Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 118889 March 23, 1998

FGU INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, FILCAR TRANSPORT, INC., and FORTUNE
INSURANCE CORPORATION, respondents.

BELLOSILLO, J .:
For damages suffered by a third party, may an action based on quasi-
delict prosper against a rent-a-car company and, consequently, its insurer
for fault or negligence of the car lessee in driving the rented vehicle?
This was a two-car collision at dawn. At around 3 o'clock of 21 April 1987,
two (2) vehicles, both Mitsubishi Colt Lancers, cruising northward along
Epifanio de los Santos Avenue, Mandaluyong City, figured in a traffic
accident. The car bearing Plate No. PDG 435 owned by Lydia F. Soriano
was being driven at the outer lane of the highway by Benjamin J acildone,
while the other car, with Plate No. PCT 792, owned by respondent FILCAR
Transport, Inc. (FILCAR), and driven by Peter Dahl-J ensen as lessee, was
at the center lane, left of the other vehicle. Upon approaching the corner of
Pioneer Street, the car owned by FILCAR swerved to the right hitting the
left side of the car of Soriano. At that time Dahl-J ensen, a Danish tourist,
did not possess a Philippine driver's license. 1
As a consequence, petitioner FGU Insurance Corporation, in view of its
insurance contract with Soriano, paid the latter P25,382.20. By way of
subrogation,2 it sued Dahl-J ensen and respondent FILCAR as well as
respondent Fortune Insurance Corporation (FORTUNE) as insurer of
FILCAR for quasi-delict before the Regional Trial Court of Makati City.
Unfortunately, summons was not served on Dahl-J ensen since he was no
longer staying at his given address; in fact, upon motion of petitioner, he
was dropped from the complaint.
On 30 J uly 1991 the trial court dismissed the case for failure of petitioner to
substantiate its claim of subrogation.3
On 31 J anuary 1995 respondent Court of Appeals affirmed the ruling of the
trial court although based on another ground, i.e., only the fault or
negligence of Dahl-J ensen was sufficiently proved but not that of
respondent FILCAR.4 In other words, petitioner failed to establish its cause
of action for sum of money based on quasi-delict.
In this appeal, petitioner insists that respondents are liable on the strength
of the ruling in MYC-Agro-Industrial Corporation v. Vda. de Caldo5 that the
registered owner of a vehicle is liable for damages suffered by third persons
although the vehicle is leased to another.
We find no reversible error committed by respondent court in upholding
the dismissal of petitioner's complaint. The pertinent provision is Art. 2176
of the Civil Code which states: "Whoever by act or omission causes damage
to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict . . . . "
To sustain a claim based thereon, the following requisites must concur: (a)
damage suffered by the plaintiff; (b) fault or negligence of the defendant;
and, (c) connection of cause and effect between the fault or negligence of
the defendant and the damage incurred by the plaintiff.6
We agree with respondent court that petitioner failed to prove the existence
of the second requisite, i.e., fault or negligence of defendant FILCAR,
because only the fault or negligence of Dahl-J ensen was sufficiently
established, not that of FILCAR. It should be noted that the damage caused
on the vehicle of Soriano was brought about by the circumstance that Dahl-
J ensen swerved to the right while the vehicle that he was driving was at the
center lane. It is plain that the negligence was solely attributable to Dahl-
J ensen thus making the damage suffered by the other vehicle his personal
liability. Respondent FILCAR did not have any participation therein.
Article 2180 of the same Code which deals also with quasi-delict provides:
The obligation imposed by article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is
responsible.
The father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children who live in their
company.
Guardians are liable for damages caused by the minors or incapacitated
persons who are under their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their
functions.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent;
but not when the damage has been caused by the official to whom the task
done properly pertains, in which case what is provided in article 2176 shall
be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable
for damages caused by their pupils and students or apprentices, so long as
they remain in their custody.
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage.
The liability imposed by Art. 2180 arises by virtue of a presumption juris
tantum of negligence on the part of the persons made responsible
thereunder, derived from their failure to exercise due care and vigilance
over the acts of subordinates to prevent them from causing damage.7 Yet,
as correctly observed by respondent court, Art. 2180 is hardly applicable
because none of the circumstances mentioned therein obtains in the case
under consideration. Respondent FILCAR being engaged in a rent-a-car
business was only the owner of the car leased to Dahl-J ensen. As such,
there was novinculum juris between them as employer and employee.
Respondent FILCAR cannot in any way be responsible for the negligent act
of Dahl-J ensen, the former not being an employer of the latter.
We now correlate par. 5 of Art. 2180 with Art. 2184 of the same Code which
provides: "In motor vehicle mishap, the owner is solidarily liable with his
driver, if the former, who was in the vehicle, could have by the use of due
diligence, prevented the misfortune . . . . If the owner was not in the motor
vehicle, the provisions of article 2180 are applicable." Obviously, this
provision of Art. 2184 is neither applicable because of the absence of master
-driver relationship between respondent FILCAR and Dahl-J ensen. Clearly,
petitioner has no cause of action against respondent FILCAR on the basis
of quasi-delict; logically, its claim against respondent FORTUNE can
neither prosper.
Petitioner's insistence on MYC-Agro-Industrial Corporation is rooted in a
misapprehension of our ruling therein. In that case, the negligent and
reckless operation of the truck owned by petitioner corporation caused
injuries to several persons and damage to property. Intending to expculpate
itself from liability, the corporation raised the defense that at the time of
the collision it had no more control over the vehicle as it was leased to
another; and, that the driver was not its employee but of the lessee. The
trial court was not persuaded as it found that the true nature of the alleged
lease contract was nothing more than a disguise effected by the corporation
to relieve itself of the burdens and responsibilities of an employer. We
upheld this finding and affirmed the declaration of joint and several
liability of the corporation with its driver.
WHEREFORE, the petition is DENIED. The decision of respondent Court
of Appeals dated 31 J anuary 1995 sustaining the dismissal of petitioner's
complaint by the trial court is AFFIRMED. Costs against petitioner.
SO ORDERED.

