Republic of the Philippines ... It is admitted that defendant is Fontanilla's employer.
There is
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:
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.
xxx xxx xxx
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.
xxx xxx xxx
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.
xxx xxx xxx
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 daño 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 Española" (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 atañen 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 daños 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 añadidura, abstenido de asistir
al juicio criminal la Compañia del Ferrocarril Cantabrico, que se
reservo ejercitar sus acciones, parece innegable que la de
indemnizacion por los daños 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, extraña 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 Compaña 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:
Oyuelos, in his "Digesto: Principios, Doctrina y Jurisprudencia, Referentes al
Codigo Civil Español," says in Vol. VII, p. 743:
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 dueño 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 daño, la ley
presume que el padre, el tutor, el maestro, etc., han cometido una
falta de negligencia para prevenir o evitar el daño. 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.
 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 quasi-delict 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 "compañia Electric Madrileña 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
compañia Electrica Madrileña al pago del daño 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 daños 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 compañia recurrente a la indemnizacion del daño
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 Compañia
Madrileña 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:
Civil Code, the court saying:
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
Considerando que la sentencia discutida reconoce, en virtud de los
hechos que consigna con relacion a las pruebas del pleito: 1.º, que
las expediciones facturadas por la compañia 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.º, 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.º,
que la falta de entrega de estas expediciones al tiempo de
reclamarlas el demandante le originaron daños 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 daños 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 Compañia 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.
xxx xxx xxx
"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.
xxx xxx xxx
"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.
xxx xxx xxx
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 defendant-petitioner.
Yulo, C.J., Moran, Ozaeta and Paras, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 23769 September 16, 1925
SONG FO & COMPANY, plaintiff-appellee,
vs.
HAWAIIAN PHILIPPINE CO., defendant-appellant.
Hilado and Hilado, Ross, Lawrence and Selph and Antonio T. Carrascoso,
Jr., for appellant.
Arroyo, Gurrea and Muller for appellee.
MALCOLM, J.:
In the court of First Instance of Iloilo, Song Fo & Company, plaintiff,
presented a complaint with two causes of action for breach of contract
against the Hawaiian-Philippine Co., defendant, in which judgment was
asked for P70,369.50, with legal interest, and costs. In an amended answer
and cross-complaint, the defendant set up the special defense that since the
plaintiff had defaulted in the payment for the molasses delivered to it by the
defendant under the contract between the parties, the latter was compelled
to cancel and rescind the said contract. The case was submitted for decision
on a stipulation of facts and the exhibits therein mentioned. The judgment of
the trial court condemned the defendant to pay to the plaintiff a total of
P35,317.93, with legal interest from the date of the presentation of the
complaint, and with costs.
From the judgment of the Court of First Instance the defendant only has
appealed. In this court it has made the following assignment of errors: "I. The
lower court erred in finding that appellant had agreed to sell to the appellee
400,000, and not only 300,000, gallons of molasses. II. The lower court erred
in finding that the appellant rescinded without sufficient cause the contract for
the sale of molasses executed by it and the appellee. III. The lower court
erred in rendering judgment in favor of the appellee and not in favor of the
appellant in accordance with the prayer of its answer and cross-complaint. IV.
The lower court erred in denying appellant's motion for a new trial." The
specified errors raise three questions which we will consider in the order
suggested by the appellant.
1. Did the defendant agree to sell to the plaintiff 400,000 gallons of
molasses or 300,000 gallons of molasses? The trial court found the
former amount to be correct. The appellant contends that the smaller
amount was the basis of the agreement.
The contract of the parties is in writing. It is found principally in the
documents, Exhibits F and G. The First mentioned exhibit is a letter
addressed by the administrator of the Hawaiian-Philippine Co. to
Song Fo & Company on December 13, 1922. It reads:
SILAY, OCC. NEGROS, P.I.
December 13, 1922
Messrs. SONG FO AND CO.
Iloilo, Iloilo.
DEAR SIRS: Confirming our conversation we had today with your Mr.
Song Fo, who visited this Central, we wish to state as follows:
He agreed to the delivery of 300,000 gallons of molasses at the
same price as last year under the same condition, and the same to
start after the completion of our grinding season. He requested if
possible to let you have molasses during January, February and
March or in other words, while we are grinding, and we agreed with
him that we would to the best of our ability, altho we are somewhat
handicapped. But we believe we can let you have 25,000 gallons
during each of the milling months, altho it interfere with the shipping
of our own and planters sugars to Iloilo. Mr. Song Fo also asked if
we could supply him with another 100,000 gallons of molasses, and
we stated we believe that this is possible and will do our best to let
you have these extra 100,000 gallons during the next year the same
to be taken by you before November 1st, 1923, along with the
300,000, making 400,000 gallons in all.
Regarding the payment for our molasses, Mr. Song Fo gave us to
understand that you would pay us at the end of each month for
molasses delivered to you.
Hoping that this is satisfactory and awaiting your answer regarding
this matter, we remain.
Yours very truly,
HAWAIIAN-PHILIPPINE COMPANY
BY R. C. PITCAIRN

Administrator.
Exhibit G is the answer of the manager of Song Fo & Company to the
Hawaiian-Philippine Co. on December 16, 1922. This letter reads:
December 16th, 1922.
Messrs. HAWAIIAN-PHILIPPINE CO.,
Silay, Neg. Occ., P.I.
DEAR SIRS: We are in receipt of your favours dated the 9th and the
13th inst. and understood all their contents.
In connection to yours of the 13th inst. we regret to hear that you
mentioned Mr. Song Fo the one who visited your Central, but it was
not for he was Mr. Song Heng, the representative and the manager
of Messrs. Song Fo & Co.
With reference to the contents of your letter dated the 13th inst. we
confirm all the arrangements you have stated and in order to make
the contract clear, we hereby quote below our old contract as
amended, as per our new arrangements.
(a) Price, at 2 cents per gallon delivered at the central.
(b) All handling charges and expenses at the central and at the dock
at Mambaguid for our account.
(c) For services of one locomotive and flat cars necessary for our six
tanks at the rate of P48 for the round trip dock to central and central
to dock. This service to be restricted to one trip for the six tanks.
Yours very truly,
SONG FO & COMPANY
By __________________________
Manager.
We agree with appellant that the above quoted correspondence is
susceptible of but one interpretation. The Hawaiian-Philippine Co. agreed to
deliver to Song Fo & Company 300,000 gallons of molasses. The Hawaiian-
Philippine Co. also believed it possible to accommodate Song Fo &
Company by supplying the latter company with an extra 100,000 gallons. But
the language used with reference to the additional 100,000 gallons was not a
definite promise. Still less did it constitute an obligation.
If Exhibit T relied upon by the trial court shows anything, it is simply that the
defendant did not consider itself obliged to deliver to the plaintiff molasses in
any amount. On the other hand, Exhibit A, a letter written by the manager of
Song Fo & Company on October 17, 1922, expressly mentions an
understanding between the parties of a contract for P300,000 gallons of
molasses.
We sustain appellant's point of view on the first question and rule that the
contract between the parties provided for the delivery by the Hawaiian-
Philippine Co. to song Fo & Company of 300,000 gallons of molasses.
2. Had the Hawaiian-Philippine Co. the right to rescind the contract of sale
made with Song Fo & Company? The trial judge answers No, the appellant
Yes.
Turning to Exhibit F, we note this sentence: "Regarding the payment for our
molasses, Mr. Song Fo (Mr. Song Heng) gave us to understand that you
would pay us at the end of each month for molasses delivered to you." In
Exhibit G, we find Song Fo & Company stating that they understand the
contents of Exhibit F, and that they confirm all the arrangements you have
stated, and in order to make the contract clear, we hereby quote below our
old contract as amended, as per our new arrangements. (a) Price, at 2 cents
per gallon delivered at the central." In connection with the portion of the
contract having reference to the payment for the molasses, the parties have
agree on a table showing the date of delivery of the molasses, the amount
and date thereof, the date of receipt of account by plaintiff, and date of
payment. The table mentioned is as follows:
Date of
Date of receipt of Date o
Account and date thereof
delivery account by payme
plaintiff
1922 1923 1923
Dec. 18 P206.16 Dec. 26/22 Jan. 5 Feb. 20
Dec. 29 206.16 Jan. 3/23 do Do
 the contract because of the breach of Song Fo & Company. But actually,
1923
there is here present no outstanding fact which would legally sanction the
Jan. 5 206.16 Jan. 9/23 Mar. 7 or 8 Mar. 31 rescission of the contract by the Hawaiian-Philippine Co.

