negligence of PASUDECO personnel which resulted in the spillage of sugarcane and
the apparent failure of the PASUDECO workers to clear and mop up the area completely, coupled with the contributory negligence
of Arnaiz in driving his car at an unreasonable speed."44 However, the petitioner changed its theory in the present recourse, and now
claims that the proximate and immediate cause of the mishap in question was the reckless imprudence or gross negligence of
respondent Arnaiz.45 Such a change of theory cannot be allowed. When a party adopts a certain theory in the trial court, he will not
be permitted to change his theory on appeal, for to permit him to do so would not only be unfair to the other party but it would also
be offensive to the basic rules of fair play, justice and due process. 46
IN LIGHT OF ALL THE FOREGOING, the present petition is hereby DENIED for lack of merit. The Decision of the Court of Appeals
in CA-G.R. CV No. 47699, dated April 29, 2003, is AFFIRMED. Costs against the petitioner.
SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-24803 May 26, 1977
PEDRO ELCANO and PATRICIA ELCANO, in their capacity as Ascendants of Agapito Elcano, deceased, plaintiffs-appellants,
vs.
REGINALD HILL, minor, and MARVIN HILL, as father and Natural Guardian of said minor, defendants-appellees.
Cruz & Avecilla for appellants.
Marvin R. Hill & Associates for appellees.

BARREDO, J.:
Appeal from the order of the Court of First Instance of Quezon City dated January 29, 1965 in Civil Case No. Q-8102, Pedro Elcano
et al. vs. Reginald Hill et al. dismissing, upon motion to dismiss of defendants, the complaint of plaintiffs for recovery of damages
from defendant Reginald Hill, a minor, married at the time of the occurrence, and his father, the defendant Marvin Hill, with whom he
was living and getting subsistence, for the killing by Reginald of the son of the plaintiffs, named Agapito Elcano, of which, when
criminally prosecuted, the said accused was acquitted on the ground that his act was not criminal, because of "lack of intent to kill,
coupled with mistake."
Actually, the motion to dismiss based on the following grounds:
1. The present action is not only against but a violation of section 1, Rule 107, which is now Rule III, of the
Revised Rules of Court;
2. The action is barred by a prior judgment which is now final and or in res-adjudicata;
3. The complaint had no cause of action against defendant Marvin Hill, because he was relieved as guardian of
the other defendant through emancipation by marriage.
(P. 23, Record [p. 4, Record on Appeal.])
was first denied by the trial court. It was only upon motion for reconsideration of the defendants of such denial, reiterating the above
grounds that the following order was issued:
Considering the motion for reconsideration filed by the defendants on January 14, 1965 and after thoroughly
examining the arguments therein contained, the Court finds the same to be meritorious and well-founded.
WHEREFORE, the Order of this Court on December 8, 1964 is hereby reconsidered by ordering the dismissal
of the above entitled case.
SO ORDERED.
Quezon City, Philippines, January 29, 1965. (p. 40, Record [p. 21, Record on Appeal.)
Hence, this appeal where plaintiffs-appellants, the spouses Elcano, are presenting for Our resolution the following assignment of
errors:
THE LOWER COURT ERRED IN DISMISSING THE CASE BY UPHOLDING THE CLAIM OF DEFENDANTS
THAT -

I
THE PRESENT ACTION IS NOT ONLY AGAINST BUT ALSO A VIOLATION OF SECTION 1, RULE 107,
NOW RULE 111, OF THE REVISED RULES OF COURT, AND THAT SECTION 3(c) OF RULE 111, RULES
OF COURT IS APPLICABLE;
II
THE ACTION IS BARRED BY A PRIOR JUDGMENT WHICH IS NOW FINAL OR RES-ADJUDICTA;
III
THE PRINCIPLES OF QUASI-DELICTS, ARTICLES 2176 TO 2194 OF THE CIVIL CODE, ARE
INAPPLICABLE IN THE INSTANT CASE; and
IV
THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST DEFENDANT MARVIN HILL BECAUSE
HE WAS RELIEVED AS GUARDIAN OF THE OTHER DEFENDANT THROUGH EMANCIPATION BY
MARRIAGE. (page 4, Record.)
It appears that for the killing of the son, Agapito, of plaintiffs-appellants, defendant- appellee Reginald Hill was prosecuted criminally
in Criminal Case No. 5102 of the Court of First Instance of Quezon City. After due trial, he was acquitted on the ground that his act
was not criminal because of "lack of intent to kill, coupled with mistake." Parenthetically, none of the parties has favored Us with a
copy of the decision of acquittal, presumably because appellants do not dispute that such indeed was the basis stated in the court's
decision. And so, when appellants filed their complaint against appellees Reginald and his father, Atty. Marvin Hill, on account of the
death of their son, the appellees filed the motion to dismiss above-referred to.
As We view the foregoing background of this case, the two decisive issues presented for Our resolution are:
1. Is the present civil action for damages barred by the acquittal of Reginald in the criminal case wherein the action for civil liability,
was not reversed?
2. May Article 2180 (2nd and last paragraphs) of the Civil Code he applied against Atty. Hill, notwithstanding the undisputed fact that
at the time of the occurrence complained of. Reginald, though a minor, living with and getting subsistenee from his father, was
already legally married?
The first issue presents no more problem than the need for a reiteration and further clarification of the dual character, criminal and
civil, of fault or negligence as a source of obligation which was firmly established in this jurisdiction in Barredo vs. Garcia, 73 Phil.
607. In that case, this Court postulated, on the basis of a scholarly dissertation by Justice Bocobo on the nature of culpa aquiliana in
relation to culpa criminal or delito and mere culpa or fault, with pertinent citation of decisions of the Supreme Court of Spain, the
works of recognized civilians, and earlier jurisprudence of our own, that the same given act can result in civil liability not only under
the Penal Code but also under the Civil Code. Thus, the opinion holds:
The, above case is pertinent because it shows that the same act machinist. come under both the Penal Code
and the Civil Code. In that case, the action of the agent killeth unjustified and fraudulent and therefore could
have been the subject of a criminal action. And yet, it was held to be also a proper subject of a civil action under
article 1902 of the Civil Code. It is also to be noted that it was the employer and not the employee who was
being sued. (pp. 615-616, 73 Phil.). 1
It will be noticed that the defendant in the above case could have been prosecuted in a criminal case because
his negligence causing the death of the child was punishable by the Penal Code. Here is therefore a clear
instance of the same act of negligence being a proper subject matter either of a criminal action with its
consequent civil liability arising from a crime or of an entirely separate and independent civil action for fault or
negligence under article 1902 of the Civil Code. Thus, in this jurisdiction, the separate individuality of a cuasidelito or culpa aquiliana, under the Civil Code has been fully and clearly recognized, even with regard to a
negligent act for which the wrongdoer could have been prosecuted and convicted in a criminal case and for
which, after such a conviction, he could have been sued for this civil liability arising from his crime. (p. 617, 73
Phil.) 2
It is most significant that in the case just cited, this Court specifically applied article 1902 of the Civil Code. It is
thus that although J. V. House could have been criminally prosecuted for reckless or simple negligence and not