THIRD DIVISION
[G.R. No. 122445. November 18, 1997]
DR. NINEVETCH CRUZ, petitioner, vs. COURT OF APPEALS and LYDIA
UMALI,respondents.
DECISION
FRANCISCO, J .:
"Doctors are protected by a special law.They are not guarantors of
care. They do not even warrant a good result. They are not insurers against
mishap or unusual consequences. Furthermore they are not liable for
honest mistake of judgment"[1]
The present case against petitioner is in the nature of a medical malpractice
suit, which in simplest term is the type of claim which a victim has available
to him or her to redress a wrong committed by a medical professional
which has cause bodily harm.[2] In this jurisdiction, however, such claims
are most often brought as a civil action for damages under Article 2176 of
the Civil Code,[3] and in some instances, as a criminal case under Article
365 of the Revised Penal Code[4] with which the civil action for damages is
impliedly instituted. It is via the latter type of action that the heirs of the
deceased sought redress for the petitioner's alleged imprudence and
negligence in treating the deceased thereby causing her death. The
petitioner and one Dr. Lina Ercillo who was the attending anaesthesiologist
during the operation of the deceased were charged with "reckless
imprudence and negligence resulting to (sic) homicide" in an information
which reads:
"That on or about March 23, 1991, in the City of San Pablo, Republic of the
Philippines and within the jurisdiction of this Honorable Court, the accused
abovenamed, being then the attending anaesthesiologist and surgeon,
respectively, did then and there, in a negligence (sic), careless, imprudent,
and incompetent manner, and failing to supply or store sufficient
provisions and facilities necessary to meet any and all exigencies apt to
arise before, during and/or after a surgical operation causing by such
negligence, carelessness, imprudence, and incompetence, and causing by
such failure, including the lack of preparation and foresight needed to avert
a tragedy, the untimely death of said Lydia Umali on the day following said
surgical operation."[5]
Trial ensued after both the petitioner and Dr. Lina Ercillo pleaded not
guilty to the above-mentioned charge. On March 4, 1994, the Municipal
Trial Court in Cities (MTCC) of San Pablo City rendered a decision, the
dispositive portion of which is hereunder quoted as follows:
"WHEREFORE, the court finds the accused Dr. Lina Ercillo not guilty of
the offense charged for insufficiency of evidence while her co-accused Dra.
Ninevetch Cruz is hereby held responsible for the death of Lydia Umali on
March 24, 1991, and therefore guilty under Art. 365 of the Revised Penal
Code, and she is hereby sentenced to suffer the penalty of 2 months and 1
day imprisonment of arresto mayor with costs."[6]
The petitioner appealed her conviction to the Regional Trial Court (RTC)
which affirmed in toto the decision of the MTCC[7] prompting the
petitioner to file a petition for review with the Court of Appeals but to no
avail. Hence this petition for review on certiorari assailing the decision
promulgated by the Court of Appeals on October 24, 1995 affirming
petitioner's conviction with modification that she is further directed to pay
the heirs of Lydia UmaliP50,000.00 as indemnity for her death.[8]
In substance, the petition brought before this Court raises the issue of
whether or not petitioner's conviction of the crime of reckless imprudence
resulting in homicide, arising from an alleged medical malpractice, is
supported by the evidence on record.
First the antecedent facts.
On March 22, 1991, prosecution witness, Rowena Umali De Ocampo,
accompanied her mother to the Perpetual Help Clinic and General Hospital
situated in Balagtas Street, San Pablo City, Laguna. They arrived at the said
hospital at around 4:30 in the afternoon of the same day.[9] Prior to March
22, 1991, Lydia was examined by the petitioner who found a "myoma"[10]
in her uterus, and scheduled her for a hysterectomy operation on March
23, 1991.[11] Rowena and her mother slept in the clinic on the evening of
March 22, 1991 as the latter was to be operated on the next day at 1:00
o'clock in the afternoon.[12] According to Rowena, she noticed that the
clinic was untidy and the window and the floor were very dusty prompting
her to ask the attendant for a rag to wipe the window and the floor with.[13]
Because of the untidy state of the clinic, Rowena tried to persuade her
mother not to proceed with the operation.[14] The following day, before her
mother was wheeled into the operating room, Rowena asked the petitioner
if the operation could be postponed. The petitioner called Lydia into her
office and the two had a conversation. Lydia then
informed Rowena that the petitioner told her that she must be operated on
as scheduled.[15]
Rowena and her other relatives, namely her husband, her sister and two
aunts waited outside the operating room while Lydia underwent operation.
While they were waiting, Dr. Ercillo went out of the operating room and
instructed them to buy tagamet ampules which Rowena's sister
immediately bought. About one hour had passed when Dr. Ercillo came out
again this time to ask them to buy blood for Lydia. They bought type "A"
blood from the St. Gerald Blood Bank and the same was brought by the
attendant into the operating room. After the lapse of a few hours, the
petitioner informed them that the operation was finished. The operating
staff then went inside the petitioner's clinic to take their snacks. Some
thirty minutes after, Lydia was brought out of the operating room in a
stretcher and the petitioner asked Rowena and the other relatives to buy
additional blood for Lydia. Unfortunately, they were not able to comply
with petitioner's order as there was no more type "A" blood available in the
blood bank. Thereafter, a person arrived to donate blood which was later
transfused to Lydia. Rowena then noticed her mother, who was attached to
an oxygen tank, gasping for breath. Apparently the oxygen supply had run
out and Rowena's husband together with the driver of the accused had to go
to the San Pablo District Hospital to get oxygen. Lydia was given the fresh
supply of oxygen as soon as it arrived.[16]But at around 10:00 o'clock P.M.
she went into shock and her blood pressure dropped to 60/50. Lydia's
unstable condition necessitated her transfer to the San Pablo District
Hospital so she could be connected to a respirator and further examined.
[17] The transfer to the San Pablo City District Hospital was without the
prior consent of Rowena nor of the other relatives present who found out
about the intended transfer only when an ambulance arrived to take Lydia
to the San Pablo District Hospital. Rowena and her other relatives then
boarded a tricycle and followed the ambulance.[18]
Upon Lydia's arrival at the San Pablo District Hospital, she was wheeled
into the operating room and the petitioner and Dr. Ercillo re-operated on
her because there was blood oozing from the abdominal incision.[19] The
attending physicians summoned Dr. Bartolome Angeles, head of the
Obstetrics and Gynecology Department of the San Pablo District Hospital.
However, when Dr. Angeles arrived, Lydia was already in shock and
possibly dead as her blood pressure was already 0/0. Dr. Angeles then
informed petitioner and Dr. Ercillo that there was nothing he could do to
help save the patient.[20] While petitioner was closing the abdominal wall,
the patient died.[21] Thus, on March 24, 1991, at 3:00 o'clock in the
morning, Lydia Umali was pronounced dead. Her death certificate states
"shock" as the immediate cause of death and "Disseminated Intravascular
Coagulation (DIC)" as the antecedent cause.[22]
In convicting the petitioner, the MTCC found the following circumstances
as sufficient basis to conclude that she was indeed negligent in the
performance of the operation:
"x x x, the clinic was untidy, there was lack of provision like blood and
oxygen to prepare for any contingency that might happen during the
operation. The manner and the fact that the patient was brought to the San
Pablo District Hospital for reoperation indicates that there was something
wrong in the manner in which Dra. Cruz conducted the operation. There
was no showing that before the operation, accused Dr. Cruz had conducted
a cardio pulmonary clearance or any typing of the blood of the patient. It
was (sic) said in medical parlance that the "abdomen of the person is a
temple of surprises" because you do not know the whole thing the moment
it was open (sic) and surgeon must be prepared for any eventuality thereof.
The patient (sic) chart which is a public document was not presented
because it is only there that we could determine the condition of the patient
before the surgery. The court also noticed in Exh. "F-1" that the sister of the
deceased wished to postpone the operation but the patient was prevailed
upon by Dra. Cruz to proceed with the surgery. The court finds that Lydia
Umali died because of the negligence and carelessness of the surgeon Dra.
Ninevetch Cruz because of loss of blood during the operation of the
deceased for evident unpreparedness and for lack of skill, the reason why
the patient was brought for operation at the San Pablo City District
Hospital. As such, the surgeon should answer for such negligence. With
respect to Dra. Lina Ercillo, the anaesthesiologist, there is no evidence to
indicate that she should be held jointly liable with Dra. Cruz who actually
did the operation."[23]
The RTC reiterated the abovementioned findings of the MTCC and upheld
the latter's declaration of "incompetency, negligence and lack of foresight
and skill of appellant (herein petitioner) in handling the subject patient
before and after the operation."[24] And likewise affirming the petitioner's
conviction, the Court of Appeals echoed similar observations, thus:
"x x x. While we may grant that the untidiness and filthiness of the clinic
may not by itself indicate negligence, it nevertheless shows the absence of
due care and supervision over her subordinate employees. Did this
unsanitary condition permeate the operating room? Were the surgical
instruments properly sterilized? Could the conditions in the OR have
contributed to the infection of the patient? Only the petitioner could answer
these, but she opted not to testify. This could only give rise to the
presumption that she has nothing good to testify on her defense. Anyway,
the alleged "unverified statement of the prosecution witness" remains
unchallenged and unrebutted.
Likewise undisputed is the prosecution's version indicating the following
facts: that the accused asked the patient's relatives to buy Tagamet capsules
while the operation was already in progress; that after an hour, they were
also asked to buy type "A" blood for the patient; that after the surgery, they
were again asked to procure more type "A" blood, but such was not
anymore available from the source; that the oxygen given to the patient was
empty; and that the son-in-law of the patient, together with a driver of the
petitioner, had to rush to the San Pablo City District Hospital to get the
much-needed oxygen. All these conclusively show that the petitioner had
not prepared for any unforeseen circumstances before going into the first
surgery, which was not emergency in nature, but was elective or pre-
scheduled; she had no ready antibiotics, no prepared blood, properly typed
and cross-matched, and no sufficient oxygen supply.
Moreover, there are a lot of questions that keep nagging Us. Was the
patient given any cardio-pulmonary clearance, or at least a clearance by an
internist, which are standard requirements before a patient is subjected to
surgery. Did the petitioner determine as part of the pre-operative
evaluation, the bleeding parameters of the patient, such as bleeding time
and clotting time? There is no showing that these were done. The
petitioner just appears to have been in a hurry to perform the operation,
even as the family wanted the postponement to April 6, 1991. Obviously,
she did not prepare the patient; neither did she get the family's consent to
the operation. Moreover, she did not prepare a medical chart with
instructions for the patient's care. If she did all these, proof thereof should
have been offered. But there is none. Indeed, these are overwhelming
evidence of recklessness and imprudence."[25]
This court, however, holds differently and finds the foregoing
circumstances insufficient to sustain a judgment of conviction against the
petitioner for the crime of reckless imprudence resulting in homicide. The
elements of reckless imprudence are: (1) that the offender does or fails to
do an act; (2) that the doing or the failure to do that act is voluntary; (3)
that it be without malice; (4) that material damage results from the reckless
imprudence; and (5) that there is inexcusable lack of precaution on the part
of the offender, taking into consideration his employment or occupation,
degree of intelligence, physical condition, and other circumstances
regarding persons, time and place.
Whether or not a physician has committed an "inexcusable lack of
precaution" in the treatment of his patient is to be determined according to
the standard of care observed by other members of the profession in good
standing under similar circumstances bearing in mind the advanced state of
the profession at the time of treatment or the present state of medical
science.[26] In the recent case ofLeonila Garcia-Rueda v. Wilfred L.
Pacasio, et. al.,[27] this Court stated that in accepting a case, a doctor in
effect represents that, having the needed training and skill possessed by
physicians and surgeons practicing in the same field, he will employ such
training, care and skill in the treatment of his patients. He therefore has a
duty to use at least the same level of care that any other reasonably
competent doctor would use to treat a condition under the same
circumstances. It is in this aspect of medical malpractice that expert
testimony is essential to establish not only the standard of care of the
profession but also that the physician's conduct in the treatment and care
falls below such standard.[28] Further, inasmuch as the causes of the
injuries involved in malpractice actions are determinable only in the light of
scientific knowledge, it has been recognized that expert testimony is usually
necessary to support the conclusion as to causation.[29]
Immediately apparent from a review of the records of this case is the
absence of any expert testimony on the matter of the standard of care
employed by other physicians of good standing in the conduct of similar
operations. The prosecution's expert witnesses in the persons of Dr.
Floresto Arizala and Dr. Nieto Salvador, J r. of the National Bureau of
Investigation (NBI) only testified as to the possible cause of death but did
not venture to illuminate the court on the matter of the standard of care
that petitioner should have exercised.
All three courts below bewail the inadequacy of the facilities of the clinic
and its untidiness; the lack of provisions such as blood, oxygen, and certain
medicines; the failure to subject the patient to a cardio-pulmonary test
prior to the operation; the omission of any form of blood typing before
transfusion; and even the subsequent transfer of Lydia to the San Pablo