Feb. 12 206.16 Mar. 12/23 do Do The general rule is that rescission will not be permitted for a slight or casual
breach of the contract, but only for such breaches as are so substantial and
Feb. 27 206.16 do do Do fundamental as to defeat the object of the parties in making the agreement. A
delay in payment for a small quantity of molasses for some twenty days is
Mar. 5 206.16 do do Do not such a violation of an essential condition of the contract was warrants
rescission for non-performance. Not only this, but the Hawaiian-Philippine Co.
Mar. 16 206.16 Mar. 20/23 Apr. 2/23 Apr. 19 waived this condition when it arose by accepting payment of the overdue
accounts and continuing with the contract. Thereafter, Song Fo & Company
Mar. 24 206.16 Mar. 31/23 do Do was not in default in payment so that the Hawaiian-Philippine co. had in
reality no excuse for writing its letter of April 2, 1923, cancelling the contract.
Mar. 29 206.16 do do Do (Warner, Barnes & Co. vs. Inza [1922], 43 Phil., 505.)

Some doubt has risen as to when Song Fo & Company was expected to
make payments for the molasses delivered. Exhibit F speaks of payments "at
the end of each month." Exhibit G is silent on the point. Exhibit M, a letter of
March 28, 1923, from Warner, Barnes & Co., Ltd., the agent of the Hawaiian-
Philippine Co. to Song Fo & Company, mentions "payment on presentation
of bills for each delivery." Exhibit O, another letter from Warner, Barnes &
Co., Ltd. to Song Fo & Company dated April 2, 1923, is of a similar tenor.
Exhibit P, a communication sent direct by the Hawaiian-Philippine Co. to
Song Fo & Company on April 2, 1923, by which the Hawaiian-Philippine Co.
gave notice of the termination of the contract, gave as the reason for the
rescission, the breach by Song Fo & Company of this condition: "You will
recall that under the arrangements made for taking our molasses, you were
to meet our accounts upon presentation and at each delivery." Not far
removed from this statement, is the allegation of plaintiff in its complaint that
"plaintiff agreed to pay defendant, at the end of each month upon
presentation accounts."
Resolving such ambiguity as exists and having in mind ordinary business
practice, a reasonable deduction is that Song Fo & Company was to pay the
Hawaiian-Philippine Co. upon presentation of accounts at the end of each
month. Under this hypothesis, Song Fo & Company should have paid for the
molasses delivered in December, 1922, and for which accounts were
received by it on January 5, 1923, not later than January 31 of that year.
Instead, payment was not made until February 20, 1923. All the rest of the
molasses was paid for either on time or ahead of time.
The terms of payment fixed by the parties are controlling. The time of
payment stipulated for in the contract should be treated as of the essence of
the contract. Theoretically, agreeable to certain conditions which could easily
be imagined, the Hawaiian-Philippine Co. would have had the right to rescind
We rule that the appellant had no legal right to rescind the contract of sale
because of the failure of Song Fo & Company to pay for the molasses within
the time agreed upon by the parties. We sustain the finding of the trial judge
in this respect.
3. On the basis first, of a contract for 300,000 gallons of molasses, and
second, of a contract imprudently breached by the Hawaiian-Philippine Co.,
what is the measure of damages? We again turn to the facts as agreed upon
by the parties.
The first cause of action of the plaintiff is based on the greater expense to
which it was put in being compelled to secure molasses from other sources.
Three hundred thousand gallons of molasses was the total of the agreement,
as we have seen. As conceded by the plaintiff, 55,006 gallons of molasses
were delivered by the defendant to the plaintiff before the breach. This leaves
244,994 gallons of molasses undelivered which the plaintiff had to purchase
in the open market. As expressly conceded by the plaintiff at page 25 of its
brief, 100,000 gallons of molasses were secured from the Central North
Negros Sugar Co., Inc., at two centavos a gallon. As this is the same price
specified in the contract between the plaintiff and the defendant, the plaintiff
accordingly suffered no material loss in having to make this purchase. So
244,994 gallons minus the 100,000 gallons just mentioned leaves as a result
144,994 gallons. As to this amount, the plaintiff admits that it could have
secured it and more from the Central Victorias Milling Company, at three and
one-half centavos per gallon. In other words, the plaintiff had to pay the
Central Victorias Milling company one and one-half centavos a gallon more
for the molasses than it would have had to pay the Hawaiian-Philippine Co.
Translated into pesos and centavos, this meant a loss to the plaintiff of
approximately P2,174.91. As the conditions existing at the central of the
Hawaiian-Philippine Co. may have been different than those found at the
Central North Negros Sugar Co., Inc., and the Central Victorias Milling
Company, and as not alone through the delay but through expenses of
transportation and incidental expenses, the plaintiff may have been put to
greater cost in making the purchase of the molasses in the open market, we
would concede under the first cause of action in round figures P3,000.

The second cause of action relates to lost profits on account of the breach of
the contract. The only evidence in the record on this question is the
stipulation of counsel to the effect that had Mr. Song Heng, the manager of
Song Fo & Company, been called as a witness, he would have testified that
the plaintiff would have realized a profit of P14,948.43, if the contract of
December 13, 1922, had been fulfilled by the defendant. Indisputably, this
statement falls far short of presenting proof on which to make a finding as to
damages.

In the first place, the testimony which Mr. Song Heng would have given
undoubtedly would follow the same line of thought as found in the decision of
the trial court, which we have found to be unsustainable. In the second place,
had Mr. Song Heng taken the witness-stand and made the statement
attributed to him, it would have been insufficient proof of the allegations of
the complaint, and the fact that it is a part of the stipulation by counsel does
not change this result. And lastly, the testimony of the witness Song Heng, it
we may dignify it as such, is a mere conclusion, not a proven fact. As to what
items up the more than P14,000 of alleged lost profits, whether loss of sales
or loss of customers, or what not, we have no means of knowing.

We rule that the plaintiff is entitled to recover damages from the defendant
for breach of contract on the first cause of action in the amount of P3,000
and on the second cause of action in no amount. Appellant's assignments of
error are accordingly found to be well taken in part and not well taken in part.

Agreeable to the foregoing, the judgment appealed from shall be modified

and the plaintiff shall have and recover from the defendant the sum of P3,000,
with legal interest form October 2, 1923, until payment. Without special
finding as to costs in either instance, it is so ordered.