only punished but also made civilly liable because of his criminal negligence, nevertheless this Court awarded
damages in an independent civil action for fault or negligence under article 1902 of the Civil Code. (p. 618, 73
Phil.) 3
The legal provisions, authors, and cases already invoked should ordinarily be sufficient to dispose of this case.
But inasmuch as we are announcing doctrines that have been little understood, in the past, it might not he
inappropriate to indicate their foundations.
Firstly, the Revised Penal Code in articles 365 punishes not only reckless but also simple negligence. If we
were to hold that articles 1902 to 1910 of the Civil Code refer only to fault or negligence not punished by law,
accordingly to the literal import of article 1093 of the Civil Code, the legal institution of culpa aquiliana would
have very little scope and application in actual life. Death or injury to persons and damage to property- through
any degree of negligence - even the slightest - would have to be Idemnified only through the principle of civil
liability arising from a crime. In such a state of affairs, what sphere would remain for cuasi-delito or culpa
aquiliana? We are loath to impute to the lawmaker any intention to bring about a situation so absurd and
anomalous. Nor are we, in the interpretation of the laws, disposed to uphold the letter that killeth rather than the
spirit that giveth life. We will not use the literal meaning of the law to smother and render almost lifeless a
principle of such ancient origin and such full-grown development as culpa aquiliana or cuasi-delito, which is
conserved and made enduring in articles 1902 to 1910 of the Spanish Civil Code.
Secondary, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt is required,
while in a civil case, preponderance of evidence is sufficient to make the defendant pay in damages. There are
numerous cases of criminal negligence which can not be shown beyond reasonable doubt, but can be proved
by a preponderance of evidence. In such cases, the defendant can and should be made responsible in a civil
action under articles 1902 to 1910 of the Civil Code. Otherwise. there would be many instances of unvindicated
civil wrongs. "Ubi jus Idemnified remedium." (p. 620,73 Phil.)
Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil Code on this
subject, which has given rise to the overlapping or concurrence of spheres already discussed, and for lack of
understanding of the character and efficacy of the action for culpa aquiliana, there has grown up a common
practice to seek damages only by virtue of the civil responsibility arising from a crime, forgetting that there is
another remedy, which is by invoking articles 1902-1910 of the Civil Code. Although this habitual method is
allowed by, our laws, it has nevertheless rendered practically useless and nugatory the more expeditious and
effective remedy based on culpa aquiliana or culpa extra-contractual. In the present case, we are asked to help
perpetuate this usual course. But we believe it is high time we pointed out to the harms done by such practice
and to restore the principle of responsibility for fault or negligence under articles 1902 et seq. of the Civil Code
to its full rigor. It is high time we caused the stream of quasi-delict or culpa aquiliana to flow on its own natural
channel, so that its waters may no longer be diverted into that of a crime under the Penal Code. This will, it is
believed, make for the better safeguarding or private rights because it realtor, an ancient and additional remedy,
and for the further reason that an independent civil action, not depending on the issues, limitations and results
of a criminal prosecution, and entirely directed by the party wronged or his counsel, is more likely to secure
adequate and efficacious redress. (p. 621, 73 Phil.)
Contrary to an immediate impression one might get upon a reading of the foregoing excerpts from the opinion in Garcia that the
concurrence of the Penal Code and the Civil Code therein referred to contemplate only acts of negligence and not intentional
voluntary acts - deeper reflection would reveal that the thrust of the pronouncements therein is not so limited, but that in fact it
actually extends to fault or culpa. This can be seen in the reference made therein to the Sentence of the Supreme Court of Spain of
February 14, 1919, supra, which involved a case of fraud or estafa, not a negligent act. Indeed, Article 1093 of the Civil Code of
Spain, in force here at the time of Garcia, provided textually that obligations "which are derived from acts or omissions in which fault
or negligence, not punishable by law, intervene shall be the subject of Chapter II, Title XV of this book (which refers to quasidelicts.)" And it is precisely the underline qualification, "not punishable by law", that Justice Bocobo emphasized could lead to an
ultimo construction or interpretation of the letter of the law that "killeth, rather than the spirit that giveth lift- hence, the ruling that
"(W)e will not use the literal meaning of the law to smother and render almost lifeless a principle of such ancient origin and such fullgrown development as culpa aquiliana or quasi-delito, which is conserved and made enduring in articles 1902 to 1910 of the
Spanish Civil Code." And so, because Justice Bacobo was Chairman of the Code Commission that drafted the original text of the
new Civil Code, it is to be noted that the said Code, which was enacted after the Garcia doctrine, no longer uses the term, 11 not
punishable by law," thereby making it clear that the concept of culpa aquiliana includes acts which are criminal in character or in
violation of the penal law, whether voluntary or matter. Thus, the corresponding provisions to said Article 1093 in the new code,
which is Article 1162, simply says, "Obligations derived from quasi-delicto shall be governed by the provisions of Chapter 2, Title
XVII of this Book, (on quasi-delicts) and by special laws." More precisely, a new provision, Article 2177 of the new code provides:
ART. 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.