Hospital and the reoperation performed on her by the petitioner. But while
it may be true that the circumstances pointed out by the courts below
seemed beyond cavil to constitute reckless imprudence on the part of the
surgeon, this conclusion is still best arrived at not through the educated
surmises nor conjectures of laymen, including judges, but by the
unquestionable knowledge of expert witnesses. For whether a physician or
surgeon has exercised the requisite degree of skill and care in the treatment
of his patient is, in the generality of cases, a matter of expert opinion.[30]
The deference of courts to the expert opinion of qualified physicians stems
from its realization that the latter possess unusual technical skills which
laymen in most instances are incapable of intelligently evaluating.[31]
Expert testimony should have been offered to prove that the circumstances
cited by the courts below are constitutive of conduct falling below the
standard of care employed by other physicians in good standing when
performing the same operation. It must be remembered that when the
qualifications of a physician are admitted, as in the instant case, there is an
inevitable presumption that in proper cases he takes the necessary
precaution and employs the best of his knowledge and skill in attending to
his clients, unless the contrary is sufficiently established.[32] This
presumption is rebuttable by expert opinion which is so sadly lacking in the
case at bench.
Even granting arguendo that the inadequacy of the facilities and untidiness
of the clinic; the lack of provisions; the failure to conduct pre-operation
tests on the patient; and the subsequent transfer of Lydia to the San Pablo
Hospital and the reoperation performed on her by the petitioner do
indicate, even without expert testimony, that petitioner was recklessly
imprudent in the exercise of her duties as a surgeon, no cogent proof exists
that any of these circumstances caused petitioner's death. Thus, the
absence of the fourth element of reckless imprudence: that the injury to the
person or property was a consequence of the reckless imprudence.
In litigations involving medical negligence, the plaintiff has the burden of
establishing appellant's negligence and for a reasonable conclusion of
negligence, there must be proof of breach of duty on the part of the
surgeon as well as a casual connection of such breach and the resulting
death of his patient.[33] InChan Lugay v. St Luke's Hospital, Inc.,[34]
where the attending physician was absolved of liability for the death of the
complainant's wife and newborn baby, this court held that:
"In order that there may be a recovery for an injury, however, it must be
shown that the 'injury for which recovery is sought must be the legitimate
consequence of the wrong done; the connection between the negligence and
the injury must be a direct and natural sequence of events, unbroken by
intervening efficient causes.' In other words, the negligence must be the
proximate cause of the injury. For, 'negligence, no matter in what it
consists, cannot create a right of action unless it is the proximate cause of
the injury complained of.' And 'the proximate cause of an injury is that
cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the
result would not have occurred.'''[35] (Underscoring supplied.)
Dr. Arizala who conducted an autopsy on the body of the deceased
summarized his findings as follows:
"Atty. Cachero:
Q. You mentioned about your Autopsy Report which has been marked as
Exh. "A-1-b". There appears here a signature above the typewritten name
Floresto Arizala, J r., whose signature is that?
That is my signature, sir.
Q. Do you affirm the truth of all the contents of Exh. "A-1-b"?
Only as to the autopsy report no. 91-09, the time and place and everything
after the post mortem findings, sir.
Q. You mentioned on your "Post Mortem Findings" about surgical incision,
14:0 cm., infraumbilical area, anterior abdominal area, midline, will you
please explain that in your own language?
There was incision wound (sic) the area just below the navel, sir.
Q. And the last paragraph of the postmortem findings which I read: Uterus,
pear-shaped and pale measuring 7.5 x 5.5 x 5.0 cm, with some surface
nodulation of the fundic area posteriorly. Cut-section shows diffusely pale
myometrium with areas of streak induration. The ovaries and adnexal
structures are missing with the raw surfaces patched with clotted blood.
Surgical sutures were noted on the operative site.
Intestines and mesenteries are pale with blood clots noted between the
mesentric folds.
Hemoperitonium: 300 s.s.,
right paracolic gutter,
50 c.c., left paracolic gutter
200 c.c., mesentric area,
100 c.c., right pelvic gutter
stomach empty.
Other visceral organs, pale.',
will you please explain that on (sic) your own language or in ordinary
There was a uterus which was not attached to the adnexal structures
namely ovaries which were not present and also sign of previous surgical
operation and there were (sic) clotted blood, sir.
Q. How about the ovaries and adnexal structures?
They are missing, sir.
Q. You mean to say there are no ovaries?
During that time there are no ovaries, sir.
Q. And there were likewise sign of surgical sutures?
Yes, sir.
Q. How about the intestines and mesenteries are place (sic) with blood clots
noted between the mesenteric folds, will you please explain on (sic) this?
In the peritoneal cavity, they are mostly perritonial blood.
Q. And what could have caused this blood?
Well, ordinarily blood is found inside the blood vessel. Blood were (sic)
outside as a result of the injuries which destroyed the integrity of the vessel
allowing blood to sip (sic) out, sir.
Q. By the nature of the postmortem findings indicated in Exh. A-1-B, can
you tell the court the cause of death?
Yes, sir. The cause of death is: Gross findings are compatible with
hemorrhagic shock.
Q. Can you tell the us what could have caused this hemorrhagic shock?
Well hemorrhagic shock is the result of blood loss.
Q. What could have the effect of that loss of blood?
Unattended hemorrhage, sir.[36] (Underscoring supplied.)
The foregoing was corroborated by Dr. Nieto Salvador:
"Q. And were you able to determine the cause of death by virtue of the
examination of the specimen submitted by Dr. Arizala?
Without knowledge of the autopsy findings it would be difficult for me to
determine the cause of death, sir.
Q. Have you examined the post mortem of Dr. Arizala?
Yes, sir, and by virtue of the autopsy report in connection with your
pathology report.
Q. What could have caused the death of the victim?
This pathologic examination are (sic) compatible with the person who died,
sir.
Q. Will you explain to us the meaning of hemorrhagic compatible?
It means that a person died of blood loss. Meaning a person died of non-
replacement of blood and so the victim before she died there was shock of
diminish of blood of the circulation. She died most probably before the
actual complete blood loss, sir.
Court: Is it possible doctor that the loss of the blood was due on (sic)
operation?
Based on my pathology findings, sir.
Q. What could have caused this loss of blood?
Many, sir. A patient who have undergone surgery. Another may be a blood
vessel may be cut while on operation and this cause (sic) bleeding, or may
be set in the course of the operation, or may be (sic) he died after the
operation. Of course there are other cause (sic).
Atty. Cachero:
Q. Especially so doctor when there was no blood replacement?
Yes, sir."[37] (Underscoring supplied.)
The testimonies of both doctors establish hemorrhage or hemorrhagic
shock as the cause of death. However, as likewise testified to by the expert
witnesses in open court, hemorrhage or hemorrhagic shock during surgery
may be caused by several different factors. Thus, Dr. Salvador's elaboration
on the matter:
"Atty. Pascual:
Q. Doctor, among the causes of hemorrhage that you mentioned you said
that it could be at the moment of operation when one losses (sic) control of
the presence, is that correct? During the operation there is lost (sic) of
control of the cut vessel?
Yes, sir.
Q. Or there is a failure to ligate a vessel of considerable size?
Yes, sir.
Q. Or even if the vessel were ligated the knot may have slipped later on?
Yes, sir.
Q. And you also mentioned that it may be possible also to some clotting
defect, is thatcorrect?
May be (sic)."[38] (Underscoring supplied).
Defense witness, Dr. Bu C. Castro also gave the following expert opinion:
"Q. Doctor even a patient after an operations (sic) would suffer hemorrage
what would be the possible causes of such hemorrage (sic)?
Among those would be what we call Intravascular Coagulation and this is
the reason for the bleeding, sir, which cannot be prevented by anyone, it
will happen to anyone, anytime and to any persons (sic), sir.
COURT:
What do you think of the cause of the bleeding, the cutting or the
operations done in the body?
Not related to this one, the bleeding here is not related to any cutting or
operation that I (sic) have done.
Q. Aside from the DIC what could another causes (sic) that could be the
cause for the hemorrhage or bleeding in a patient by an operations (sic)?
In general sir, if there was an operations (sic) and it is possible that the
ligature in the suture was (sic) become (sic) loose, it is (sic) becomes loose if
proven.
xxxxxxxxx
Q. If the person who performed an autopsy does not find any untight (sic)
clot (sic) blood vessel or any suture that become (sic) loose the cause of the
bleeding could not be attributed to the fault of the subject?
Definitely, sir."[39] (Underscoring supplied.)
According to both doctors, the possible causes of hemorrhage during an
operation are: (1) the failure of the surgeon to tie or suture a cut blood
vessel; (2) allowing a cut blood vessel to get out of control; (3) the
subsequent loosening of the tie or suture applied to a cut blood vessel; and
(4) and a clotting defect known as DIC. It is significant to state at this
juncture that the autopsy conducted by Dr. Arizala on the body of Lydia did
not reveal any untied or unsutured cut blood vessel nor was there any
indication that the tie or suture of a cut blood vessel had become loose
thereby causing the hemorrhage.[40] Hence the following pertinent portion
of Dr. Arizala's testimony:
"Q: Doctor, in examining these structures did you know whether these were
sutured ligature or plain ligature
A: Ligature, sir.
Q: We will explain that later on. Did you recall if the cut structures were
tied by first suturing it and then tying a knot or the tie was merely placed
around the cut structure and tied?
A: I cannot recall, sir.
Q: As a matter of fact, you cannot recall because you did not even bothered
(sic) to examine, is that correct?
A: Well, I bothered enough to know that they were sutured, sir.
Q: So, therefore, Doctor, you would not know whether any of the cut
structures were not sutured or tied neither were you able to determine
whether any loose suture was found in the peritoneal cavity?
A: I could not recall any loose sutured (sic), sir."[41]
On the other hand, the findings of all three doctors do not preclude the
probability that DIC caused the hemorrhage and consequently, Lydia's
death. DIC which is a clotting defect creates a serious bleeding tendency
and when massive DIC occurs as a complication of surgery leaving raw
surface, major hemorrhage occurs.[42] And as testified to by defense
witness, Dr. Bu C. Castro, hemorrhage due to DIC "cannot be prevented, it
will happen to anyone, anytime."[43] He testified further:
"Q. Now, under the circumstance one of the possibility as you mentioned in
(sic) DIC?
Yes, sir.
Q. And you mentioned that it cannot be prevented?
Yes, sir.
Q. Can you even predict if it really happen (sic)?
Possible, sir.
Q. Are there any specific findings of autopsy that will tell you whether this
patient suffered among such things as DIC?
Well, I did reserve because of the condition of the patient.
Q. Now, Doctor you said that you went through the record of the deceased
Lydia Umali looking for the chart, the operated (sic) records, the post
mortem findings on the histophanic (sic) examination based on your
examination of record, doctor, can you more or less says (sic) what part are
(sic) concerned could have been the caused (sic) of death of this Lydia
Umali?
As far as the medical record is concern (sic) the caused (sic) of death is
dessimulated (sic) Intra Vascular Coagulation or the DIC which resulted to
hemorrhage or bleedings, sir.
Q. Doctor based on your findings then there is knowing (sic) the doctor
would say whether the doctor her (sic) has been (sic) fault?
ATTY. MALVEDA:
We will moved (sic) to strike out the (sic) based on finding they just read
the chart as well as the other record.
ATTY. PASCUAL:
Precisely based on this examination.
ATTY. MALVEDA:
Not finding, there was no finding made.
COURT:
He is only reading the record.
ATTY. PASCUAL:
Yes, sir.
No, sir, there is no fault on the part of the surgeon, sir." [44]
This court has no recourse but to rely on the expert testimonies rendered by
both prosecution and defense witnesses that substantiate rather than
contradict petitioner's allegation that the cause of Lydia's death was DIC
which, as attested to by an expert witness, cannot be attributed to the
petitioner's fault or negligence. The probability that Lydia's death was
caused by DIC was unrebutted during trial and has engendered in the mind
of this Court a reasonable doubt as to the petitioner's guilt. Thus, her
acquittal of the crime of reckless imprudence resulting in homicide. While
we condole with the family of Lydia Umali, our hands are bound by the
dictates of justice and fair dealing which hold inviolable the right of an
accused to be presumed innocent until proven guilty beyond reasonable
doubt. Nevertheless, this Court finds the petitioner civilly liable for the
death of Lydia Umali, for while a conviction of a crime requires proof
beyond reasonable doubt, only a preponderance of evidence is required to
establish civil liability.[45]
The petitioner is a doctor in whose hands a patient puts his life and limb.
For insufficiency of evidence this Court was not able to render a sentence of
conviction but it is not blind to the reckless and imprudent manner in
which the petitioner carried out her duties. A precious life has been lost and
the circumstances leading thereto exacerbated the grief of those left behind.
The heirs of the deceased continue to feel the loss of their mother up to the
present time[46] and this Court is aware that no amount of compassion and
commiseration nor words of bereavement can suffice to assuage the sorrow
felt for the loss of a loved one. Certainly, the award of moral and exemplary
damages in favor of the heirs of Lydia Umali are proper in the instant case.
WHEREFORE, premises considered, petitioner DR. NINEVETCH CRUZ is
hereby ACQUITTED of the crime of reckless imprudence resulting in
homicide but is ordered to pay the heirs of the deceased Lydia Umali the
amount of FIFTY THOUSAND PESOS (P50,000.00) as civil liability, ONE
HUNDRED THOUSAND PESOS (P100,000.00) as moral damages, and
FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages.
Let the copy of this decision be furnished to the Professional Regulation
Commission (PRC) for appropriate action.
SO ORDERED.
Romero, Melo, and Panganiban, J J ., concur.
Narvasa, C.J ., (Chairman), on leave.

Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION
SPOUSES ERLINDA BATAL AND G.R. No. 164601
FRANK BATAL,
Petitioners,
Present:

- versus - PANGANIBAN, C.J .,

(Chairperson)
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJ O, SR. and
SPOUSES LUZ SAN PEDRO AND CHICO-NAZARIO, J J .
KENICHIRO TOMINAGA,
Respondents.

Promulgated:

September 27, 2006

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

DECISION

AUSTRIA-MARTINEZ, J .:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court questioning the Decision[1] dated September 29, 2003
promulgated by the Court of Appeals (CA) in CA-G.R. CV No. 71758, which
affirmed the Decision dated May 31, 2004 of the Regional Trial Court,
Branch 7, Malolos, Bulacan (RTC); and the CA Resolution[2] dated J uly 19,
2004.

This case originated from an action for damages filed with the RTC by
Spouses Luz San Pedro and Kenichiro Tominaga (respondents) against
Spouses Erlinda Batal and Frank Batal (petitioners) for failure to exercise
due care and diligence by the latter in the preparation of a survey which
formed the basis for the construction of a perimeter fence that was later
discovered to have encroached on a right of way.

The facts of the case, as found by the RTC and summarized by the CA, are
as follows:

The spouses Luz San Pedro (Luz) and Kenichiro Tominaga (Kenichiro) are
the owners of a parcel of land, on which their house was erected, described
as Lot 1509-C-3 with an area of 700 square meters situated in Barangay
Malis, Guiguinto, Bulacan.Said property was acquired by them from one
Guillermo Narciso as evidenced by a Bilihan ng Bahagi ng
Lupa dated March 18, 1992.

The spouses Luz and Kenichiro then contracted the services of

FrankBatal (Frank) who represented himself as a surveyor to conduct a
survey of their lot for the sum ofP6,500.00. As Luz and Kenichiro wanted
to enclose their property, they again procured the services of Frank for an
additional fee ofP1,500.00 in order to determine the exact boundaries of
the same by which they will base the construction of their perimeter fence.
Consequently, Frank placed concrete monuments marked P.S. on all
corners of the lot which were used as guides by Luz and Kenichiro in
erecting a concrete fence measuring about eight (8) feet in height and cost
them P250,000.00 to build.

Sometime in 1996, a complaint was lodged against Luz and Kenichiro

before the barangay on the ground that the northern portion of their fence
allegedly encroached upon a designated right-of-way known as Lot 1509-
D. Upon verification with another surveyor, Luz and Kenichiro found that
their wall indeed overlapped the adjoining lot. They also discovered that it
was not Frank but his wife Erlinda Batal (Erlinda), who is a licensed
geodetic engineer.

During their confrontations before the barangay, Frank admitted that he

made a mistake and offered to share in the expenses for the demolition and
reconstruction of the questioned portion of Luz and Kenichiros fence.He
however failed to deliver on his word, thus the filing of the instant suit.

In their defense, the defendants-spouses Frank and Erlinda Batal

submitted that Frank never represented himself to be a licensed geodetic
engineer. It was Erlinda who supervised her husbands work [and t]hat the
house and lot of plaintiffs, Luz and Kenichiro, were already fenced even
before they were contracted to do a resurvey of the same and the laying out
of the concrete monuments. The spouses Frank and Erlinda also refuted the
spouses Luzs and Kenichiros allegation of negligence and averred that the
subject complaint was instituted to harass them.[3]

On May 31, 2001, the RTC rendered its Decision, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and

against defendants, as follows:

Ordering the defendants [petitioners] to pay to plaintiffs [respondents] the

sum of P6,500.00as refund for their professional fees by reason of the
erroneous relocation survey of the property in question;

Ordering the defendants to pay to plaintiffs the sum of Three Hundred

Thousand Pesos (P300,000.00) as actual damages;

Ordering the defendants to pay to plaintiffs the sum of P50,000.00 as

attorneys fees; and

Ordering the defendants to pay to plaintiffs the costs of this suit.

SO ORDERED.[4]

Regarding the issue whether the petitioners failed to exercise due care and
diligence in the conduct of the resurvey which eventually caused damage to
the respondents, the RTC held:

As against the bare and self-serving denials of the [petitioners], the

testimony of [respondent] Luz San Pedro that she constructed the
encroaching perimeter fence in question using as guide the cyclone
concrete monuments marked P.S. that were installed by [petitioner]
Frank Batal and his survey team, is more credible. As testified to by
[respondent] Luz San Pedro, she proceeded with the construction of the
perimeter fence in question upon assurance given by [petitioner]
Frank Batal that she could already do so as there were already concrete
monuments placed on the boundaries of her property x x x.
xxxx

It does not matter that the location plan dated May 3, 1992 (Exhibit B) was
later approved by the DENR, as it is quite apparent that the mistake
committed by [petitioner] FrankBatal pertains to the wrong locations of the
concrete monuments that he placed on the subject property and which were
used or relied upon by the [respondents] in putting up the fence in
question. Such mistake or negligence happened because quite obviously the
installation of said concrete monuments was without the needed
supervision of [respondent] Erlinda Batal, the one truly qualified to
supervise the same. x x x x

x x x x[5]

The RTC found that indeed the perimeter fence constructed by the
respondents encroached on the right-of-way in question; that the
preponderance of evidence supports the finding that the encroachment was
caused by the negligence of the petitioners; that, in particular, respondents
constructed the fence based on the concrete cyclone monuments that were
installed by petitioner Frank Batal and after he gave his assurance that they
can proceed accordingly; that the negligence in the installation of the
monuments was due to the fact that petitioner Erlinda Batal, the one truly
qualified, did not provide the needed supervision over the work; and, lastly,
that the testimonies of the petitioners on the whole were not credible.

The petitioners appealed to the CA. OnSeptember 29, 2003, the CA

rendered its Decision affirming the RTC decision in its entirety.[6]
In concurring with the findings of the RTC, the CA in addition held that the
petitioners cannot claim that the error of the construction of the fence was
due to the unilateral act of respondents in building the same without their
consent, since the former gave their word that the arrangement of the
monuments of title accurately reflected the boundaries of the lot; and that,
as a result, the northern portion of the fence had to be demolished and
rebuilt in order to correct the error.

Hence, the instant Petition assigning the following errors:

I.

The Court of Appeals erred in ruling for the Respondents and basing its
decision [o]n the following jurisprudence:

[A] party, having performed affirmative acts upon which another person
based his subsequent actions, cannot thereafter refute his acts or renege on
the effects of the same, to the prejudice of the latter. (Pureza vs. Court of
Appeals, 290 SCRA 110); and

Findings of fact made by the trial court [are] entitled to great weight and
respect. (Lopez vs. Court of Appeals, 322 SCRA 686).

II.

The Court of Appeals erred in ruling in favor of Respondents by premising

its Decision on [a] misapprehension of facts amounting to grave abuse of
discretion . . . which is also a ground for a Petition for Review.[7]

The petition must fail.

The petitioners insist that there had been no error in their resurvey, but
rather, the error occurred in respondents fencing; that the proximate cause
of the damage had been respondents own negligence such that the fencing
was done unilaterally and solely by them without the prior approval and
supervision of the petitioners. And to justify their case, the petitioners
argue that the courts a quomisapprehended the facts. Accordingly, they ask
this Court to review findings of fact.

A review of the factual findings of the CA and the RTC are matters not
ordinarily reviewable in a petition for review on certiorari.[8] Well-
established is the rule that factual findings of the trial court and the CA are
entitled to great weight and respect[9] and will not be disturbed on appeal
save in exceptional circumstances,[10] none of which obtains in the present
case. This Court must stress that the findings of fact of the CA are
conclusive on the parties and carry even more weight when these coincide
with the factual findings of the trial court,[11] as in this case.

The Court will not weigh the evidence all over again unless there is a
showing that the findings of the lower court are totally devoid of support or
are clearly erroneous so as to constitute serious abuse of discretion.[12] The
petitioners failed to demonstrate this point. On the contrary, the finding of
the courts a quothat the damage caused to the respondents was due to
petitioners negligence is sufficiently supported by the evidence on
record. For these reasons, the petitioner's contentions bear no import.

Culpa, or negligence, may be understood in two different senses: either

as culpaaquiliana, which is the wrongful or negligent act or omission which
creates a vinculum juris and gives rise to an obligation between two persons
not formally bound by any other obligation, or as culpa contractual, which
is the fault or negligence incident in the performance of an obligation which
already existed, and which increases the liability from such already existing
obligation.[13] Culpa aquiliana is governed by Article 2176 of the Civil Code
and the immediately following Articles; while culpa contractual is governed
by Articles 1170 to 1174 of the same Code.[14]

Articles 1170 and 1173 provide:

ART. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.

ART. 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and
2202, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in
the performance, that which is expected of a good father of a family shall be
required.

In the present case, it is clear that the petitioners, in carrying out their
contractual obligations, failed to exercise the requisite diligence in the
placement of the markings for the concrete perimeter fence that was later
constructed. The placement of the markings had been done solely by
petitioner Frank Batal who is not a geodetic engineer. It was later
discovered that it was not he but his wife, petitioner Erlinda Batal, who is
the licensed geodetic engineer and who is, therefore, the one qualified to do
the work. Petitioner Frank Batals installation of the concrete cyclone
monuments had been done without the adequate supervision of his wife,
Erlinda. As a result, the placement of the monuments did not accurately
reflect the dimensions of the lot. The respondents, upon assurance given by
petitioner Frank Batal that they couldproceed with the construction of the
perimeter fence by relying on the purported accuracy of the placement of
the monuments, erected their fence which turned out to encroach on an
adjacent easement. Because of the encroachment, the respondents had to
demolish and reconstruct the fence and, thus, suffered damages.

The Court affirms and adopts the findings of the CA, to wit:
Records show that the services of the [petitioners] Frank and Erlinda were
initially contracted to segregate Luz and Kenichiros property from its
adjoining lots. When the [respondent] spouses Luz and Kenichiro planned
to fence the segregated lot, they again commissioned [petitioners] Frank
and Erlinda to conduct a resurvey in order to determine the precise
boundaries of their property upon which they will base the construction of
their fence. It was also shown that in the course of the resurvey, Frank
caused the installation of monuments of title on the four (4) corners of Luz
and Kenichiros property and that he instructed them to just follow the same
in building their fence.

[Petitioners] Frank and Erlinda cannot thus validly claim that the error in
the construction of the northern portion of the fence was due to the spouses
Luz and Kenichiros act of building the same without their consent. This is
considering that the former led the latter to believe the purported accuracy
of the resurvey and exactness of the lots boundaries based on the
monuments of title which they installed.
It has been ruled that [A] party, having performed affirmative acts upon
which another person based his subsequent actions, cannot thereafter
refute his acts or renege on the effects of the same, to the prejudice of the
latter. (Pureza v. Court of Appeals, 290 SCRA 110)

The foregoing clearly supports the findings of the RTC that the spouses
Batal committed a mistake in the conduct of their business that led to the
encroachment of plaintiffs-appellees fence on the adjoining alley-lot. As a
result, the northern portion ha[d] to be torn down and rebuilt in order to
correct the error in its original construction. The defendants-appellants
cannot be excused from the effects of their actions in the survey of plaintiffs
-appellees lot.