Avanceña, C.J., Johnson, Street, Villamor, Ostrand, Johns, Romualdez and

Villa-Real, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-4811 July 31, 1953
CHARLES F. WOODHOUSE, plaintiff-appellant,
vs.
FORTUNATO F. HALILI, defendant-appellant.
Tañada, Pelaez & Teehankee for defendant and appellant.
Gibbs, Gibbs, Chuidian & Quasha for plaintiff and appellant.
LABRADOR, J.:
On November 29, 1947, the plaintiff entered on a written agreement, Exhibit
A, with the defendant, the most important provisions of which are (1) that
they shall organize a partnership for the bottling and distribution of Mision
soft drinks, plaintiff to act as industrial partner or manager, and the defendant
as a capitalist, furnishing the capital necessary therefor; (2) that the
defendant was to decide matters of general policy regarding the business,
while the plaintiff was to attend to the operation and development of the
bottling plant; (3) that the plaintiff was to secure the Mission Soft Drinks
franchise for and in behalf of the proposed partnership; and (4) that the
plaintiff was to receive 30 per cent of the net profits of the business. The
above agreement was arrived at after various conferences and consultations
by and between them, with the assistance of their respective attorneys. Prior
to entering into this agreement, plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, U.S.A., manufacturers of the bases
and ingridients of the beverages bearing its name, that he had interested a
prominent financier (defendant herein) in the business, who was willing to
invest half a million dollars in the bottling and distribution of the said
beverages, and requested, in order that he may close the deal with him, that
the right to bottle and distribute be granted him for a limited time under the
condition that it will finally be transferred to the corporation (Exhibit H).
Pursuant for this request, plaintiff was given "a thirty-days" option on
exclusive bottling and distribution rights for the Philippines" (Exhibit J).
Formal negotiations between plaintiff and defendant began at a meeting on
November 27, 1947, at the Manila Hotel, with their lawyers attending. Before
this meeting plaintiff's lawyer had prepared the draft of the agreement,
Exhibit II or OO, but this was not satisfactory because a partnership, instead
of a corporation, was desired. Defendant's lawyer prepared after the meeting
his own draft, Exhibit HH. This last draft appears to be the main basis of the
agreement, Exhibit A.
The contract was finally signed by plaintiff on December 3, 1947. Plaintiff did
not like to go to the United States without the agreement being not first
signed. On that day plaintiff and defendant went to the United States, and on
December 10, 1947, a franchise agreement (Exhibit V) was entered into the
Mission Dry Corporation and Fortunato F. Halili and/or Charles F.
Woodhouse, granted defendant the exclusive right, license, and authority to
produce, bottle, distribute, and sell Mision beverages in the Philippines. The
plaintiff and the defendant thereafter returned to the Philippines. Plaintiff
reported for duty in January, 1948, but operations were not begun until the
first week of February, 1948. In January plaintiff was given as advance, on
account of profits, the sum of P2,000, besides the use of a car; in February,
1948, also P2,000, and in March only P1,000. The car was withdrawn from
plaintiff on March 9, 1948.
When the bottling plant was already on operation, plaintiff demanded of
defendant that the partnership papers be executed. At first defendant
executed himself, saying there was no hurry. Then he promised to do so
after the sales of the product had been increased to P50,000. As nothing
definite was forthcoming, after this condition was attained, and as defendant
refused to give further allowances to plaintiff, the latter caused his attorneys
to take up the matter with the defendant with a view to a possible settlement.
as none could be arrived at, the present action was instituted.
In his complaint plaintiff asks for the execution of the contract of partnership,
an accounting of the profits, and a share thereof of 30 per cent, as well as
damages in the amount of P200,000. In his answer defendant alleges by way
of defense (1) that defendant's consent to the agreement, Exhibit A, was
secured by the representation of plaintiff that he was the owner, or was about
to become owner of an exclusive bottling franchise, which representation
was false, and plaintiff did not secure the franchise, but was given to
defendant himself; (2) that defendant did not fail to carry out his undertakings,
but that it was plaintiff who failed; (3) that plaintiff agreed to contribute the
exclusive franchise to the partnership, but plaintiff failed to do so. He also
presented a counter-claim for P200,000 as damages. On these issues the
parties went to trial, and thereafter the Court of First Instance rendered
judgment ordering defendant to render an accounting of the profits of the
bottling and distribution business, subject of the action, and to pay plaintiff 15
percent thereof. it held that the execution of the contract of partnership could
not be enforced upon the parties, but it also held that the defense of fraud
was not proved. Against this judgment both parties have appealed.
The most important question of fact to be determined is whether defendant
had falsely represented that he had an exclusive franchise to bottle Mission
beverages, and whether this false representation or fraud, if it existed, annuls
the agreement to form the partnership. The trial court found that it is
improbable that defendant was never shown the letter, Exhibit J, granting
plaintiff had; that the drafts of the contract prior to the final one can not be
considered for the purpose of determining the issue, as they are presumed to
have been already integrated into the final agreement; that fraud is never
presumed and must be proved; that the parties were represented by
attorneys, and that if any party thereto got the worse part of the bargain, this
fact alone would not invalidate the agreement. On this appeal the defendant,
as appellant, insists that plaintiff did represent to the defendant that he had
an exclusive franchise, when as a matter of fact, at the time of its execution,
he no longer had it as the same had expired, and that, therefore, the consent
of the defendant to the contract was vitiated by fraud and it is, consequently,
null and void.
Our study of the record and a consideration of all the surrounding
circumstances lead us to believe that defendant's contention is not without
merit. Plaintiff's attorney, Mr. Laurea, testified that Woodhouse presented
himself as being the exclusive grantee of a franchise, thus:
A. I don't recall any discussion about that matter. I took along with
me the file of the office with regards to this matter. I notice from the
first draft of the document which I prepared which calls for the
organization of a corporation, that the manager, that is, Mr.
Woodhouse, is represented as being the exclusive grantee of a
franchise from the Mission Dry Corporation. . . . (t.s.n., p.518)
As a matter of fact, the first draft that Mr. Laurea prepared, which was made
before the Manila Hotel conference on November 27th, expressly states that
plaintiff had the exclusive franchise. Thus, the first paragraph states:
Whereas, the manager is the exclusive grantee of a franchise from
the Mission Dry Corporation San Francisco, California, for the
bottling of Mission products and their sale to the public throughout
the Philippines; . . . .
3. The manager, upon the organization of the said corporation, shall
forthwith transfer to the said corporation his exclusive right to bottle
Mission products and to sell them throughout the Philippines. . . . .
(Exhibit II; emphasis ours)
The trial court did not consider this draft on the principle of integration of jural
acts. We find that the principle invoked is inapplicable, since the purpose of
considering the prior draft is not to vary, alter, or modify the agreement, but
to discover the intent of the parties thereto and the circumstances
surrounding the execution of the contract. The issue of fact is: Did plaintiff
represent to defendant that he had an exclusive franchise? Certainly, his acts
or statements prior to the agreement are essential and relevant to the
determination of said issue. The act or statement of the plaintiff was not
sought to be introduced to change or alter the terms of the agreement, but to
prove how he induced the defendant to enter into it — to prove the
representations or inducements, or fraud, with which or by which he secured
the other party's consent thereto. These are expressly excluded from the
parol evidence rule. (Bough and Bough vs. Cantiveros and Hanopol, 40 Phil.,
209; port Banga Lumber Co. vs. Export & Import Lumber Co., 26 Phil., 602;
III Moran 221,1952 rev. ed.) Fraud and false representation are an incident to
the creation of a jural act, not to its integration, and are not governed by the
rules on integration. Were parties prohibited from proving said
representations or inducements, on the ground that the agreement had
already been entered into, it would be impossible to prove misrepresentation
or fraud. Furthermore, the parol evidence rule expressly allows the evidence
to be introduced when the validity of an instrument is put in issue by the
pleadings (section 22, par. (a), Rule 123, Rules of Court),as in this case.
That plaintiff did make the representation can also be easily gleaned from his
own letters and his own testimony. In his letter to Mission Dry Corporation,
Exhibit H, he said:.
. . . He told me to come back to him when I was able to speak with
authority so that we could come to terms as far as he and I were
concerned. That is the reason why the cable was sent. Without this
authority, I am in a poor bargaining position. . .
I would propose that you grant me the exclusive bottling and
distributing rights for a limited period of time, during which I may
consummate my plants. . . .
By virtue of this letter the option on exclusive bottling was given to the
plaintiff on October 14, 1947. (See Exhibit J.) If this option for an exclusive
franchise was intended by plaintiff as an instrument with which to bargain
with defendant and close the deal with him, he must have used his said
option for the above-indicated purpose, especially as it appears that he was
able to secure, through its use, what he wanted.
Plaintiff's own version of the preliminary conversation he had with defendant
is to the effect that when plaintiff called on the latter, the latter answered,
"Well, come back to me when you have the authority to operate. I am
definitely interested in the bottling business." (t. s. n., pp. 60-61.) When after
the elections of 1949 plaintiff went to see the defendant (and at that time he
had already the option), he must have exultantly told defendant that he had
the authority already. It is improbable and incredible for him to have
disclosed the fact that he had only an option to the exclusive franchise, which
was to last thirty days only, and still more improbable for him to have
disclosed that, at the time of the signing of the formal agreement, his option
had already expired. Had he done so, he would have destroyed all his
bargaining power and authority, and in all probability lost the deal itself.
The trial court reasoned, and the plaintiff on this appeal argues, that plaintiff
only undertook in the agreement "to secure the Mission Dry franchise for and
in behalf of the proposed partnership." The existence of this provision in the
final agreement does not militate against plaintiff having represented that he
had the exclusive franchise; it rather strengthens belief that he did actually
make the representation. How could plaintiff assure defendant that he would
get the franchise for the latter if he had not actually obtained it for himself?
Defendant would not have gone into the business unless the franchise was
raised in his name, or at least in the name of the partnership. Plaintiff
assured defendant he could get the franchise. Thus, in the draft prepared by
defendant's attorney, Exhibit HH, the above provision is inserted, with the
difference that instead of securing the franchise for the defendant, plaintiff
was to secure it for the partnership. To show that the insertion of the above
provision does not eliminate the probability of plaintiff representing himself as