According to the Code Commission: "The foregoing provision (Article 2177) through at first sight startling, is not so novel or
extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation of the criminal law, while
the latter is a "culpa aquiliana" or quasi-delict, of ancient origin, having always had its own foundation and individuality, separate
from criminal negligence. Such distinction between criminal negligence and "culpa extracontractual" or "cuasi-delito" has been
sustained by decision of the Supreme Court of Spain and maintained as clear, sound and perfectly tenable by Maura, an
outstanding Spanish jurist. Therefore, under the proposed Article 2177, acquittal from an accusation of criminal negligence, whether
on reasonable doubt or not, shall not be a bar to a subsequent civil action, not for civil liability arising from criminal negligence, but
for damages due to a quasi-delict or 'culpa aquiliana'. But said article forestalls a double recovery.", (Report of the Code)
Commission, p. 162.)
Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same argument of Justice Bacobo about
construction that upholds "the spirit that giveth lift- rather than that which is literal that killeth the intent of the lawmaker should be
observed in applying the same. And considering that the preliminary chapter on human relations of the new Civil Code definitely
establishes the separability and independence of liability in a civil action for acts criminal in character (under Articles 29 to 32) from
the civil responsibility arising from crime fixed by Article 100 of the Revised Penal Code, and, in a sense, the Rules of Court, under
Sections 2 and 3 (c), Rule 111, contemplate also the same separability, it is "more congruent with the spirit of law, equity and
justice, and more in harmony with modern progress"- to borrow the felicitous relevant language in Rakes vs. Atlantic. Gulf and
Pacific Co., 7 Phil. 359, to hold, as We do hold, that Article 2176, where it refers to "fault or negligencia covers not only acts "not
punishable by law" but also acts criminal in character, whether intentional and voluntary or negligent. Consequently, a separate civil
action 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
estinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed
by the accused. Briefly stated, We here hold, in reiteration of Garcia, that culpa aquiliana includes voluntary and negligent acts
which may be punishable by law.4
It results, therefore, that the acquittal of Reginal Hill in the criminal case has not extinguished his liability for quasi-delict, hence that
acquittal is not a bar to the instant action against him.
Coming now to the second issue about the effect of Reginald's emancipation by marriage on the possible civil liability of Atty. Hill,
his father, it is also Our considered opinion that the conclusion of appellees that Atty. Hill is already free from responsibility cannot
be upheld.
While it is true that parental authority is terminated upon emancipation of the child (Article 327, Civil Code), and under Article 397,
emancipation takes place "by the marriage of the minor (child)", it is, however, also clear that pursuant to Article 399, emancipation
by marriage of the minor is not really full or absolute. Thus "(E)mancipation by marriage or by voluntary concession shall terminate
parental authority over the child's person. It shall enable the minor to administer his property as though he were of age, but he
cannot borrow money or alienate or encumber real property without the consent of his father or mother, or guardian. He can sue and
be sued in court only with the assistance of his father, mother or guardian."
Now under Article 2180, "(T)he obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also
for those of persons for whom one is responsible. The father and, in case of his death or incapacity, the mother, are responsible.
The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who
live in their company." In the instant case, it is not controverted that Reginald, although married, was living with his father and getting
subsistence from him at the time of the occurrence in question. Factually, therefore, Reginald was still subservient to and dependent
on his father, a situation which is not unusual.
It must be borne in mind that, according to Manresa, the reason behind the joint and solidary liability of presuncion with their
offending child under Article 2180 is that is the obligation of the parent to supervise their minor children in order to prevent them
from causing damage to third persons. 5 On the other hand, the clear implication of Article 399, in providing that a minor
emancipated by marriage may not, nevertheless, sue or be sued without the assistance of the parents, is that such emancipation
does not carry with it freedom to enter into transactions or do any act that can give rise to judicial litigation. (See Manresa, Id., Vol.
II, pp. 766-767, 776.) And surely, killing someone else invites judicial action. Otherwise stated, the marriage of a minor child does
not relieve the parents of the duty to see to it that the child, while still a minor, does not give answerable for the borrowings of money
and alienation or encumbering of real property which cannot be done by their minor married child without their consent. (Art. 399;
Manresa, supra.)
Accordingly, in Our considered view, Article 2180 applies to Atty. Hill notwithstanding the emancipation by marriage of Reginald.
However, inasmuch as it is evident that Reginald is now of age, as a matter of equity, the liability of Atty. Hill has become milling,
subsidiary to that of his son.
WHEREFORE, the order appealed from is reversed and the trial court is ordered to proceed in accordance with the foregoing
opinion. Costs against appellees.

Fernando (Chairman), Antonio, and Martin, JJ., concur.

Concepcion Jr., J, is on leave.
Martin, J, was designated to sit in the Second Division.