We therefore concur with the findings of the RTC holding defendants-

appellants liable for damages in the case at bar. Findings of fact made by
the trial court isentitled to great weight and respect.(Lopez v. Court of
Appeals, 322 SCRA 686)[15]

Being guilty of a breach of their contract, petitioners are liable for damages
suffered by the respondents in accordance with Articles 1170 and 2201 of
the Civil Code,[16] which state:

Art. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay and those who in any manner contravene the
tenor thereof are liable for damages

Art. 2201. In contracts and quasi-contracts, the damages for which the
obligor who acted in good faith is liable shall be those that are the natural
and probable consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at the time the
obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-
performance of the obligation.

Thus, the Court agrees with the CAsaffirmance of the findings of the RTC
on the matter of damages, to wit:

Going now to the claims for damages, Engr. Arnold Martin testified on his
computation and estimate (Exhibits G and G-1) that the total cost for the
demolition and reconstruction of the perimeter fence in question would be
in the total amount of P428,163.90, and this was not at all disputed by the
defendants, whose counsel waived cross-examination. This estimate is
practically double the amount of the cost of constructing said fence as
testified to by plaintiff Luz San Pedro as she was told that it is much costlier
to demolish and reconstruct a fence than to simply erect one because of the
added expense involved in tearing it down and hauling its debris. On the
other hand, said plaintiff stated that the iron decorative grills of the fence,
which is re-usable, cost her P50,000.00, and it is only proper to deduct said
amount from the total cost of reconstructing the fence in question.At the
same time, some figures in the said estimate appear to be quite excessive,
such as the estimated cost for demolition which was quoted
atP25,000.00 in addition to the amount of excavation priced
at P30,000.00 and the cost of hauling of scrap materials
at P10,000.00. The court believes that the sum of P300,000.00 for the
demolition and reconstruction of the fence in question would be reasonable
considering that the original cost for its construction was only
aboutP200,000.00, and considering further that its iron grills are re-
usable.

The plaintiffs are likewise entitled to recover attorneys fees considering that
they were compelled by the defendants to resort to court action in order to
protect their rights and interest, as defendants, particularly defendant
Frank Batal, failed and refused repeatedly to even attend the confrontation
of conciliation meetings arranged between him and the plaintiffs by
the barangayauthorities concerned, and to honor his promise to help in
shouldering the cost of reconstructing the fence in question.

On the other hand, there is no legal or factual bases for the claim of the
plaintiffs for moral or exemplary damages as there was no showing at all
that defendants acted with malice or in bad faith.

In a long line of cases, we have consistently ruled that in the absence of a

wrongful act or omission or of fraud or bad faith, moral damages cannot be
awarded. (R & B Surety Insurance Co. v. Intermediate Court of Appeals, 129
SCRA 736;Guita v. Court of Appeals, 139 SCRA 576).[17]