the exclusive grantee of the franchise, the final agreement contains in its
third paragraph the following:
. . . and the manager is ready and willing to allow the capitalists to
use the exclusive franchise . . .
and in paragraph 11 it also expressly states:
1. In the event of the dissolution or termination of the partnership, . . .
the franchise from Mission Dry Corporation shall be reassigned to
the manager.
These statements confirm the conclusion that defendant believed, or was
made to believe, that plaintiff was the grantee of an exclusive franchise. Thus
it is that it was also agreed upon that the franchise was to be transferred to
the name of the partnership, and that, upon its dissolution or termination, the
same shall be reassigned to the plaintiff.
Again, the immediate reaction of defendant, when in California he learned
that plaintiff did not have the exclusive franchise, was to reduce, as he
himself testified, plaintiff's participation in the net profits to one half of that
agreed upon. He could not have had such a feeling had not plaintiff actually
made him believe that he (plaintiff) was the exclusive grantee of the franchise.
The learned trial judge reasons in his decision that the assistance of counsel
in the making of the contract made fraud improbable. Not necessarily,
because the alleged representation took place before the conferences were
had, in other words, plaintiff had already represented to defendant, and the
latter had already believed in, the existence of plaintiff's exclusive franchise
before the formal negotiations, and they were assisted by their lawyers only
when said formal negotiations actually took place. Furthermore, plaintiff's
attorney testified that plaintiff had said that he had the exclusive franchise;
and defendant's lawyer testified that plaintiff explained to him, upon being
asked for the franchise, that he had left the papers evidencing it.(t.s.n., p.
266.)
We conclude from all the foregoing that plaintiff did actually represent to
defendant that he was the holder of the exclusive franchise. The defendant
was made to believe, and he actually believed, that plaintiff had the exclusive
franchise. Defendant would not perhaps have gone to California and incurred
expenses for the trip, unless he believed that plaintiff did have that exclusive
privilege, and that the latter would be able to get the same from the Mission
Dry Corporation itself. Plaintiff knew what defendant believed about his
(plaintiff's) exclusive franchise, as he induced him to that belief, and he may
not be allowed to deny that defendant was induced by that belief. (IX
Wigmore, sec. 2423; Sec. 65, Rule 123, Rules of Court.)
We now come to the legal aspect of the false representation. Does it amount
to a fraud that would vitiate the contract? It must be noted that fraud is
manifested in illimitable number of degrees or gradations, from the innocent
praises of a salesman about the excellence of his wares to those malicious
machinations and representations that the law punishes as a crime. In
consequence, article 1270 of the Spanish Civil Code distinguishes two kinds
of (civil) fraud, the causal fraud, which may be a ground for the annulment of
a contract, and the incidental deceit, which only renders the party who
employs it liable for damages. This Court had held that in order that fraud
may vitiate consent, it must be the causal (dolo causante), not merely the
incidental (dolo causante), inducement to the making of the contract. (Article
1270, Spanish Civil Code; Hill vs. Veloso, 31 Phil. 160.) The record abounds
with circumstances indicative that the fact that the principal consideration, the
main cause that induced defendant to enter into the partnership agreement
with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle
and distribute for the defendant or for the partnership. The original draft
prepared by defendant's counsel was to the effect that plaintiff obligated
himself to secure a franchise for the defendant. Correction appears in this
same original draft, but the change is made not as to the said obligation but
as to the grantee. In the corrected draft the word "capitalist"(grantee) is
changed to "partnership." The contract in its final form retains the substituted
term "partnership." The defendant was, therefore, led to the belief that
plaintiff had the exclusive franchise, but that the same was to be secured for
or transferred to the partnership. The plaintiff no longer had the exclusive
franchise, or the option thereto, at the time the contract was perfected. But
while he had already lost his option thereto (when the contract was entered
into), the principal obligation that he assumed or undertook was to secure
said franchise for the partnership, as the bottler and distributor for the
Mission Dry Corporation. We declare, therefore, that if he was guilty of a
false representation, this was not the causal consideration, or the principal
inducement, that led plaintiff to enter into the partnership agreement.
But, on the other hand, this supposed ownership of an exclusive franchise
was actually the consideration or price plaintiff gave in exchange for the
share of 30 percent granted him in the net profits of the partnership business.
Defendant agreed to give plaintiff 30 per cent share in the net profits because
he was transferring his exclusive franchise to the partnership. Thus, in the
draft prepared by plaintiff's lawyer, Exhibit II, the following provision exists:
3. That the MANAGER, upon the organization of the said corporation,
shall forthwith transfer to the said corporation his exclusive right to
bottle Mission products and to sell them throughout the
Philippines. As a consideration for such transfer, the CAPITALIST
shall transfer to the Manager fully paid non assessable shares of the
said corporation . . . twenty-five per centum of the capital stock of the
said corporation. (Par. 3, Exhibit II; emphasis ours.)
Plaintiff had never been a bottler or a chemist; he never had experience in
the production or distribution of beverages. As a matter of fact, when the
bottling plant being built, all that he suggested was about the toilet facilities
for the laborers.
We conclude from the above that while the representation that plaintiff had
the exclusive franchise did not vitiate defendant's consent to the contract, it
was used by plaintiff to get from defendant a share of 30 per cent of the net
profits; in other words, by pretending that he had the exclusive franchise and
promising to transfer it to defendant, he obtained the consent of the latter to
give him (plaintiff) a big slice in the net profits. This is the dolo
incidente defined in article 1270 of the Spanish Civil Code, because it was
used to get the other party's consent to a big share in the profits, an
incidental matter in the agreement.
El dolo incidental no es el que puede producirse en el cumplimiento
del contrato sino que significa aqui, el que concurriendoen el
consentimiento, o precediendolo, no influyo para arrancar porsi solo
el consentimiento ni en la totalidad de la obligacion, sinoen algun
extremo o accidente de esta, dando lugar tan solo a una accion para
reclamar indemnizacion de perjuicios. (8 Manresa 602.)
Having arrived at the conclusion that the agreement may not be declared null
and void, the question that next comes before us is, May the agreement be
carried out or executed? We find no merit in the claim of plaintiff that the
partnership was already a fait accompli from the time of the operation of the
plant, as it is evident from the very language of the agreement that the
parties intended that the execution of the agreement to form a partnership
was to be carried out at a later date. They expressly agreed that they shall
form a partnership. (Par. No. 1, Exhibit A.) As a matter of fact, from the time
that the franchise from the Mission Dry Corporation was obtained in
California, plaintiff himself had been demanding that defendant comply with
the agreement. And plaintiff's present action seeks the enforcement of this
agreement. Plaintiff's claim, therefore, is both inconsistent with their intention
and incompatible with his own conduct and suit.
As the trial court correctly concluded, the defendant may not be compelled
against his will to carry out the agreement nor execute the partnership
papers. Under the Spanish Civil Code, the defendant has an obligation to do,
not to give. The law recognizes the individual's freedom or liberty to do an act
he has promised to do, or not to do it, as he pleases. It falls within what
Spanish commentators call a very personal act (acto personalismo), of which
courts may not compel compliance, as it is considered an act of violence to
do so.
Efectos de las obligaciones consistentes en hechos personalismo.—
Tratamos de la ejecucion de las obligaciones de hacer en el
solocaso de su incumplimiento por parte del deudor, ya sean los
hechos personalisimos, ya se hallen en la facultad de un tercero;
porque el complimiento espontaneo de las mismas esta regido por
los preceptos relativos al pago, y en nada les afectan las
disposiciones del art. 1.098.
Esto supuesto, la primera dificultad del asunto consiste en resolver
si el deudor puede ser precisado a realizar el hecho y porque
medios.
Se tiene por corriente entre los autores, y se traslada generalmente
sin observacion el principio romano nemo potest precise cogi ad
factum. Nadie puede ser obligado violentamente a haceruna cosa.
Los que perciben la posibilidad de la destruccion deeste principio,
añaden que, aun cuando se pudiera obligar al deudor, no deberia
hacerse, porque esto constituiria una violencia, y noes la
violenciamodo propio de cumplir las obligaciones (Bigot, Rolland,
etc.). El maestro Antonio Gomez opinaba lo mismo cuandodecia que
obligar por la violencia seria infrigir la libertad eimponer una especie
de esclavitud.
 xxx xxx xxx
En efecto; las obligaciones contractuales no se acomodan biencon
el empleo de la fuerza fisica, no ya precisamente porque
seconstituya de este modo una especie de esclavitud, segun el
dichode Antonio Gomez, sino porque se supone que el acreedor
tuvo encuenta el caracter personalisimo del hecho ofrecido, y calculo
sobre laposibilidad de que por alguna razon no se realizase.
Repugna,ademas, a la conciencia social el empleo de la fuerza
publica, mediante coaccion sobre las personas, en las relaciones
puramente particulares; porque la evolucion de las ideas ha ido
poniendo masde relieve cada dia el respeto a la personalidad
humana, y nose admite bien la violencia sobre el individuo la cual
tiene caracter visiblemente penal, sino por motivos que interesen a
la colectividad de ciudadanos. Es, pues, posible y licita esta
violencia cuando setrata de las obligaciones que hemos llamado ex
lege, que afectanal orden social y a la entidad de Estado, y
aparecen impuestas sinconsideracion a las conveniencias
particulares, y sin que por estemotivo puedan tampoco ser
modificadas; pero no debe serlo cuandola obligacion reviste un
interes puramente particular, como sucedeen las contractuales, y
cuando, por consecuencia, paraceria salirseel Estado de su esfera
propia, entrado a dirimir, con apoyo dela fuerza colectiva, las
diferencias producidas entre los ciudadanos. (19 Scaevola 428, 431-
432.)
the contract may not be considered modified as to plaintiff's share in the
profits, by the decision of defendant to reduce the same to one-half and the
assent thereto of plaintiff, then we may consider the said amount as a fair
estimate of the damages plaintiff is entitled to under the principle enunciated
in the case of Varadero de Manila vs. Insular Lumber Co., 46 Phil. 176.
Defendant's decision to reduce plaintiff's share and plaintiff's consent thereto
amount to an admission on the part of each of the reasonableness of this
amount as plaintiff's share. This same amount was fixed by the trial court.
The agreement contains the stipulation that upon the termination of the
partnership, defendant was to convey the franchise back to plaintiff (Par. 11,
Exhibit A). The judgment of the trial court does not fix the period within which
these damages shall be paid to plaintiff. In view of paragraph 11 of Exhibit A,
we declare that plaintiff's share of 15 per cent of the net profits shall continue
to be paid while defendant uses the franchise from the Mission Dry
Corporation.
With the modification above indicated, the judgment appealed from is hereby
affirmed. Without costs.
Paras, C.J., Pablo, Bengzon, Tuason, Montemayor, Reyes, Jugo and
Bautista Angelo, JJ., concur.