Separate Opinions

AQUINO, J, concurring:
Article 2176 of the Civil Code comprehends any culpable act, which is blameworthy, when judged by accepted legal standards. "The
Idea thus expressed is undoubtedly board enough to include any rational conception of liability for the tortious acts likely to be
developed in any society." (Street, J. in Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587, 600). See article 38,
Civil Code and the ruling that "the infant tortfeasor is liable in a civil action to the injured person in the same manner and to the same
extent as an adult" (27 Am. Jur. 812 cited by Bocobo, J., in Magtibay vs. Tiangco, 74 Phil. 576, 579).

Separate Opinions
AQUINO, J, concurring:
Article 2176 of the Civil Code comprehends any culpable act, which is blameworthy, when judged by accepted legal standards. "The
Idea thus expressed is undoubtedly board enough to include any rational conception of liability for the tortious acts likely to be
developed in any society." (Street, J. in Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587, 600). See article 38,
Civil Code and the ruling that "the infant tortfeasor is liable in a civil action to the injured person in the same manner and to the same
extent as an adult" (27 Am. Jur. 812 cited by Bocobo, J., in Magtibay vs. Tiangco, 74 Phil. 576, 579).
Footnotes
1 Referring to Sentence of the Supreme Court of Spain of February 14, 1919.
2 Referring to Manzanares vs. Moreta, 38 Phil. 821.
3 Referring to Bernal et al, vs. House et al., 54 Phil. 327.
4 Parenthetically, Manresa seemingly holds. the contrary view thus:
"Sin embargo, para no ineurrir en error hay que tener en cuenta que los lineage. del precepts contenido en el
presente articulo son bastante mas reducidos, pues no se hallan comprendidos en el todos los datios que pues
tener por causa la culpa o la negligencia.
"En efecto, examinando detenidamente la terminos general de la culpa y de la negligencia. se observe que,
tanto en una como en otra de dichas causas, hay tres generoso o tres especies distintas, a saber:
1. La que represents una accion u omision voluntaria por la que results incumplida una obligacion
anteriormente constituida.
2. La que sin existencia de una obligacion anterior produce un dano o perjuicio que, teniendo su origen en un
hecho ilicito, no reviste los caracteres de delito o falta; y

3. La que teniendo por origen un hecho que constituya delito o falta produce una responsabilidad civil como
accesoria de la responsabilidad criminal.
"La primera de estas tres especies de culpa o negligencia es siempre accesoria de una obligacion principal,
cuyo incumplimiento da origen a la terminos especial de la culpa en materia de contratos, y el eatudio de esta
debe harms al examinar cada contrato, en especial, como lo hicimos asi, analizando entoces los peculiares
efectos de dicha culpa en cada uno de ellos.
"La tercera de las especies citadas es accesoria tambien, pues no puede concebirse su existencia sin la de un
delicto o falts que la produzca. Es decir, que solo al lado de la responsabilidad criminal puede supuesto esa
responsabilidad civil y la obligacion proveniente de la culpa, ineurrir como una consecuencia de la
responsabilidad criminal, y, por consiguente, su examen y regulacion perusal. al Derecho penal.
"Como consecuencia de ello, results que la unica especie de culpa y omisiones o negligencia que puede ser y
es meanwhile.' del presente capitulo, es la separability, o sea la que sin la existencia de una obligacion anterior,
y sin ningun antecedents contractual, produce un dano o perjuico que tiene su origen en una accion u omision
culpable solo civilmente; as decir, que siendo ilicita, no reviste sin embargo, los caracteres de un delito o falta
por no estar penada por la ley. Y aun dentro de estos lineage hay que restringir aun mas los terminos o la
materia propria de este articulo, el cual se refiere unicamente a la culpa o negligencia personates del obligado,
pero no a las que prudencia de actos o de omisiones de persons., distintas de este." (pp. 642-643, Vol. XII,
Manresa, Codigo Civil Espanol.)
5 "Nuestro Codigo no ha seguido la escuela italiana, sino que mas bien se ha instantaneous, en el criterio de la
doctrina full-grown puesto que impone la obligacion de reparar, el dano causado en virtud de una presuncion
juris tecum de culpa por parte del que tiene bajo su autoridad o dependecia al causante del daho, derivada del
hicimos de no haber puesto el cuidado y la vinculos debida en los actos de sus subordinados para evitar dicho
resultado. Asi es que, segun el parrafo ultimo del art. 1,903, cesa dicha responsabilidad cuando se prueba que
los obligados por los actos ajenos emplearon toda la diligencia de un buen padre de familia. Luego no es la
causa de la obligacion impuesta la representacion, ni el interes, ni la necesidad de que haya quienes responda
del dano causado por el que no tiene personalidad in garantias de specialist. para responsabilidad por siendo
sino el incumplimiento implicito o supuesto de los deberes de precaucion y de prudencia que impuesta los
vinculos civiles que unicamente al obligado con las persons., por quienes debe representacion, el mal causado,
Por ese motivo coloca dicha obligacion entre las que prudencia de la culpa of negligentj (pp. 670671, Manresa,
Codigo Civil Espanol, Vol. XII.)
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165732

December 14, 2006

SAFEGUARD SECURITY AGENCY, INC., and ADMER PAJARILLO, petitioners,

vs.
LAURO TANGCO, VAL TANGCO, VERN LARRY TANGCO, VAN LAURO TANGCO, VON LARRIE TANGCO, VIEN LARI
TANGCO and VIVIEN LAURIZ TANGCO, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari filed by Safeguard Security Agency, Inc. (Safeguard) and Admer Pajarillo (Pajarillo)
assailing the Decision1 dated July 16, 2004 and the Resolution2 dated October 20, 2004 issued by the Court of Appeals (CA) in CAG.R. CV No. 77462.
On November 3, 1997, at about 2:50 p.m., Evangeline Tangco (Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City,
to renew her time deposit per advise of the bank's cashier as she would sign a specimen card. Evangeline, a duly licensed firearm
holder with corresponding permit to carry the same outside her residence, approached security guard Pajarillo, who was stationed
outside the bank, and pulled out her firearm from her bag to deposit the same for safekeeping. Suddenly, Pajarillo shot Evangeline
with his service shotgun hitting her in the abdomen instantly causing her death.