WHEREFORE, the instant petition isDENIED and the assailed Decision

and Resolution of the Court of Appeals areAFFIRMED.
Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 179337 April 30, 2008
J OSEPH SALUDAGA, petitioner,
vs.
FAR EASTERN UNIVERSITY and EDILBERTO C. DE J ESUS in his
capacity as President of FEU,respondents.
DECISION
YNARES-SANTIAGO, J .:
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court
assails the J une 29, 2007 Decision2 of the Court of Appeals in CA-G.R. CV
No. 87050, nullifying and setting aside the November 10, 2004 Decision3
of the Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483
and dismissing the complaint filed by petitioner; as well as its August 23,
2007 Resolution4 denying the Motion for Reconsideration.5
The antecedent facts are as follows:
Petitioner J oseph Saludaga was a sophomore law student of respondent Far
Eastern University (FEU) when he was shot by Alejandro Rosete (Rosete),
one of the security guards on duty at the school premises on August 18,
1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical Foundation
(FEU-NRMF) due to the wound he sustained.6 Meanwhile, Rosete was
brought to the police station where he explained that the shooting was
accidental. He was eventually released considering that no formal
complaint was filed against him.
Petitioner thereafter filed a complaint for damages against respondents on
the ground that they breached their obligation to provide students with a
safe and secure environment and an atmosphere conducive to learning.
Respondents, in turn, filed a Third-Party Complaint7 against Galaxy
Development and Management Corporation (Galaxy), the agency
contracted by respondent FEU to provide security services within its
premises and Mariano D. Imperial (Imperial), Galaxy's President, to
indemnify them for whatever would be adjudged in favor of petitioner, if
any; and to pay attorney's fees and cost of the suit. On the other hand,
Galaxy and Imperial filed a Fourth-Party Complaint against AFP General
Insurance.8
On November 10, 2004, the trial court rendered a decision in favor of
petitioner, the dispositive portion of which reads:
WHEREFORE, from the foregoing, judgment is hereby rendered ordering:
FEU and Edilberto de J esus, in his capacity as president of FEU to pay
jointly and severally J oseph Saludaga the amount of P35,298.25 for actual
damages with 12% interest per annum from the filing of the complaint until
fully paid; moral damages of P300,000.00, exemplary damages of
P500,000.00, attorney's fees of P100,000.00 and cost of the suit;
Galaxy Management and Development Corp. and its president, Col.
Mariano Imperial to indemnify jointly and severally 3rd party plaintiffs
(FEU and Edilberto de J esus in his capacity as President of FEU) for the
above-mentioned amounts;
And the 4th party complaint is dismissed for lack of cause of action. No
pronouncement as to costs.
SO ORDERED.9
Respondents appealed to the Court of Appeals which rendered the assailed
Decision, the decretal portion of which provides, viz:
WHEREFORE, the appeal is hereby GRANTED. The Decision dated
November 10, 2004 is hereby REVERSED and SET ASIDE. The complaint
filed by J oseph Saludaga against appellant Far Eastern University and its
President in Civil Case No. 98-89483 is DISMISSED.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration which was denied; hence, the
instant petition based on the following grounds:
THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY
TO LAW AND J URISPRUDENCE IN RULING THAT:
5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;
5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE
INJ URY RESULTING FROM A GUNSHOT WOUND SUFFERED BY THE
PETITIONER FROM THE HANDS OF NO LESS THAN THEIR OWN
SECURITY GUARD IN VIOLATION OF THEIR BUILT-IN
CONTRACTUAL OBLIGATION TO PETITIONER, BEING THEIR LAW
STUDENT AT THAT TIME, TO PROVIDE HIM WITH A SAFE AND
SECURE EDUCATIONAL ENVIRONMENT;
5.3. SECURITY GAURD, ALEJ ANDRO ROSETE, WHO SHOT
PETITIONER WHILE HE WAS WALKING ON HIS WAY TO THE LAW
LIBRARY OF RESPONDENT FEU IS NOT THEIR EMPLOYEE BY
VIRTUE OF THE CONTRACT FOR SECURITY SERVICES BETWEEN
GALAXY AND FEU NOTWITHSTANDING THE FACT THAT
PETITIONER, NOT BEING A PARTY TO IT, IS NOT BOUND BY THE
SAME UNDER THE PRINCIPLE OF RELATIVITY OF CONTRACTS; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING
GALAXY AS THE AGENCY WHICH WOULD PROVIDE SECURITY
SERVICES WITHIN THE PREMISES OF RESPONDENT FEU.11
Petitioner is suing respondents for damages based on the alleged breach of
student-school contract for a safe learning environment. The pertinent
portions of petitioner's Complaint read:
6.0. At the time of plaintiff's confinement, the defendants or any of their
representative did not bother to visit and inquire about his condition. This
abject indifference on the part of the defendants continued even after
plaintiff was discharged from the hospital when not even a word of
consolation was heard from them. Plaintiff waited for more than one (1)
year for the defendants to perform their moral obligation but the wait was
fruitless. This indifference and total lack of concern of defendants served to
exacerbate plaintiff's miserable condition.
xxxx
11.0. Defendants are responsible for ensuring the safety of its students
while the latter are within the University premises. And that should
anything untoward happens to any of its students while they are within the
University's premises shall be the responsibility of the defendants. In this
case, defendants, despite being legally and morally bound, miserably failed
to protect plaintiff from injury and thereafter, to mitigate and compensate
plaintiff for said injury;
12.0. When plaintiff enrolled with defendant FEU, a contract was entered
into between them. Under this contract, defendants are supposed to ensure
that adequate steps are taken to provide an atmosphere conducive to study
and ensure the safety of the plaintiff while inside defendant FEU's
premises. In the instant case, the latter breached this contract when
defendant allowed harm to befall upon the plaintiff when he was shot at by,
of all people, their security guard who was tasked to maintain peace inside
the campus.12
In Philippine School of Business Administration v. Court of Appeals,13 we
held that:
When an academic institution accepts students for enrollment, there is
established a contract between them, resulting in bilateral obligations
which both parties are bound to comply with. For its part, the school
undertakes to provide the student with an education that would
presumably suffice to equip him with the necessary tools and skills to
pursue higher education or a profession. On the other hand, the student
covenants to abide by the school's academic requirements and observe its
rules and regulations.
Institutions of learning must also meet the implicit or "built-in" obligation
of providing their students with an atmosphere that promotes or assists in
attaining its primary undertaking of imparting knowledge. Certainly, no
student can absorb the intricacies of physics or higher mathematics or
explore the realm of the arts and other sciences when bullets are flying or
grenades exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the school must
ensure that adequate steps are taken to maintain peace and order within
the campus premises and to prevent the breakdown thereof.14
It is undisputed that petitioner was enrolled as a sophomore law student in
respondent FEU. As such, there was created a contractual obligation
between the two parties. On petitioner's part, he was obliged to comply with
the rules and regulations of the school. On the other hand, respondent FEU,
as a learning institution is mandated to impart knowledge and equip its
students with the necessary skills to pursue higher education or a
profession. At the same time, it is obliged to ensure and take adequate steps
to maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a
corresponding right of relief.15 In the instant case, we find that, when
petitioner was shot inside the campus by no less the security guard who was
hired to maintain peace and secure the premises, there is a prima facie
showing that respondents failed to comply with its obligation to provide a
safe and secure environment to its students.
In order to avoid liability, however, respondents aver that the shooting
incident was a fortuitous event because they could not have reasonably
foreseen nor avoided the accident caused by Rosete as he was not their
employee;16 and that they complied with their obligation to ensure a safe
learning environment for their students by having exercised due diligence
in selecting the security services of Galaxy.
After a thorough review of the records, we find that respondents failed to
discharge the burden of proving that they exercised due diligence in
providing a safe learning environment for their students. They failed to
prove that they ensured that the guards assigned in the campus met the
requirements stipulated in the Security Service Agreement. Indeed, certain
documents about Galaxy were presented during trial; however, no evidence
as to the qualifications of Rosete as a security guard for the university was
offered.
Respondents also failed to show that they undertook steps to ascertain and
confirm that the security guards assigned to them actually possess the
qualifications required in the Security Service Agreement. It was not proven
that they examined the clearances, psychiatric test results, 201 files, and
other vital documents enumerated in its contract with Galaxy. Total
reliance on the security agency about these matters or failure to check the
papers stating the qualifications of the guards is negligence on the part of
respondents. A learning institution should not be allowed to completely
relinquish or abdicate security matters in its premises to the security
agency it hired. To do so would result to contracting away its inherent
obligation to ensure a safe learning environment for its students.
Consequently, respondents' defense of force majeure must fail. In order
for force majeure to be considered, respondents must show that no
negligence or misconduct was committed that may have occasioned the
loss. An act of God cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse consequences of such a loss.
One's negligence may have concurred with an act of God in producing
damage and injury to another; nonetheless, showing that the immediate or
proximate cause of the damage or injury was a fortuitous event would not
exempt one from liability. When the effect is found to be partly the result of
a person's participation - whether by active intervention, neglect or failure
to act - the whole occurrence is humanized and removed from the rules
applicable to acts of God.17
Article 1170 of the Civil Code provides that those who are negligent in the
performance of their obligations are liable for damages. Accordingly, for
breach of contract due to negligence in providing a safe learning
environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have satisfactorily
proven during the trial the existence of the factual basis of the damages and
its causal connection to defendant's acts.18
In the instant case, it was established that petitioner spent P35,298.25 for
his hospitalization and other medical expenses.19While the trial court
correctly imposed interest on said amount, however, the case at bar
involves an obligation arising from a contract and not a loan or forbearance
of money. As such, the proper rate of legal interest is six percent (6%) per
annum of the amount demanded. Such interest shall continue to run from
the filing of the complaint until the finality of this Decision.20After this
Decision becomes final and executory, the applicable rate shall be twelve
percent (12%) per annum until its satisfaction.
The other expenses being claimed by petitioner, such as transportation
expenses and those incurred in hiring a personal assistant while
recuperating were however not duly supported by receipts.21 In the
absence thereof, no actual damages may be awarded. Nonetheless,
temperate damages under Art. 2224 of the Civil Code may be recovered
where it has been shown that the claimant suffered some pecuniary loss but
the amount thereof cannot be proved with certainty. Hence, the amount of
P20,000.00 as temperate damages is awarded to petitioner.
As regards the award of moral damages, there is no hard and fast rule in the
determination of what would be a fair amount of moral damages since each
case must be governed by its own peculiar circumstances.22 The testimony
of petitioner about his physical suffering, mental anguish, fright, serious
anxiety, and moral shock resulting from the shooting incident23 justify the
award of moral damages. However, moral damages are in the category of an
award designed to compensate the claimant for actual injury suffered and
not to impose a penalty on the wrongdoer. The award is not meant to enrich
the complainant at the expense of the defendant, but to enable the injured
party to obtain means, diversion, or amusements that will serve to obviate
the moral suffering he has undergone. It is aimed at the restoration, within
the limits of the possible, of the spiritual status quo ante, and should be
proportionate to the suffering inflicted. Trial courts must then guard
against the award of exorbitant damages; they should exercise balanced
restrained and measured objectivity to avoid suspicion that it was due to
passion, prejudice, or corruption on the part of the trial court.24 We deem
it just and reasonable under the circumstances to award petitioner moral
damages in the amount of P100,000.00.
Likewise, attorney's fees and litigation expenses in the amount of
P50,000.00 as part of damages is reasonable in view of Article 2208 of the
Civil Code.25 However, the award of exemplary damages is deleted
considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
We note that the trial court held respondent De J esus solidarily liable with
respondent FEU. InPowton Conglomerate, Inc. v. Agcolicol,26 we held that:
[A] corporation is invested by law with a personality separate and distinct
from those of the persons composing it, such that, save for certain
exceptions, corporate officers who entered into contracts in behalf of the
corporation cannot be held personally liable for the liabilities of the latter.
Personal liability of a corporate director, trustee or officer along (although
not necessarily) with the corporation may so validly attach, as a rule, only
when - (1) he assents to a patently unlawful act of the corporation, or when
he is guilty of bad faith or gross negligence in directing its affairs, or when
there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons; (2) he consents to the issuance of watered
down stocks or who, having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto; (3) he agrees to hold
himself personally and solidarily liable with the corporation; or (4) he is
made by a specific provision of law personally answerable for his corporate
action.27
None of the foregoing exceptions was established in the instant case; hence,
respondent De J esus should not be held solidarily liable with respondent
FEU.
Incidentally, although the main cause of action in the instant case is the
breach of the school-student contract, petitioner, in the alternative, also
holds respondents vicariously liable under Article 2180 of the Civil Code,
which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for whom one
is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.
xxxx
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage.
We agree with the findings of the Court of Appeals that respondents cannot
be held liable for damages under Art. 2180 of the Civil Code because
respondents are not the employers of Rosete. The latter was employed by
Galaxy. The instructions issued by respondents' Security Consultant to
Galaxy and its security guards are ordinarily no more than requests
commonly envisaged in the contract for services entered into by a principal
and a security agency. They cannot be construed as the element of control
as to treat respondents as the employers of Rosete.28
As held in Mercury Drug Corporation v. Libunao:29
In Soliman, J r. v. Tuazon,30 we held that where the security agency
recruits, hires and assigns the works of its watchmen or security guards to a
client, the employer of such guards or watchmen is such agency, and not
the client, since the latter has no hand in selecting the security guards.
Thus, the duty to observe the diligence of a good father of a family cannot
be demanded from the said client:
… [I]t is settled in our jurisdiction that where the security agency, as here,
recruits, hires and assigns the work of its watchmen or security guards, the
agency is the employer of such guards or watchmen. Liability for illegal or
harmful acts committed by the security guards attaches to the employer
agency, and not to the clients or customers of such agency. As a general
rule, a client or customer of a security agency has no hand in selecting who
among the pool of security guards or watchmen employed by the agency
shall be assigned to it; the duty to observe the diligence of a good father of a
family in the selection of the guards cannot, in the ordinary course of
events, be demanded from the client whose premises or property are
protected by the security guards.
xxxx
The fact that a client company may give instructions or directions to the
security guards assigned to it, does not, by itself, render the client
responsible as an employer of the security guards concerned and liable for
their wrongful acts or omissions.31
We now come to respondents' Third Party Claim against Galaxy.
In Firestone Tire and Rubber Company of the Philippines v. Tempengko,32
we held that:
The third-party complaint is, therefore, a procedural device whereby a
'third party' who is neither a party nor privy to the act or deed complained
of by the plaintiff, may be brought into the case with leave of court, by the
defendant, who acts as third-party plaintiff to enforce against such third-
party defendant a right for contribution, indemnity, subrogation or any
other relief, in respect of the plaintiff's claim. The third-party complaint is
actually independent of and separate and distinct from the plaintiff's
complaint. Were it not for this provision of the Rules of Court, it would
have to be filed independently and separately from the original complaint
by the defendant against the third-party. But the Rules permit defendant to
bring in a third-party defendant or so to speak, to litigate his separate cause
of action in respect of plaintiff's claim against a third-party in the original
and principal case with the object of avoiding circuitry of action and
unnecessary proliferation of law suits and of disposing expeditiously in one
litigation the entire subject matter arising from one particular set of facts.
33
Respondents and Galaxy were able to litigate their respective claims and
defenses in the course of the trial of petitioner's complaint. Evidence duly
supports the findings of the trial court that Galaxy is negligent not only in
the selection of its employees but also in their supervision. Indeed, no
administrative sanction was imposed against Rosete despite the shooting
incident; moreover, he was even allowed to go on leave of absence which
led eventually to his disappearance.34 Galaxy also failed to monitor
petitioner's condition or extend the necessary assistance, other than the
P5,000.00 initially given to petitioner. Galaxy and Imperial failed to make
good their pledge to reimburse petitioner's medical expenses.
For these acts of negligence and for having supplied respondent FEU with
an unqualified security guard, which resulted to the latter's breach of
obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU
for such damages equivalent to the above-mentioned amounts awarded to
petitioner.
Unlike respondent De J esus, we deem Imperial to be solidarily liable with
Galaxy for being grossly negligent in directing the affairs of the security
agency. It was Imperial who assured petitioner that his medical expenses
will be shouldered by Galaxy but said representations were not fulfilled
because they presumed that petitioner and his family were no longer
interested in filing a formal complaint against them.35
WHEREFORE, the petition is GRANTED. The J une 29, 2007 Decision of
the Court of Appeals in CA-G.R. CV No. 87050 nullifying the Decision of
the trial court and dismissing the complaint as well as the August 23, 2007
Resolution denying the Motion for Reconsideration are REVERSED and
SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2,
in Civil Case No. 98-89483 finding respondent FEU liable for damages for
breach of its obligation to provide students with a safe and secure learning
atmosphere, is AFFIRMED with the followingMODIFICATIONS:
respondent Far Eastern University (FEU) isORDERED to pay petitioner
actual damages in the amount of P35,298.25, plus 6% interest per annum
from the filing of the complaint until the finality of this Decision. After this
decision becomes final and executory, the applicable rate shall be twelve
percent (12%) per annum until its satisfaction;
respondent FEU is also ORDERED to pay petitioner temperate damages in
the amount of P20,000.00; moral damages in the amount of P100,000.00;
and attorney's fees and litigation expenses in the amount of P50,000.00;
the award of exemplary damages is DELETED.
The Complaint against respondent Edilberto C. De J esus is DISMISSED.
The counterclaims of respondents are likewise DISMISSED.
Galaxy Development and Management Corporation (Galaxy) and its
president, Mariano D. Imperial are ORDERED to jointly and severally pay
respondent FEU damages equivalent to the above-mentioned amounts
awarded to petitioner.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate J ustice
SPOUSES VILORIA vs CONTINENTAL AIRLINES