The last question for us to decide is that of damages,damages that plaintiff is

entitled to receive because of defendant's refusal to form the partnership,
and damages that defendant is also entitled to collect because of the falsity
of plaintiff's representation. (Article 1101, Spanish Civil Code.) Under article
1106 of the Spanish Civil Code the measure of damages is the actual loss
suffered and the profits reasonably expected to be received, embraced in the
terms daño emergente and lucro cesante. Plaintiff is entitled under the terms
of the agreement to 30 per cent of the net profits of the business. Against this
amount of damages, we must set off the damage defendant suffered by
plaintiff's misrepresentation that he had obtained a very high percentage of
share in the profits. We can do no better than follow the appraisal that the
parties themselves had adopted.

When defendant learned in Los Angeles that plaintiff did not have the
exclusive franchise which he pretended he had and which he had agreed to
transfer to the partnership, his spontaneous reaction was to reduce plaintiff's
share form 30 per cent to 15 per cent only, to which reduction defendant
appears to have readily given his assent. It was under this understanding,
which amounts to a virtual modification of the contract, that the bottling plant
was established and plaintiff worked as Manager for the first three months. If
 Republic of the Philippines
On August 24, 1989, General Milling Corporation (GMC) entered into a Growers
SUPREME COURT
Manila Contract with spouses Librado and Remedios Ramos (Spouses Ramos). Under the
contract, GMC was to supply broiler chickens for the spouses to raise on their land
THIRD DIVISION
in Barangay Banaybanay, Lipa City, Batangas.[1] To guarantee full compliance, the
GENERAL MILLING G.R. No. 193723 Growers Contract was accompanied by a Deed of Real Estate Mortgage over a piece
CORPORATION,
of real property upon which their conjugal home was built. The spouses further
Petitioner, Present:
agreed to put up a surety bond at the rate of PhP 20,000 per 1,000 chicks delivered
CARPIO, J.,* by GMC. The Deed of Real Estate Mortgage extended to Spouses Ramos a
VELASCO, JR.,
- versus - Chairperson, maximum credit line of PhP 215,000 payable within an indefinite period with an
LEONARDO-DE interest of twelve percent (12%) per annum.[2]
CASTRO,**
ABAD, and The Deed of Real Estate Mortgage contained the following provision:
SPS. LIBRADO RAMOS and MENDOZA, JJ.
REMEDIOS RAMOS, WHEREAS, the MORTGAGOR/S has/have agreed to guarantee
Respondents. Promulgated: and secure the full and faithful compliance of
[MORTGAGORS] obligation/s with the MORTGAGEE by a First
July 20, 2011 Real Estate Mortgage in favor of the MORTGAGEE, over
x-----------------------------------------------------------------------------------------x a 1 parcel of land and the improvements existing thereon, situated
in the Barrio/s of Banaybanay, Municipality of Lipa City, Province
of Batangas, Philippines, his/her/their title/s thereto being
evidenced by Transfer Certificate/s No./s T-9214 of the Registry of
DECISION
Deeds for the Province of Batangas in the amount of TWO
VELASCO, JR., J.: HUNDRED FIFTEEN THOUSAND (P 215,000.00), Philippine
Currency, which the maximum credit line payable within a x x x
day term and to secure the payment of the same plus interest of
The Case twelve percent (12%) per annum.

This is a petition for review of the April 15, 2010 Decision of the Court of Appeals
(CA) in CA-G.R. CR-H.C. No. 85400 entitled Spouses Librado Ramos & Remedios Spouses Ramos eventually were unable to settle their account with GMC.
Ramos v. General Milling Corporation, et al., which affirmed the May 31, 2005 They alleged that they suffered business losses because of the negligence of GMC
Decision of the Regional Trial Court (RTC), Branch 12 in Lipa City, in Civil Case and its violation of the Growers Contract.[3]
No. 00-0129 for Annulment and/or Declaration of Nullity of Extrajudicial
Foreclosure Sale with Damages.
On March 31, 1997, the counsel for GMC notified Spouses Ramos that GMC would
institute foreclosure proceedings on their mortgaged property.[4]
The Facts
On May 7, 1997, GMC filed a Petition for Extrajudicial Foreclosure of Mortgage.
On June 10, 1997, the property subject of the foreclosure was subsequently sold by
[5]
public auction to GMC after the required posting and publication. It was foreclosed
for PhP 935,882,075, an amount representing the losses on chicks and feeds
exclusive of interest at 12% per annum and attorneys fees. [6] To complicate matters,
on October 27, 1997, GMC informed the spouses that its Agribusiness Division had
[7]
closed its business and poultry operations.
On March 3, 2000, Spouses Ramos filed a Complaint for Annulment and/or
Declaration of Nullity of the Extrajudicial Foreclosure Sale with Damages. They
contended that the extrajudicial foreclosure sale on June 10, 1997 was null and void,
since there was no compliance with the requirements of posting and publication of
notices under Act No. 3135, as amended, or An Act to Regulate the Sale of Property
under Special Powers Inserted in or Annexed to Real Estate Mortgages. They
likewise claimed that there was no sheriffs affidavit to prove compliance with the
requirements on posting and publication of notices. It was further alleged that the
Deed of Real Estate Mortgage had no fixed term. A prayer for moral and exemplary
damages and attorneys fees was also included in the complaint.[8] Librado Ramos
alleged that, when the property was foreclosed, GMC did not notify him at all of the
foreclosure.[9]
During the trial, the parties agreed to limit the issues to the following: (1) the validity
of the Deed of Real Estate Mortgage; (2) the validity of the extrajudicial foreclosure;
and (3) the party liable for damages.[10]
In its Answer, GMC argued that it repeatedly reminded Spouses Ramos of their
liabilities under the Growers Contract. It argued that it was compelled to foreclose
the mortgage because of Spouses Ramos failure to pay their obligation. GMC
insisted that it had observed all the requirements of posting and publication of
notices under Act No. 3135.[11]
The Ruling of the Trial Court
Holding in favor of Spouses Ramos, the trial court ruled that the Deed of Real Estate
Mortgage was valid even if its term was not fixed. Since the duration of the term was
made to depend exclusively upon the will of the debtors-spouses, the trial court cited
jurisprudence and said that the obligation is not due and payable until an action is
commenced by the mortgagee against the mortgagor for the purpose of having the
court fix the date on and after which the instrument is payable and the date of
maturity is fixed in pursuance thereto.[12]
The trial court held that the action of GMC in moving for the foreclosure of the
spouses properties was premature, because the latters obligation under their contract
was not yet due.
The trial court awarded attorneys fees because of the premature action taken by
GMC in filing extrajudicial foreclosure proceedings before the obligation of the
spouses became due.
The RTC ruled, thus:
WHEREFORE, premises considered, judgment is rendered as
follows:
1. The Extra-Judicial Foreclosure Proceedings under
docket no. 0107-97 is hereby declared null and void;
2. The Deed of Real Estate Mortgage is hereby declared
valid and legal for all intents and puposes;
3. Defendant-corporation General Milling Corporation
is ordered to pay Spouses Librado and Remedios Ramos attorneys
fees in the total amount of P 57,000.00 representing acceptance fee
of P30,000.00 and P3,000.00 appearance fee for nine (9) trial dates
or a total appearance fee of P 27,000.00;
4. The claims for moral and exemplary damages are
denied for lack of merit.
IT IS SO ORDERED.[13]

The Ruling of the Appellate Court
On appeal, GMC argued that the trial court erred in: (1) declaring the extrajudicial
foreclosure proceedings null and void; (2) ordering GMC to pay Spouses Ramos
attorneys fees; and (3) not awarding damages in favor of GMC.
WHEREFORE, and in view of the foregoing considerations, the
Decision of the Regional Trial Court of Lipa City, Branch 12,
dated May 21, 2005 is hereby AFFIRMED with MODIFICATION
by deleting the award of attorneys fees to plaintiffs-appellees
spouses Librado Ramos and Remedios Ramos.[16]
Hence, We have this appeal.