Lauro Tangco, Evangeline's husband, together with his six minor children (respondents) filed with the Regional Trial Court (RTC) of
Quezon City, a criminal case of Homicide against Pajarillo, docketed as Criminal Case No. 0-97-73806 and assigned to Branch 78.
Respondents reserved their right to file a separate civil action in the said criminal case. The RTC of Quezon City subsequently
convicted Pajarillo of Homicide in its Decision dated January 19, 2000. 3 On appeal to the CA, the RTC decision was affirmed with
modification as to the penalty in a Decision4 dated July 31, 2000. Entry of Judgment was made on August 25, 2001.
Meanwhile, on January 14, 1998, respondents filed with RTC, Branch 273, Marikina City, a complaint5 for damages against Pajarillo
for negligently shooting Evangeline and against Safeguard for failing to observe the diligence of a good father of a family to prevent
the damage committed by its security guard. Respondents prayed for actual, moral and exemplary damages and attorney's fees.
In their Answer,6 petitioners denied the material allegations in the complaint and alleged that Safeguard exercised the diligence of a
good father of a family in the selection and supervision of Pajarillo; that Evangeline's death was not due to Pajarillo's negligence as
the latter acted only in self-defense. Petitioners set up a compulsory counterclaim for moral damages and attorney's fees.
Trial thereafter ensued. On January 10, 2003, the RTC rendered its Decision, 7 the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs, the heirs of Evangeline Tangco, and against
defendants Admer Pajarillo and Safeguard Security Agency, Inc. ordering said defendants to pay the plaintiffs, jointly and
severally, the following:
1. ONE HUNDRED FIFTY SEVEN THOUSAND FOUR HUNDRED THIRTY PESOS (P157,430.00), as actual
damages
2. FIFTY THOUSAND PESOS (P50,000.00) as death indemnity;
3. ONE MILLION PESOS (P1,000,000.00), as moral damages;
4. THREE HUNDRED THOUSAND PESOS (P300,000.00), as exemplary damages;
5. THIRTY THOUSAND PESOS (P30,000.00), as attorney's fees; and
6. costs of suit.
For lack of merit, defendants' counterclaim is hereby DISMISSED.
SO ORDERED. 8
The RTC found respondents to be entitled to damages. It rejected Pajarillo's claim that he merely acted in self-defense. It gave no
credence to Pajarillo's bare claim that Evangeline was seen roaming around the area prior to the shooting incident since Pajarillo
had not made such report to the head office and the police authorities. The RTC further ruled that being the guard on duty, the
situation demanded that he should have exercised proper prudence and necessary care by asking Evangeline for him to ascertain
the matter instead of shooting her instantly; that Pajarillo had already been convicted of Homicide in Criminal Case No. 0-97-73806;
and that he also failed to proffer proof negating liability in the instant case.
The RTC also found Safeguard as employer of Pajarillo to be jointly and severally liable with Pajarillo. It ruled that while it may be
conceded that Safeguard had perhaps exercised care in the selection of its employees, particularly of Pajarillo, there was no
sufficient evidence to show that Safeguard exercised the diligence of a good father of a family in the supervision of its employee;
that Safeguard's evidence simply showed that it required its guards to attend trainings and seminars which is not the supervision
contemplated under the law; that supervision includes not only the issuance of regulations and instructions designed for the
protection of persons and property, for the guidance of their servants and employees, but also the duty to see to it that such
regulations and instructions are faithfully complied with.
Petitioners appealed the RTC decision to the CA. On July 16, 2004, the CA issued its assailed Decision, the dispositive portion of
which reads:
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby AFFIRMED, with the modification that Safeguard
Security Agency, Inc.'s civil liability in this case is only subsidiary under Art. 103 of the Revised Penal Code. No
pronouncement as to costs.9
In finding that Safeguard is only subsidiarily liable, the CA held that the applicable provisions are not Article 2180 in relation to
Article 2176 of the Civil Code, on quasi-delicts, but the provisions on civil liability arising from felonies under the Revised Penal