DECISION
REYES, J .:
This is a petition for review under Rule 45 of the Rules of Court from the
J anuary 30, 2009 Decision1 of the Special Thirteenth Division of the Court
of Appeals (CA) in CA-G.R. CV No. 88586 entitled “ Spouses Fernando and
Lourdes Viloria v. Continental Airlines, Inc.,” the dispositive portion of
which states:
WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated
03 April 2006, awarding US$800.00 or its peso equivalent at the time of
payment, plus legal rate of interest from 21 J uly 1997 until fully paid,
[P]100,000.00 as moral damages, [P]50,000.00 as exemplary damages,
[P]40,000.00 as attorney’s fees and costs of suit to plaintiffs-appellees is
hereby REVERSED and SET ASIDE.
Defendant-appellant’s counterclaim is DENIED.
Costs against plaintiffs-appellees.
SO ORDERED.2
On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74
(RTC) rendered a Decision, giving due course to the complaint for sum of
money and damages filed by petitioners Fernando Viloria (Fernando) and
Lourdes Viloria (Lourdes), collectively called Spouses Viloria, against
respondent Continental Airlines, Inc. (CAI). As culled from the records,
below are the facts giving rise to such complaint.
On or about J uly 21, 1997 and while in the United States, Fernando
purchased for himself and his wife, Lourdes, two (2) round trip airline
tickets from San Diego, California to Newark, New J ersey on board
Continental Airlines. Fernando purchased the tickets at US$400.00 each
from a travel agency called “ Holiday Travel” and was attended to by a
certain Margaret Mager (Mager). According to Spouses Viloria, Fernando
agreed to buy the said tickets after Mager informed them that there were no
available seats at Amtrak, an intercity passenger train service provider in
the United States. Per the tickets, Spouses Viloria were scheduled to leave
for Newark on August 13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to
Newark to an earlier date or August 6, 1997. Mager informed him that
flights to Newark via Continental Airlines were already fully booked and
offered the alternative of a round trip flight via Frontier Air. Since flying
with Frontier Air called for a higher fare of US$526.00 per passenger and
would mean traveling by night, Fernando opted to request for a refund.
Mager, however, denied his request as the subject tickets are non-
refundable and the only option that Continental Airlines can offer is the re-
issuance of new tickets within one (1) year from the date the subject tickets
were issued. Fernando decided to reserve two (2) seats with Frontier Air.
As he was having second thoughts on traveling via Frontier Air, Fernando
went to the Greyhound Station where he saw an Amtrak station nearby.
Fernando made inquiries and was told that there are seats available and he
can travel on Amtrak anytime and any day he pleased. Fernando then
purchased two (2) tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager with
the Amtrak tickets, telling her that she had misled them into buying the
Continental Airlines tickets by misrepresenting that Amtrak was already
fully booked. Fernando reiterated his demand for a refund but Mager was
firm in her position that the subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on
February 11, 1998, demanding a refund and alleging that Mager had
deluded them into purchasing the subject tickets.3
In a letter dated February 24, 1998, Continental Micronesia informed
Fernando that his complaint had been referred to the Customer Refund
Services of Continental Airlines at Houston, Texas.4
In a letter dated March 24, 1998, Continental Micronesia denied
Fernando’s request for a refund and advised him that he may take the
subject tickets to any Continental ticketing location for the re-issuance of
new tickets within two (2) years from the date they were issued.
Continental Micronesia informed Fernando that the subject tickets may be
used as a form of payment for the purchase of another Continental ticket,
albeit with a re-issuance fee.5
On J une 17, 1999, Fernando went to Continental’s ticketing office at Ayala
Avenue, Makati City to have the subject tickets replaced by a single round
trip ticket to Los Angeles, California under his name. Therein, Fernando
was informed that Lourdes’ ticket was non-transferable, thus, cannot be
used for the purchase of a ticket in his favor. He was also informed that a
round trip ticket to Los Angeles was US$1,867.40 so he would have to pay
what will not be covered by the value of his San Diego to Newark round trip
ticket.
In a letter dated J une 21, 1999, Fernando demanded for the refund of the
subject tickets as he no longer wished to have them replaced. In addition to
the dubious circumstances under which the subject tickets were issued,
Fernando claimed that CAI’s act of charging him with US$1,867.40 for a
round trip ticket to Los Angeles, which other airlines priced at US$856.00,
and refusal to allow him to use Lourdes’ ticket, breached its undertaking
under its March 24, 1998 letter.6
On September 8, 2000, Spouses Viloria filed a complaint against CAI,
praying that CAI be ordered to refund the money they used in the purchase
of the subject tickets with legal interest from J uly 21, 1997 and to
pay P1,000,000.00 as moral damages, P500,000.00 as exemplary damages
and P250,000.00 as attorney’s fees.7
CAI interposed the following defenses: (a) Spouses Viloria have no right to
ask for a refund as the subject tickets are non-refundable; (b) Fernando
cannot insist on using the ticket in Lourdes’ name for the purchase of a
round trip ticket to Los Angeles since the same is non-transferable; (c) as
Mager is not a CAI employee, CAI is not liable for any of her acts; (d) CAI,
its employees and agents did not act in bad faith as to entitle Spouses
Viloria to moral and exemplary damages and attorney’s fees. CAI also
invoked the following clause printed on the subject tickets:
To the extent not in conflict with the foregoing carriage and other services
performed by each carrier are subject to: (i) provisions contained in this
ticket, (ii) applicable tariffs, (iii) carrier’s conditions of carriage and related
regulations which are made part hereof (and are available on application at
the offices of carrier), except in transportation between a place in the
United States or Canada and any place outside thereof to which tariffs in
force in those countries apply.8
According to CAI, one of the conditions attached to their contract of
carriage is the non-transferability and non-refundability of the subject
tickets.
The RTC’s Ruling
Following a full-blown trial, the RTC rendered its April 3, 2006 Decision,
holding that Spouses Viloria are entitled to a refund in view of Mager’s
misrepresentation in obtaining their consent in the purchase of the subject
tickets.9 The relevant portion of the April 3, 2006 Decision states:
Continental Airlines agent Ms. Mager was in bad faith when she was less
candid and diligent in presenting to plaintiffs spouses their booking
options. Plaintiff Fernando clearly wanted to travel via AMTRAK, but
defendant’s agent misled him into purchasing Continental Airlines tickets
instead on the fraudulent misrepresentation that Amtrak was fully booked.
In fact, defendant Airline did not specifically denied (sic) this allegation.
Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into
buying Continental Airline tickets on Ms. Mager’s misleading
misrepresentations. Continental Airlines’ agent Ms. Mager further relied on
and exploited plaintiff Fernando’s need and told him that they must book a
flight immediately or risk not being able to travel at all on the couple’s
preferred date. Unfortunately, plaintiffs spouses fell prey to the airline’s
and its agent’s unethical tactics for baiting trusting customers.” 10
Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is
CAI’s agent, hence, bound by her bad faith and misrepresentation. As far as
the RTC is concerned, there is no issue as to whether Mager was CAI’s
agent in view of CAI’s implied recognition of her status as such in its March
24, 1998 letter.
The act of a travel agent or agency being involved here, the following are the
pertinent New Civil Code provisions on agency:
Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with
the consent or authority of the latter.
Art. 1869. Agency may be express, or implied from the acts of the principal,
from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
As its very name implies, a travel agency binds itself to render some service
or to do something in representation or on behalf of another, with the
consent or authority of the latter. This court takes judicial notice of the
common services rendered by travel agencies that represent themselves as
such, specifically the reservation and booking of local and foreign tours as
well as the issuance of airline tickets for a commission or fee.
The services rendered by Ms. Mager of Holiday Travel agency to the
plaintiff spouses on J uly 21, 1997 were no different from those offered in
any other travel agency. Defendant airline impliedly if not expressly
acknowledged its principal-agent relationship with Ms. Mager by its offer in
the letter dated March 24, 1998 – an obvious attempt to assuage plaintiffs
spouses’ hurt feelings.11
Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its
undertaking to replace the subject tickets within two (2) years from their
date of issue when it charged Fernando with the amount of US$1,867.40 for
a round trip ticket to Los Angeles and when it refused to allow Fernando to
use Lourdes’ ticket. Specifically:
Tickets may be reissued for up to two years from the original date of issue.
When defendant airline still charged plaintiffs spouses US$1,867.40 or
more than double the then going rate of US$856.00 for the unused tickets
when the same were presented within two (2) years from date of issue,
defendant airline exhibited callous treatment of passengers.12
The Appellate Court’s Ruling
On appeal, the CA reversed the RTC’s April 3, 2006 Decision, holding that
CAI cannot be held liable for Mager’s act in the absence of any proof that a
principal-agent relationship existed between CAI and Holiday Travel.
According to the CA, Spouses Viloria, who have the burden of proof to
establish the fact of agency, failed to present evidence demonstrating that
Holiday Travel is CAI’s agent. Furthermore, contrary to Spouses Viloria’s
claim, the contractual relationship between Holiday Travel and CAI is not
an agency but that of a sale.
Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel
who was in turn a ticketing agent of Holiday Travel who was in turn a
ticketing agent of Continental Airlines. Proceeding from this premise, they
contend that Continental Airlines should be held liable for the acts of
Mager. The trial court held the same view.
We do not agree. By the contract of agency, a person binds him/herself to
render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter. The elements of agency
are: (1) consent, express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agent acts as a representative and not for him/herself;
and (4) the agent acts within the scope of his/her authority. As the basis of
agency is representation, there must be, on the part of the principal, an
actual intention to appoint, an intention naturally inferable from the
principal’s words or actions. In the same manner, there must be an
intention on the part of the agent to accept the appointment and act upon
it. Absent such mutual intent, there is generally no agency. It is likewise a
settled rule that persons dealing with an assumed agent are bound at their
peril, if they would hold the principal liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it. Agency is
never presumed, neither is it created by the mere use of the word in a trade
or business name. We have perused the evidence and documents so far
presented. We find nothing except bare allegations of plaintiffs-appellees
that Mager/Holiday Travel was acting in behalf of Continental Airlines.
From all sides of legal prism, the transaction in issue was simply a contract
of sale, wherein Holiday Travel buys airline tickets from Continental
Airlines and then, through its employees, Mager included, sells it at a
premium to clients.13
The CA also ruled that refund is not available to Spouses Viloria as the word
“ non-refundable” was clearly printed on the face of the subject tickets,
which constitute their contract with CAI. Therefore, the grant of their
prayer for a refund would violate the proscription against impairment of
contracts.
Finally, the CA held that CAI did not act in bad faith when they charged
Spouses Viloria with the higher amount of US$1,867.40 for a round trip
ticket to Los Angeles. According to the CA, there is no compulsion for CAI
to charge the lower amount of US$856.00, which Spouses Viloria claim to
be the fee charged by other airlines. The matter of fixing the prices for its
services is CAI’s prerogative, which Spouses Viloria cannot intervene. In
particular:
It is within the respective rights of persons owning and/or operating
business entities to peg the premium of the services and items which they
provide at a price which they deem fit, no matter how expensive or
exhorbitant said price may seem vis-à-vis those of the competing
companies. The Spouses Viloria may not intervene with the business
judgment of Continental Airlines.14
The Petitioners’ Case
In this Petition, this Court is being asked to review the findings and
conclusions of the CA, as the latter’s reversal of the RTC’s April 3, 2006
Decision allegedly lacks factual and legal bases. Spouses Viloria claim that
CAI acted in bad faith when it required them to pay a higher amount for a
round trip ticket to Los Angeles considering CAI’s undertaking to re-issue
new tickets to them within the period stated in their March 24, 1998 letter.
CAI likewise acted in bad faith when it disallowed Fernando to use Lourdes’
ticket to purchase a round trip to Los Angeles given that there is nothing in
Lourdes’ ticket indicating that it is non-transferable. As a common carrier,