The Issues
The CA sustained the decision of the trial court but anchored its ruling on a different
ground. Contrary to the findings of the trial court, the CA ruled that the requirements A. WHETHER [THE CA] MAY CONSIDER ISSUES NOT
of posting and publication of notices under Act No. 3135 were complied with. The ALLEGED AND DISCUSSED IN THE LOWER COURT
CA, however, still found that GMCs action against Spouses Ramos was premature, AND LIKEWISE NOT RAISED BY THE PARTIES ON
APPEAL, THEREFORE HAD DECIDED THE CASE NOT
as they were not in default when the action was filed on May 7, 1997. [14] IN ACCORD WITH LAW AND APPLICABLE DECISIONS
OF THE SUPREME COURT.

B. WHETHER [THE CA] ERRED IN RULING THAT

PETITIONER GMC MADE NO DEMAND TO
The CA ruled: RESPONDENT SPOUSES FOR THE FULL PAYMENT OF
THEIR OBLIGATION CONSIDERING THAT THE
In this case, a careful scrutiny of the evidence on record shows that LETTER DATED MARCH 31, 1997 OF PETITIONER GMC
defendant-appellant GMC made no demand to spouses Ramos for TO RESPONDENT SPOUSES IS TANTAMOUNT TO A
the full payment of their obligation. While it was alleged in the FINAL DEMAND TO PAY, THEREFORE IT DEPARTED
Answer as well as in the Affidavit constituting the direct testimony FROM THE ACCEPTED AND USUAL COURSE OF
of Joseph Dominise, the principal witness of defendant-appellant JUDICIAL PROCEEDINGS.[17]
GMC, that demands were sent to spouses Ramos, the documentary
evidence proves otherwise. A perusal of the letters presented and
offered as evidence by defendant-appellant GMC did not demand
but only request spouses Ramos to go to the office of GMC to The Ruling of this Court
discuss the settlement of their account.[15] Can the CA consider matters not alleged?

According to the CA, however, the RTC erroneously awarded attorneys fees to GMC asserts that since the issue on the existence of the demand letter was not raised
Spouses Ramos, since the presumption of good faith on the part of GMC was not in the trial court, the CA, by considering such issue, violated the basic requirements
overturned. of fair play, justice, and due process.[18]

The CA disposed of the case as follows:

In their Comment,[19] respondents-spouses aver that the CA has ample authority to
rule on matters not assigned as errors on appeal if these are indispensable or
necessary to the just resolution of the pleaded issues.
In Diamonon v. Department of Labor and Employment,[20] We explained that an
appellate court has a broad discretionary power in waiving the lack of assignment of
errors in the following instances:
(a) Grounds not assigned as errors but affecting the
jurisdiction of the court over the subject matter;
(b) Matters not assigned as errors on appeal but are
evidently plain or clerical errors within contemplation of law;
(c) Matters not assigned as errors on appeal but
consideration of which is necessary in arriving at a just decision
and complete resolution of the case or to serve the interests of a
justice or to avoid dispensing piecemeal justice;
(d) Matters not specifically assigned as errors on appeal
but raised in the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to raise or
which the lower court ignored;
(e) Matters not assigned as errors on appeal but closely
related to an error assigned;
(f) Matters not assigned as errors on appeal but upon
which the determination of a question properly assigned, is
dependent.
Paragraph (c) above applies to the instant case, for there would be a just and
complete resolution of the appeal if there is a ruling on whether the Spouses Ramos
were actually in default of their obligation to GMC.
Was there sufficient demand?
We now go to the second issue raised by GMC. GMC asserts error on the part of the
CA in finding that no demand was made on Spouses Ramos to pay their obligation.
On the contrary, it claims that its March 31, 1997 letter is akin to a demand.
We disagree.
There are three requisites necessary for a finding of default. First, the obligation is
demandable and liquidated; second, the debtor delays performance; and third, the
creditor judicially or extrajudicially requires the debtors performance. [21]
According to the CA, GMC did not make a demand on Spouses Ramos but merely
requested them to go to GMCs office to discuss the settlement of their account. In
spite of the lack of demand made on the spouses, however, GMC proceeded with the
foreclosure proceedings. Neither was there any provision in the Deed of Real Estate
Mortgage allowing GMC to extrajudicially foreclose the mortgage without need of
demand.
Indeed, Article 1169 of the Civil Code on delay requires the following:
Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them
the fulfilment of their obligation.
However, the demand by the creditor shall not be necessary in
order that delay may exist:
(1) When the obligation or the law expressly so declares;
xxx
As the contract in the instant case carries no such provision on demand not being
necessary for delay to exist, We agree with the appellate court that GMC should have
first made a demand on the spouses before proceeding to foreclose the real estate
mortgage.
Development Bank of the Philippines v. Licuanan finds application to the instant
case:

The issue of whether demand was made before the

foreclosure was effected is essential. If demand was made and duly
received by the respondents and the latter still did not pay, then
they were already in default and foreclosure was proper. However,
if demand was not made, then the loans had not yet become due
and demandable. This meant that respondents had not defaulted in
their payments and the foreclosure by petitioner was
premature. Foreclosure is valid only when the debtor is in
default in the payment of his obligation.[22]

In turn, whether or not demand was made is a question of fact. [23] This petition filed
under Rule 45 of the Rules of Court shall raise only questions of law. For a question
to be one of law, it must not involve an examination of the probative value of the
evidence presented by the litigants or any of them. The resolution of the issue must
rest solely on what the law provides on the given set of circumstances. Once it is
clear that the issue invites a review of the evidence presented, the question posed is
one of fact.[24] It need not be reiterated that this Court is not a trier of facts.[25] We
will defer to the factual findings of the trial court, because petitioner GMC has not
shown any circumstances making this case an exception to the rule.

WHEREFORE, the petition is DENIED. The CA Decision in CA-G.R.

CR-H.C. No. 85400 is AFFIRMED.

SO ORDERED.
 METROPOLITAN BANK and
G.R. No. 176008
TRUST COMPANY, substituted by
MERIDIAN (SPV-AMCI) INTERNATIONAL EXCHANGE
CORPORATION, BANK (now UNION BANK OF THE
PHILIPPINES),
Petitioner,
Respondent.

x-----------------------------------------------------------------------------------------x

- versus -

DECISION

INTERNATIONAL EXCHANGE
BANK,

Respondent. G.R. No. 176131

PERALTA, J.:
x--------------------------------------------x Present:
CARPIO,* J.,
CHUAYUCO STEEL
MANUFACTURING, VELASCO, JR., J.,
Chairperson,
Petitioner, BRION,**
PERALTA, and Before the Court are two consolidated petitions for review on certiorari under Rule
***
SERENO, JJ. 45 of the Rules of Court, both of which are seeking the reversal and setting aside of
the Decision1and Resolution2 of the Court of Appeals (CA) dated May 5, 2006 and
Promulgated:
December 22, 2006, respectively, in CA-G.R. SP No. 00549-MIN which annulled
and set aside the Orders dated September 6, 2004 and February 14, 2005, the
- versus -
August 10, 2011 Resolution dated March 15, 2005 and the Joint Resolution dated June 8, 2005 of the
Regional Trial Court (RTC) of Misamis Oriental, Branch 17 in Civil Case Nos.
2004-197 and 2004-200.
 for the issuance of a writ of replevin or, in the alternative, for the payment of SSC's
outstanding obligations and attorney's fees.3
The pertinent factual and procedural antecedents of the case are as follows:

Sacramento Steel Corporation (SSC) is a business entity engaged in manufacturing
and producing steel and steel products, such as cold rolled coils and galvanized
sheets, in its own steel manufacturing plant located at Tagoloan, Misamis Oriental.
For the purpose of increasing its capital, SSC entered into a Credit Agreement with
herein respondent International Exchange Bank (IEB) on September 10, 2001
wherein the latter granted the former an omnibus credit line in the amount
of P60,000,000.00, a loan of P20,000,000.00 and a subsequent credit line with a limit
of P100,000,000.00.
On the other hand, on July 18, 2004, SSC filed with the same RTC
of Misamis Oriental a Complaint for annulment of mortgage and specific
performance for the purpose of compelling the IEB to restructure SSC's outstanding
obligations. SSC also prayed for the issuance of a Temporary Restraining Order
(TRO) and writ of preliminary injunction to prevent IEB from taking any steps to
dispossess SSC of any equipment in its steel manufacturing plant as well as to
restrain it from foreclosing the mortgage on the said equipment. 4 The RTC issued a
TRO. The case was docketed as Civil Case No. 2004-200 and was subsequently
consolidated with Civil Case No. 2004-197.