Code; that since Pajarillo had been found guilty of Homicide in a final and executory judgment and is said to be serving sentence in
Muntinlupa, he must be adjudged civilly liable under the provisions of Article 100 of the Revised Penal Code since the civil liability
recoverable in the criminal action is one solely dependent upon conviction, because said liability arises from the offense charged
and no other; that this is also the civil liability that is deemed extinguished with the extinction of the penal liability with a
pronouncement that the fact from which the civil action might proceed does not exist; that unlike in civil liability arising from quasidelict, the defense of diligence of a good father of a family in the employment and supervision of employees is inapplicable and
irrelevant in civil liabilities based on crimes or ex-delicto; that Article 103 of the Revised Penal Code provides that the liability of an
employer for the civil liability of their employees is only subsidiary, not joint or solidary.
Petitioners filed their Motion for Reconsideration which the CA denied in a Resolution dated October 20, 2004.
Hence, the instant Petition for Review on Certiorari with the following assignment of errors, to wit:
The Honorable Court of Appeals gravely erred in finding petitioner Pajarillo liable to respondents for the payment of
damages and other money claims.
The Honorable Court of Appeals gravely erred when it applied Article 103 of the Revised Penal Code in holding petitioner
Safeguard solidarily [sic] liable with petitioner Pajarillo for the payment of damages and other money claims.
The Honorable Court of Appeals gravely erred in failing to find that petitioner Safeguard Security Agency, Inc. exercised
due diligence in the selection and supervision of its employees, hence, should be excused from any liability.10
The issues for resolution are whether (1) Pajarillo is guilty of negligence in shooting Evangeline; and (2) Safeguard should be held
solidarily liable for the damages awarded to respondents.
Safeguard insists that the claim for damages by respondents is based on culpa aquiliana under Article 217611 of the Civil Code, in
which case, its liability is jointly and severally with Pajarillo. However, since it has established that it had exercised due diligence in
the selection and supervision of Pajarillo, it should be exonerated from civil liability.
We will first resolve whether the CA correctly held that respondents, in filing a separate civil action against petitioners are limited to
the recovery of damages arising from a crime or delict, in which case the liability of Safeguard as employer under Articles 102 and
103 of the Revised Penal Code12 is subsidiary and the defense of due diligence in the selection and supervision of employee is not
available to it.
The CA erred in ruling that the liability of Safeguard is only subsidiary.
The law at the time the complaint for damages was filed is Rule 111 of the 1985 Rules on Criminal Procedure, as amended, to wit:
SECTION 1. Institution of criminal and civil actions. - When a criminal action is instituted, the civil action for the recovery
of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his
right to institute it separately, or institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34,
and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused.
Respondents reserved the right to file a separate civil action and in fact filed the same on January 14, 1998.
The CA found that the source of damages in the instant case must be the crime of homicide, for which he had already been found
guilty of and serving sentence thereof, thus must be governed by the Revised Penal Code.
We do not agree.
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. 13

It is important to determine the nature of respondents' cause of action. The nature of a cause of action is determined by the facts
alleged in the complaint as constituting the cause of action. 14 The purpose of an action or suit and the law to govern it is to be
determined not by the claim of the party filing the action, made in his argument or brief, but rather by the complaint itself, its
allegations and prayer for relief.15
The pertinent portions of the complaint read:
7. That Defendant Admer A. Pajarillo was the guard assigned and posted in the Ecology Bank Katipunan Branch,
Quezon City, who was employed and under employment of Safeguard Security Agency, Inc. hence there is employeremployee relationship between co-defendants.
The Safeguard Security Agency, Inc. failed to observe the diligence of a good father of a family to prevent damage to
herein plaintiffs.
8. That defendant Admer Pajarillo upon seeing Evangeline Tangco, who brought her firearm out of her bag, suddenly
without exercising necessary caution/care, and in idiotic manner, with the use of his shotgun, fired and burst bullets upon
Evangeline M. Tangco, killing her instantly. x x x
xxxx
16. That defendants, being employer and the employee are jointly and severally liable for the death of Evangeline M.
Tangco.16
Thus, a reading of respondents' complaint shows that the latter are invoking their right to recover damages against Safeguard for
their vicarious responsibility for the injury caused by Pajarillo's act of shooting and killing Evangeline under Article 2176, Civil Code
which provides:
ARTICLE 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties is called
a quasi-delict and is governed by the provisions of this Chapter.
The scope of Article 2176 is not limited to acts or omissions resulting from negligence. In Dulay v. Court of Appeals,17 we held:
x x x Well-entrenched is the doctrine that Article 2176 covers not only acts committed with negligence, but also acts which
are voluntary and intentional. As far back as the definitive case of Elcano v. Hill (77 SCRA 98 [1977]), this Court already
held that:
"x x x Article 2176, where it refers to "fault or negligence," covers not only acts "not punishable by law" but also
acts criminal in character, whether intentional and voluntary or negligent. Consequently, a separate civil action 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 quasidelict 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. Briefly stated, We here hold, in reiteration of Garcia, that
culpa aquiliana includes voluntary and negligent acts which may be punishable by law." (Emphasis supplied)
The civil action filed by respondents was not derived from the criminal liability of Pajarillo in the criminal case but one based on
culpa aquiliana or quasi-delict which is separate and distinct from the civil liability arising from crime. 18 The source of the obligation
sought to be enforced in the civil case is a quasi-delict not an act or omission punishable by law.
In Bermudez v. Melencio-Herrera,19 where the issue involved was whether the civil action filed by plaintiff-appellants is founded on
crime or on quasi-delict, we held:
x x x 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, 1969 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 x x x.
xxxx
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 solidarily 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 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.20 (Emphasis supplied)
Although the judgment in the criminal case finding Pajarillo guilty of Homicide is already final and executory, such judgment has no
relevance or importance to this case.21 It would have been entirely different if respondents' cause of action was for damages arising
from a delict, in which case the CA is correct in finding Safeguard to be only subsidiary liable pursuant to Article 103 of the Revised
Penal Code.22
As clearly shown by the allegations in the complaint, respondents' cause of action is based on quasi-delict. Under Article 2180 of the
Civil Code, when the injury is caused by the negligence of the employee, there instantly arises a presumption of law that there was
negligence on the part of the master or the employer either in the selection of the servant or employee, or in the supervision over
him after selection or both. The liability of the employer under Article 2180 is direct and immediate. Therefore, it is incumbent upon
petitioners to prove that they exercised the diligence of a good father of a family in the selection and supervision of their employee.
We must first resolve the issue of whether Pajarillo was negligent in shooting Evangeline.
The issue of negligence is factual in nature. Whether a person is negligent or not is a question of fact, which, as a general rule, we
cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing errors of law.23 Generally, factual
findings of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal. The established
exceptions are: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is grave abuse of
discretion; (3) when the findings are grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the CA is
based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA, in making its findings, went
beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings of
fact are conclusions without citation of specific evidence on which they are based; (8) when the CA manifestly overlooked certain
relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (9) when the
findings of fact of the CA are premised on the absence of evidence and are contradicted by the evidence on record. [24]
A thorough review of the records of the case fails to show any cogent reason for us to deviate from the factual finding of the trial
court and affirmed by the CA that petitioner Pajarillo was guilty of negligence in shooting Evangeline.
Respondents' evidence established that Evangeline's purpose in going to the bank was to renew her time deposit. 25 On the other
hand, Pajarillo claims that Evangeline drew a gun from her bag and aimed the same at him, thus, acting instinctively, he shot her in
self-defense.
Pajarillo testified that when Evangeline aimed the gun at him at a distance of about one meter or one arm's length 26 he stepped
backward, loaded the chamber of his gun and shot her.27 It is however unimaginable that petitioner Pajarillo could still make such
movements if indeed the gun was already pointed at him. Any movement could have prompted Evangeline to pull the trigger to
shoot him.
Petitioner Pajarillo would like to justify his action in shooting Evangeline on his mere apprehension that Evangeline will stage a bank
robbery. However, such claim is befuddled by his own testimony. Pajarillo testified that prior to the incident, he saw Evangeline
roaming under the fly over which was about 10 meters away from the bank28 and saw her talking to a man thereat;29 that she left the
man under the fly-over, crossed the street and approached the bank. However, except for the bare testimony of Pajarillo, the
records do not show that indeed Evangeline was seen roaming near the vicinity of the bank and acting suspiciously prior to the
shooting incident. In fact, there is no evidence that Pajarillo called the attention of his head guard or the bank's branch manager
regarding his concerns or that he reported the same to the police authorities whose outpost is just about 15 meters from the bank.
Moreover, if Evangeline was already roaming the vicinity of the bank, she could have already apprised herself that Pajarillo, who
was posted outside the bank, was armed with a shotgun; that there were two guards inside the bank 30 manning the entrance door.