On July 23, 2004, the RTC issued an Order5 granting IEB's application for the
As security for its loan obligations, SSC executed five separate deeds of
issuance of a writ of replevin. However, upon agreement of the parties, the
chattel mortgage constituted over various equipment found in its steel manufacturing
implementation of the said writ was held in abeyance pending the trial court's
plant. The deeds of mortgage were dated September 17, 2001, February 26, 2003,
resolution of the other incidents in the said case.6 The RTC also directed that there
April 16, 2003, May 25, 2004 and June 7, 2004.
shall be no commercial operation without court approval.7

Subsequently, SSC defaulted in the payment of its obligations. IEB's demand for
On August 26, 2004, the IEB filed a petition for extrajudicial foreclosure of chattel
payment went unheeded. On July 7, 2004, the IEB filed with the RTC
mortgage.
of Misamis Oriental an action for injunction for the purpose of enjoining SSC from
taking out the mortgaged equipment from its premises. The case was docketed as
Civil Case No. 2004-197. Thereafter, IEB filed a Supplemental Complaint praying
SSC opposed IEB's petition and prayed for the issuance of a writ of preliminary SSC and that the mortgage contracts between IEB and SSC were entered into to
injunction. defraud the latter's creditors.9Metrobank prayed for the rescission of the chattel
mortgages executed by SSC in favor of IEB.

On September 6, 2004, the RTC issued an Order disposing as follows:

On January 21, 2005, CSMC filed an Omnibus Motion for intervention and for
allowance to immediately operate the cold rolling mill and galvanizing plant of SSC
WHEREFORE, let a Writ of preliminary injunction be issued
contending that its purpose in intervening is to seek the approval of the court to
restraining defendant iBank [IEB], the Sheriff, his agents and other
person/s acting in their behalf as agents privies or representative[s] operate the said plant pursuant to the Capacity Lease Agreement it entered into with
in whatever capacity, from conducting foreclosure, whether
judicial or extrajudicial, of any properties subject of the SSC.10 IEB filed its Opposition to the said Motion.11
controversy and are further directed not to take any steps that will,
in effect, dispossess plaintiff [SSC] of any of its machineries and
equipment in its steel manufacturing plant pending determination
of the case. Let a bond (cash or surety) of Five Hundred Thousand
(P500,000.00) Pesos be posted by the plaintiff Sacramento Steel On February 14, 2005, the RTC issued an Order 12 admitting the motions for
Corporation as required by law.
intervention filed by CSMC and Metrobank.

SO ORDERED.8

On March 15, 2005, the RTC issued a Resolution, the dispositive portion of which
reads, thus:

Meanwhile, on August 30, 2004, SSC entered into a Capacity Lease Agreement with
herein petitioner Chuayuco Steel Manufacturing Corporation (CSMC) which
allowed the latter to lease and operate the former's cold rolling mill and galvanizing
plant for a period of five years.
WHEREFORE, premises considered, the motion to operate the
machineries pendente lite is hereby GRANTED based on law and
equity as soon as practicable. This is without prejudice on the part
of the I-bank [IEB] to assert the enforcement of the proposed
schedule of payment submitted by SSC to the Court (Exh. A
Motion for Early Resolution, 2/16/2005 hearing) and to continually
post their security guards unless withdrawn.

On October 21, 2004, herein petitioner Metropolitan Bank and Trust Company
SO ORDERED.13
(Metrobank) filed a motion for intervention contending that it has legal interest in the
properties subject of the litigation between IEB and SSC because it is a creditor of
On June 8, 2005, the RTC issued a Joint Resolution14 reiterating its admission of Hence, the instant petitions for review on certiorari.
CSMC's motion for intervention and directing the latter to file its complaint-in-
intervention.

In G.R. No. 176008, petitioner Metrobank submits the following issues:

(A) WHETHER OR NOT THE HONORABLE COURT OF
APPEALS ERRED WHEN IT RULED THAT PETITIONER'S
On August 25, 2005, IEB filed a petition for certiorari, prohibition and mandamus COMPLAINT-IN-INTERVENTION IS AN ACCION PAULIANA,
with the CA assailing the RTC Orders dated September 6, 2004 and February 14, A SUBSIDIARY ACTION, WHICH PRESUPPOSES AN
UNSATISFIED JUDGMENT, WHICH UNSATISFIED
2005, Resolution dated March 15, 2005 and Joint Resolution dated June 8, 2005. 15 JUDGMENT IS ABSENT IN THE CASE AT BAR.

(B) WHETHER OR NOT THE HONORABLE COURT OF

APPEALS ERRED WHEN IT RULED THAT THE TRIAL
COURT COMMITTED GRAVE ABUSE OF DISCRETION IN
On May 5, 2006, the CA rendered its presently assailed Decision which disposed of
ALLOWING PETITIONER'S COMPLAINT-IN-
the case as follows: INTERVENTION.17

WHEREFORE, the petition is hereby GRANTED. The questioned

Orders dated September 6, 2004, February 14, 2005, March 15, In G.R. No. 176131, petitioner CSMC raises the following grounds:
2005 and June 8, 2005 issued by public respondent RTC, Branch
17, Misamis Oriental, presided by Hon. Florencia D. Sealana-
Abbu in Civil Case Nos. 2004-197 and 2004-200 are hereby
ANNULLED and SET ASIDE. Public respondent is hereby
I. THE HONORABLE COURT ERRED IN NOT PASSING
DIRECTED to turn-over the mortgaged properties covered by the
UPON THE ISSUE THAT HEREIN RESPONDENT IBANK IS
writ of replevin to petitioner I-Bank for the eventual foreclosure
GUILTY OF FORUM-SHOPPING.
thereof.

II. THE HONORABLE COURT ERRED IN NOT RULING

SO ORDERED.16
THAT HEREIN RESPONDENT IBANK'S FAILURE TO FILE A
MOTION FOR RECONSIDERATION TO THE ORDER DATED
08 JUNE 2005 IS FATAL TO ITS PETITION.

Metrobank, CSMC and SSC filed their respective motions for reconsideration, but III. THE HONORABLE COURT ERRED IN RULING THAT
these were all denied by the CA in its Resolution dated December 22, 2006. THE ORDER OF JUDGE SEALANA-ABBU ADMITTING THE
INTERVENTION OF HEREIN PETITIONER CSMC IS
WITHOUT LEGAL BASIS.18
In a Manifestation and Motion dated September 26, 2007,
A perusal of Metrobank's Complaint-in-Intervention would show that its main
petitioner Metrobank manifested that it no longer has any interest in pursuing the
objective is to have the chattel mortgages executed by SSC in favor of IEB rescinded.
instant case as the loan obligation owed by SSC to it has been sold by the latter to a
This is clearly evident in its prayer, which reads as follows:
corporation known as Meridian (SPV-AMC) Corporation (Meridian).
Accordingly, Metrobank prayed that it be substituted by Meridian as petitioner in the
instant case.19 WHEREFORE, premises considered, it is respectfully prayed unto
the Honorable Court that judgment be rendered:

(1) RESCINDING the chattel mortgages

20
executed by Defendants Sacramento
In a Resolution dated November 12, 2007, this Court granted Metrobank's Motion. and Delmo in favor of Defendant Ibank dated
May 25, 2004 and June 7, 2004, respectively;
At the outset, the Court takes note that no arguments or questions were raised by
petitioners with respect to the September 6, 2004 Order and March 15, 2005 (2) Ordering defendants
Sacramento, Delmo and Ibank to pay, jointly and
Resolution of the RTC which were annulled by the CA. Hence, the only issues left severally, Plaintiff-Intervenor the amounts of:
for resolution in the instant petition are whether or not petitioners Metrobank and
CSMC may be allowed to intervene in Civil Case Nos. 2004-197 and 2004-200. (A) P500,000.00, as and
by way of exemplary
damages;
(B) P500,000.00, as and
by way of attorney's fees;
The Court will dwell first on the issues raised by Metrobank in G.R. No. 176008. and
(C) Costs of suit.

Other reliefs as may be just and equitable under the premises are
In its first assigned error, Metrobank contends that the CA erred in ruling that its likewise prayed for.

Complaint-in-Intervention is in the nature of an accion pauliana.

x x x x21

The Court does not agree.