Thus, it is quite incredible that if she really had a companion, she would leave him under the fly-over which is 10 meters far from the
bank and stage a bank robbery all by herself without a back-up. In fact, she would have known, after surveying the area, that aiming
her gun at Pajarillo would not ensure entrance to the bank as there were guards manning the entrance door.
Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself such as the
common experience and observation of mankind can approve as probable under the circumstances. We have no test of the truth of
human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to
the miraculous and is outside judicial cognizance.31
That Evangeline just wanted to deposit her gun before entering the bank and was actually in the act of pulling her gun from her bag
when petitioner Pajarillo recklessly shot her, finds support from the contentions raised in petitioners' petition for review where they
argued that when Evangeline approached the bank, she was seen pulling a gun from inside her bag and petitioner Pajarillo who was
suddenly beset by fear and perceived the act as a dangerous threat, shot and killed the deceased out of pure instinct;32 that the act
of drawing a gun is a threatening act, regardless of whether or not the gun was intended to be used against petitioner Pajarillo;33
that the fear that was created in the mind of petitioner Pajarillo as he saw Evangeline Tangco drawing a gun from her purse was
suddenly very real and the former merely reacted out of pure self-preservation.34
Considering that unlawful aggression on the part of Evangeline is absent, Pajarillo's claim of self-defense cannot be accepted
specially when such claim was uncorroborated by any separate competent evidence other than his testimony which was even
doubtful. Pajarillo's apprehension that Evangeline will shoot him to stage a bank robbery has no basis at all. It is therefore clear that
the alleged threat of bank robbery was just a figment of Pajarillo's imagination which caused such unfounded unlawful aggression
on his part.
Petitioners argue that Evangeline was guilty of contributory negligence. Although she was a licensed firearm holder, she had no
business bringing the gun in such establishment where people would react instinctively upon seeing the gun; that had Evangeline
been prudent, she could have warned Pajarillo before drawing the gun and did not conduct herself with suspicion by roaming
outside the vicinity of the bank; that she should not have held the gun with the nozzle pointed at Pajarillo who mistook the act as
hold up or robbery.
We are not persuaded.
As we have earlier held, Pajarillo failed to substantiate his claim that Evangeline was seen roaming outside the vicinity of the bank
and acting suspiciously prior to the shooting incident. Evangeline's death was merely due to Pajarillo's negligence in shooting her on
his imagined threat that Evangeline will rob the bank.
Safeguard contends that it cannot be jointly held liable since it had adequately shown that it had exercised the diligence required in
the selection and supervision of its employees. It claims that it had required the guards to undergo the necessary training and to
submit the requisite qualifications and credentials which even the RTC found to have been complied with; that the RTC erroneously
found that it did not exercise the diligence required in the supervision of its employee. Safeguard further claims that it conducts
monitoring of the activities of its personnel, wherein supervisors are assigned to routinely check the activities of the security guards
which include among others, whether or not they are in their proper post and with proper equipment, as well as regular evaluations
of the employees' performances; that the fact that Pajarillo loaded his firearm contrary to Safeguard's operating procedure is not
sufficient basis to say that Safeguard had failed its duty of proper supervision; that it was likewise error to say that Safeguard was
negligent in seeing to it that the procedures and policies were not properly implemented by reason of one unfortunate event.
We are not convinced.
Article 2180 of the Civil Code provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for
those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged in any business or industry.
xxxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.