Under Article 1381 of the Civil Code, an accion pauliana is an action to rescind
contracts in fraud of creditors. 22
However, jurisprudence is clear that the following successive measures must be
taken by a creditor before he may bring an action for rescission of an allegedly
fraudulent contract: (1) exhaust the properties of the debtor through levying by
attachment and execution upon all the property of the debtor, except such as are
exempt by law from execution; (2) exercise all the rights and actions of the debtor,
save those personal to him (accion subrogatoria); and (3) seek rescission of the
contracts executed by the debtor in fraud of their rights (accionpauliana).23 It is thus
apparent that an action to rescind, or an accion pauliana, must be of last resort,
availed of only after the creditor has exhausted all the properties of the debtor not
exempt from execution or after all other legal remedies have been exhausted and
have been proven futile.24
It does not appear that Metrobank sought other properties of SSC other than the
subject lots alleged to have been transferred in fraud of creditors. Neither is there any
showing that Metrobank subrogated itself in SSC's transmissible rights and actions.
Without availing of the first and second remedies, Metrobank simply undertook the
third measure and filed an action for annulment of the chattel mortgages. This cannot
be done. Article 1383 of the New Civil Code is very explicit that the right or remedy
of the creditor to impugn the acts which the debtor may have done to defraud them is
subsidiary in nature.25 It can only be availed of in the absence of any other legal
remedy to obtain reparation for the injury.26 This fact is not present in this case. No
evidence was presented nor even an allegation was offered to show
that Metrobank had availed of the abovementioned remedies before it tried to
question the validity of the contracts of chattel mortgage between IEB and SSC.
Metrobank also contends that in order to apply the concept of, and the rules
pertaining to, accion pauliana, the subject matter must be a conveyance, otherwise
valid, which is undertaken in fraud of creditors. Metrobank claims that since there is
no conveyance involved in the contract of chattel mortgage between SSC and IEB,
which Metrobank seeks to rescind, the CA erred in ruling that the latter's Complaint-
in-Intervention is an accion pauliana.
The Court is not persuaded.
In the instant case, the contract of chattel mortgage entered into by and between SSC
and IEB involves a conveyance of patrimonial benefit in favor of the latter as the
properties subject of the chattel mortgage stand as security for the credit it extended
to SSC. In a very recent case involving an action for the rescission of a real estate
mortgage,27 while this Court found that some of the elements
of accion pauliana were not present, it found that a mortgage contract involves the
conveyance of a patrimonial benefit.
In sum, Metrobank may not be allowed to intervene and pray for the rescission of the
chattel mortgages executed by SSC in favor of IEB. The remedy being sought
by Metrobank is in the nature of an accion pauliana which, under the factual
circumstances obtaining in the present case, may not be allowed. Based on the
foregoing, the Court finds no error in the ruling of the CA that the RTC committed
grave abuse of discretion in allowing Metrobank's intervention.
The Court will now proceed to resolve the issues raised by petitioner CSMC in G.R.
No. 176131.
Firstly, CSMC contends that IEB was forum shopping when it filed a petition
for certiorari with the CA seeking, among others, the enjoinment of the commercial
operation of the subject machineries and equipment when its Opposition28 to the
implementation of the Capacity Lease Agreement between SSC and CSMC is still
pending determination by the RTC.
In the instant case on the one hand, IEB's Opposition questions the legality and seeks
to prevent the implementation of the Capacity Lease Agreement between CSMC and
SSC which, in essence, authorizes CSMC to operate the subject
machineries pendente lite. On the other hand, the petition for certiorari filed by IEB
assails and seeks to nullify, among others, the March 15, 2005 and June 8, 2005
Orders of the RTC allowing SSC to operate the subject machineries pendente lite. It
is, thus, clear that there is no identity of subject matter, cause of action and reliefs
sought in IEB's Opposition filed with the RTC and in its petition for certiorari filed
with the CA. Hence, IEB is not guilty of forum shopping.

The Court does not agree.

Secondly, CSMC argues that IEB's failure to file a motion for reconsideration of the
RTC Order dated June 8, 2005 is fatal to its petition for certiorari filed with the CA.

Forum shopping has been defined as an act of a party, against whom an adverse
judgment has been rendered in one forum, of seeking and possibly getting a
favorable opinion in another forum, other than by appeal or a special civil action
for certiorari, or the institution of two or more actions or proceedings grounded on
the same cause on the supposition that one or the other court would make a favorable The Court is not persuaded.
disposition.29

While the general rule is that before certiorari may be availed of, petitioner must
have filed a motion for reconsideration of the act or order complained of, the Court

Forum shopping exists when two or more actions involve the same has dispensed with this requirement in several instances.32 Thus, a previous motion
for reconsideration before the filing of a petition for certiorari is necessary unless: (i)
transactions, essential facts and circumstances, and raise identical causes of action,
the issue raised is one purely of law; (ii) public interest is involved; (iii) there is
subject matter, and issues.30Still another test of forum shopping is when the elements
urgency; (iv) a question of jurisdiction is squarely raised before and decided by the
of litis pendencia are present or where a final judgment in one case will amount
lower court; and (v) the order is a patent nullity. 33 In the instant case, the Court
to res judicata in another whether in the two or more pending cases, there is an
agrees with the CA that there is no need for such motion because the issue regarding
identity of (a) parties (or at least such parties as represent the same interests in both
the applicability of the rule on intervention raised by IEB in its petition
actions); (b) rights or causes of action, and (c) reliefs sought. 31
 will either gain or lose by direct legal operation and effect of a
for certiorari filed with the CA, insofar as the June 8, 2005 Order of the RTC is judgment. (Hrs. of Nicolas Orosa vs. Migrino 218 SCRA 311) The
concerned, is one purely of law. Court finds that Chuayuco had a constituted and sufficient legal
interest in the machineries subject of the litigation which is actual
and material. Any disposition of the case will adversely affect the
standing of the intervenor.37
The foregoing notwithstanding, the Court finds that the CA erred in ruling that the
allowance of CSMC's motion for intervention is improper. CSMC's intervention
should be allowed.
Moreover, considering that CSMC's interest is limited only to the operation of the
subject machineries pursuant to its lease contract with SSC, its intervention would
The purpose of intervention is to enable a stranger to an action to become a party in
not unduly delay or prejudice the adjudication of the rights of SSC and IEB. CSMC's
order for him to protect his interest and for the court to settle all conflicting
intervention should be treated as one pro interesse suo which is a mode of
claims.34 Intervention is allowed to avoid multiplicity of suits more than on due
intervention in equity wherein a stranger desires to intervene for the purpose of
process considerations.35 To warrant intervention under Rule 19 of the Rules of
asserting a property right in the res, or thing, which is the subject matter of the
Court, two requisites must concur: (1) the movanthas a legal interest on the matter in
litigation, without becoming a formal plaintiff or defendant, and without acquiring
litigation; and (2) intervention must not unduly delay or prejudice the adjudication of
control over the course of a litigation, which is conceded to the main actors therein. 38
the rights of the parties, nor should the claim of the intervenorbe capable of being
properly decided in a separate proceeding.36
Lastly, the Court does not agree with the CA when it ruled that the applicable
provision is Rule 3, Section 19 (erroneously cited as Section 20) of the Rules of
In the present case, CSMC, being a lessee of the subject properties, has a legal
Court on transfer of interest and substitution of parties. Being a mere lessee of the
interest therein. The RTC correctly held, thus:
subject properties, CSMC is a stranger insofar as the dispute between SSC and IEB is
concerned. The action filed by IEB against SSC is an action for the payment or
Under the Rules of Court, intervention is permissive and maybe
permitted by the Court when the applicant shows facts which satisfaction of the loans incurred by the latter, which includes a possible foreclosure
satisfy the requirements of the law authorizing intervention. of the subject properties given as security for the said loans. CSMC may not be
(Firestone Ceramics Inc. vs. CA 313 SCRA 522) Records of the
case showed that on August 30, 2004, an agreement was finalized considered a successor, and may not be substituted in place of SSC, insofar as these
and entered into by applicant Chuayuco and defendant/plaintiff loans are concerned. If any, what has been transferred to CSMC is only the right of
Sacramento Steel Corporation whereby the former shall lease and
make use of the machineries of Sacramento Steel under the SSC to operate the subject equipment and machineries which it owns. As such, SSC
Capacity Lease Agreement (CLA). One of the terms and may not be removed as defendant because its interest in the subject properties
condition[s] under [the] CLA was for the monthly lease payments
to take effect upon signing of the contract. A person seeking to remains, being the owner thereof.
intervene in a suit must show that he has legal interest which must
be actual and material, direct and immediate. He must show that he
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 00549-MIN are AFFIRMED with MODIFICATION. The
February 14, 2005 Order of the Regional Trial Court of Misamis Oriental, Branch 17,
is MODIFIED by denying Metrobank's Motion for Intervention, while the Joint
Resolution of the same trial court, dated June 8, 2005, reiterating its admission of
CSMC's Motion for Intervention and directing the latter to file its complaint-in-
intervention, is REINSTATED.

SO ORDERED.