As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the quasi-delict committed by the former. Safeguard is
presumed to be negligent in the selection and supervision of his employee by operation of law. This presumption may be overcome
only by satisfactorily showing that the employer exercised the care and the diligence of a good father of a family in the selection and
the supervision of its employee.
In the selection of prospective employees, employers are required to examine them as to their qualifications, experience, and
service records.35 On the other hand, due diligence in the supervision of employees includes the formulation of suitable rules and
regulations for the guidance of employees and the issuance of proper instructions intended for the protection of the public and
persons with whom the employer has relations through his or its employees and the imposition of necessary disciplinary measures
upon employees in case of breach or as may be warranted to ensure the performance of acts indispensable to the business of and
beneficial to their employer. To this, we add that actual implementation and monitoring of consistent compliance with said rules
should be the constant concern of the employer, acting through dependable supervisors who should regularly report on their
supervisory functions.36 To establish these factors in a trial involving the issue of vicarious liability, employers must submit concrete
proof, including documentary evidence.
We agree with the RTC's finding that Safeguard had exercised the diligence in the selection of Pajarillo since the record shows that
Pajarillo underwent a psychological and neuro-psychiatric evaluation conducted by the St. Martin de Porres Center where no
psychoses ideations were noted, submitted a certification on the Pre-licensing training course for security guards, as well as police
and NBI clearances.
The RTC did not err in ruling that Safeguard fell short of the diligence required in the supervision of its employee, particularly
Pajarillo. In this case, while Safeguard presented Capt. James Camero, its Director for Operations, who testified on the issuance of
company rules and regulations, such as the Guidelines of Guards Who Will Be Assigned To Banks, 37 Weapons Training,38
Safeguard Training Center Marksmanship Training Lesson Plan,39 Disciplinary/Corrective Sanctions,40 it had also been established
during Camero's cross-examination that Pajarillo was not aware of such rules and regulations. 41 Notwithstanding Camero's
clarification on his re-direct examination that these company rules and regulations are lesson plans as a basis of guidelines of the
instructors during classroom instructions and not necessary to give students copy of the same, 42 the records do not show that
Pajarillo had attended such classroom instructions.
The records also failed to show that there was adequate training and continuous evaluation of the security guard's performance.
Pajarillo had only attended an in-service training on March 1, 1997 conducted by Toyota Sta. Rosa, his first assignment as security
guard of Safeguard, which was in collaboration with Safeguard. It was established that the concept of such training was purely on
security of equipments to be guarded and protection of the life of the employees. 43
It had not been established that after Pajarillo's training in Toyota, Safeguard had ever conducted further training of Pajarillo when
he was later assigned to guard a bank which has a different nature of business with that of Toyota. In fact, Pajarillo testified that
being on duty in a bank is different from being on duty in a factory since a bank is a very sensitive area. 44
Moreover, considering his reactions to Evangeline's act of just depositing her firearm for safekeeping, i.e., of immediately shooting
her, confirms that there was no training or seminar given on how to handle bank clients and on human psychology.
Furthermore, while Safeguard would like to show that there were inspectors who go around the bank two times a day to see the
daily performance of the security guards assigned therein, there was no record ever presented of such daily inspections. In fact, if
there was really such inspection made, the alleged suspicious act of Evangeline could have been taken noticed and reported.
Turning now to the award of damages, we find that the award of actual damages in the amount P157,430.00 which were the
expenses incurred by respondents in connection with the burial of Evangeline were supported by receipts. The award of P50,000.00
as civil indemnity for the death of Evangeline is likewise in order.
As to the award of moral damages, Article 2206 of the Civil Code provides that the spouse, legitimate children and illegitimate
descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the
deceased. Moral damages are awarded to enable the injured party to obtain means, diversions or amusements that will serve to
alleviate the moral suffering he/she has undergone, by reason of the defendant's culpable action. Its award is aimed at restoration,
as much as possible, of the spiritual status quo ante; thus it must be proportionate to the suffering inflicted.45 The intensity of the
pain experienced by the relatives of the victim is proportionate to the intensity of affection for him and bears no relation whatsoever
with the wealth or means of the offender.46
In this case, respondents testified as to their moral suffering caused by Evangeline's death was so sudden causing respondent
Lauro to lose a wife and a mother to six children who were all minors at the time of her death. In People v. Teehankee, Jr.,47 we
awarded one million pesos as moral damages to the heirs of a seventeen-year-old girl who was murdered. In Metro Manila Transit
Corporation v. Court of Appeals,48 we likewise awarded the amount of one million pesos as moral damages to the parents of a third
year high school student and who was also their youngest child who died in a vehicular accident since the girl's death left a void in
their lives. Hence, we hold that the respondents are also entitled to the amount of one million pesos as Evangeline's death left a
void in the lives of her husband and minor children as they were deprived of her love and care by her untimely demise.

We likewise uphold the award of exemplary damages in the amount of P300,000.00. Under Article 2229 of the Civil Code,
exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or
compensatory damages.49 It is awarded as a deterrent to socially deleterious actions. In quasi-delict, exemplary damages may be
granted if the defendant acted with gross negligence. 50
Pursuant to Article 2208 of the Civil Code, attorney's fees may be recovered when, as in the instant case, exemplary damages are
awarded. Hence, we affirm the award of attorney's fees in the amount of P30,000.00.
WHEREFORE, the petition for review is DENIED. The Decision dated July 16, 2004 of the Court of Appeals is AFFIRMED with
MODIFICATION that the civil liability of petitioner Safeguard Security Agency, Inc. is SOLIDARY and PRIMARY under Article 2180
of the Civil Code.
SO ORDERED.
Ynares-Santiago, (Working Chairperson), Callejo Sr., and Chico-Nazario, JJ., concur.
Panganiban, C.J., Retired as of December 7, 2006.