it is CAI’s duty to inform its passengers of the terms and conditions of their
contract and passengers cannot be bound by such terms and conditions
which they are not made aware of. Also, the subject contract of carriage is a
contract of adhesion; therefore, any ambiguities should be construed
against CAI. Notably, the petitioners are no longer questioning the validity
of the subject contracts and limited its claim for a refund on CAI’s alleged
breach of its undertaking in its March 24, 1998 letter.
The Respondent’s Case
In its Comment, CAI claimed that Spouses Viloria’s allegation of bad faith is
negated by its willingness to issue new tickets to them and to credit the
value of the subject tickets against the value of the new ticket Fernando
requested. CAI argued that Spouses Viloria’s sole basis to claim that the
price at which CAI was willing to issue the new tickets is unconscionable is
a piece of hearsay evidence – an advertisement appearing on a newspaper
stating that airfares from Manila to Los Angeles or San Francisco cost
US$818.00.15 Also, the advertisement pertains to airfares in September
2000 and not to airfares prevailing in J une 1999, the time when Fernando
asked CAI to apply the value of the subject tickets for the purchase of a new
one.16 CAI likewise argued that it did not undertake to protect Spouses
Viloria from any changes or fluctuations in the prices of airline tickets and
its only obligation was to apply the value of the subject tickets to the
purchase of the newly issued tickets.
With respect to Spouses Viloria’s claim that they are not aware of CAI’s
restrictions on the subject tickets and that the terms and conditions that are
printed on them are ambiguous, CAI denies any ambiguity and alleged that
its representative informed Fernando that the subject tickets are non-
transferable when he applied for the issuance of a new ticket. On the other
hand, the word “ non-refundable” clearly appears on the face of the subject
tickets.
CAI also denies that it is bound by the acts of Holiday Travel and Mager
and that no principal-agency relationship exists between them. As an
independent contractor, Holiday Travel was without capacity to bind CAI.
Issues
To determine the propriety of disturbing the CA’s J anuary 30, 2009
Decision and whether Spouses Viloria have the right to the reliefs they
prayed for, this Court deems it necessary to resolve the following issues:
Does a principal-agent relationship exist between CAI and Holiday Travel?
Assuming that an agency relationship exists between CAI and Holiday
Travel, is CAI bound by the acts of Holiday Travel’s agents and employees
such as Mager?
Assuming that CAI is bound by the acts of Holiday Travel’s agents and
employees, can the representation of Mager as to unavailability of seats at
Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria
in the purchase of the subject tickets?
Is CAI justified in insisting that the subject tickets are non-transferable and
non-refundable?
Is CAI justified in pegging a different price for the round trip ticket to Los
Angeles requested by Fernando?
Alternatively, did CAI act in bad faith or renege its obligation to Spouses
Viloria to apply the value of the subject tickets in the purchase of new ones
when it refused to allow Fernando to use Lourdes’ ticket and in charging a
higher price for a round trip ticket to Los Angeles?
This Court’s Ruling
A principal-agent relationship exists between CAI and Holiday Travel.
With respect to the first issue, which is a question of fact that would require
this Court to review and re-examine the evidence presented by the parties
below, this Court takes exception to the general rule that the CA’s findings
of fact are conclusive upon Us and our jurisdiction is limited to the review
of questions of law. It is well-settled to the point of being axiomatic that this
Court is authorized to resolve questions of fact if confronted with
contrasting factual findings of the trial court and appellate court and if the
findings of the CA are contradicted by the evidence on record.17
According to the CA, agency is never presumed and that he who alleges that
it exists has the burden of proof. Spouses Viloria, on whose shoulders such
burden rests, presented evidence that fell short of indubitably
demonstrating the existence of such agency.
We disagree. The CA failed to consider undisputed facts, discrediting CAI’s
denial that Holiday Travel is one of its agents. Furthermore, in erroneously
characterizing the contractual relationship between CAI and Holiday Travel
as a contract of sale, the CA failed to apply the fundamental civil law
principles governing agency and differentiating it from sale.
In Rallos v. Felix Go Chan & Sons Realty Corporation,18 this Court
explained the nature of an agency and spelled out the essential elements
thereof:
Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, called the principal
(mandante), authorizes another, called the agent (mandatario), to act for
and in his behalf in transactions with third persons. The essential elements
of agency are: (1) there is consent, express or implied of the parties to
establish the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agent acts as a representative and not for
himself, and (4) the agent acts within the scope of his authority.
Agency is basically personal, representative, and derivative in nature. The
authority of the agent to act emanates from the powers granted to him by
his principal; his act is the act of the principal if done within the scope of
the authority. Qui facit per alium facit se. “ He who acts through another
acts himself.” 19
Contrary to the findings of the CA, all the elements of an agency exist in this
case. The first and second elements are present as CAI does not deny that it
concluded an agreement with Holiday Travel, whereby Holiday Travel
would enter into contracts of carriage with third persons on CAI’s behalf.
The third element is also present as it is undisputed that Holiday Travel
merely acted in a representative capacity and it is CAI and not Holiday
Travel who is bound by the contracts of carriage entered into by Holiday
Travel on its behalf. The fourth element is also present considering that CAI
has not made any allegation that Holiday Travel exceeded the authority that
was granted to it. In fact, CAI consistently maintains the validity of the
contracts of carriage that Holiday Travel executed with Spouses Viloria and
that Mager was not guilty of any fraudulent misrepresentation. That CAI
admits the authority of Holiday Travel to enter into contracts of carriage on
its behalf is easily discernible from its February 24, 1998 and March 24,
1998 letters, where it impliedly recognized the validity of the contracts
entered into by Holiday Travel with Spouses Viloria. When Fernando
informed CAI that it was Holiday Travel who issued to them the subject
tickets, CAI did not deny that Holiday Travel is its authorized agent.
Prior to Spouses Viloria’s filing of a complaint against it, CAI never refuted
that it gave Holiday Travel the power and authority to conclude contracts of
carriage on its behalf. As clearly extant from the records, CAI recognized
the validity of the contracts of carriage that Holiday Travel entered into
with Spouses Viloria and considered itself bound with Spouses Viloria by
the terms and conditions thereof; and this constitutes an unequivocal
testament to Holiday Travel’s authority to act as its agent. This Court
cannot therefore allow CAI to take an altogether different position and deny
that Holiday Travel is its agent without condoning or giving imprimatur to
whatever damage or prejudice that may result from such denial or
retraction to Spouses Viloria, who relied on good faith on CAI’s acts in
recognition of Holiday Travel’s authority. Estoppel is primarily based on
the doctrine of good faith and the avoidance of harm that will befall an
innocent party due to its injurious reliance, the failure to apply it in this
case would result in gross travesty of justice.20 Estoppel bars CAI from
making such denial.
As categorically provided under Article 1869 of the Civil Code, “ [a]gency
may be express, or implied from the acts of the principal, from his silence
or lack of action, or his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority.”
Considering that the fundamental hallmarks of an agency are present, this
Court finds it rather peculiar that the CA had branded the contractual
relationship between CAI and Holiday Travel as one of sale. The
distinctions between a sale and an agency are not difficult to discern and
this Court, as early as 1970, had already formulated the guidelines that
would aid in differentiating the two (2) contracts. In Commissioner of
Internal Revenue v. Constantino,21 this Court extrapolated that the
primordial differentiating consideration between the two (2) contracts is
the transfer of ownership or title over the property subject of the contract.
In an agency, the principal retains ownership and control over the property
and the agent merely acts on the principal’s behalf and under his
instructions in furtherance of the objectives for which the agency was
established. On the other hand, the contract is clearly a sale if the parties
intended that the delivery of the property will effect a relinquishment of
title, control and ownership in such a way that the recipient may do with
the property as he pleases.
Since the company retained ownership of the goods, even as it delivered
possession unto the dealer for resale to customers, the price and terms of
which were subject to the company’s control, the relationship between the
company and the dealer is one of agency, tested under the following
criterion:
“ The difficulty in distinguishing between contracts of sale and the creation
of an agency to sell has led to the establishment of rules by the application
of which this difficulty may be solved. The decisions say the transfer of title
or agreement to transfer it for a price paid or promised is the essence of
sale. If such transfer puts the transferee in the attitude or position of an
owner and makes him liable to the transferor as a debtor for the agreed
price, and not merely as an agent who must account for the proceeds of a
resale, the transaction is a sale; while the essence of an agency to sell is the
delivery to an agent, not as his property, but as the property of the
principal, who remains the owner and has the right to control sales, fix the
price, and terms, demand and receive the proceeds less the agent’s
commission upon sales made. 1 Mechem on Sales, Sec. 43; 1 Mechem on
Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1.” (Salisbury v.
Brooks, 94 SE 117, 118-119)22
As to how the CA have arrived at the conclusion that the contract between
CAI and Holiday Travel is a sale is certainly confounding, considering that
CAI is the one bound by the contracts of carriage embodied by the tickets
being sold by Holiday Travel on its behalf. It is undisputed that CAI and not
Holiday Travel who is the party to the contracts of carriage executed by
Holiday Travel with third persons who desire to travel via Continental
Airlines, and this conclusively indicates the existence of a principal-agent
relationship. That the principal is bound by all the obligations contracted by
the agent within the scope of the authority granted to him is clearly
provided under Article 1910 of the Civil Code and this constitutes the very
notion of agency.
In actions based on quasi-delict, a principal can only be held liable for the
tort committed by its agent’s employees if it has been established by
preponderance of evidence that the principal was also at fault or negligent
or that the principal exercise control and supervision over them.
Considering that Holiday Travel is CAI’s agent, does it necessarily follow
that CAI is liable for the fault or negligence of Holiday Travel’s employees?
Citing China Air Lines, Ltd. v. Court of Appeals, et al.,23 CAI argues that it
cannot be held liable for the actions of the employee of its ticketing agent in
the absence of an employer-employee relationship.
An examination of this Court’s pronouncements in China Air Lines will
reveal that an airline company is not completely exonerated from any
liability for the tort committed by its agent’s employees. A prior
determination of the nature of the passenger’s cause of action is necessary.
If the passenger’s cause of action against the airline company is premised
on culpa aquiliana or quasi-delict for a tort committed by the employee of
the airline company’s agent, there must be an independent showing that
the airline company was at fault or negligent or has contributed to the
negligence or tortuous conduct committed by the employee of its agent. The
mere fact that the employee of the airline company’s agent has committed a
tort is not sufficient to hold the airline company liable. There is
no vinculum juris between the airline company and its agent’s employees
and the contractual relationship between the airline company and its agent
does not operate to create a juridical tie between the airline company and
its agent’s employees. Article 2180 of the Civil Code does not make the
principal vicariously liable for the tort committed by its agent’s employees
and the principal-agency relationship per se does not make the principal a
party to such tort; hence, the need to prove the principal’s own fault or
negligence.
On the other hand, if the passenger’s cause of action for damages against
the airline company is based on contractual breach or culpa contractual, it
is not necessary that there be evidence of the airline company’s fault or
negligence. As this Court previously stated in China Air Lines and reiterated
in Air France vs. Gillego,24 “ in an action based on a breach of contract of
carriage, the aggrieved party does not have to prove that the common
carrier was at fault or was negligent. All that he has to prove is the existence
of the contract and the fact of its non-performance by the carrier.”
Spouses Viloria’s cause of action on the basis of Mager’s alleged fraudulent
misrepresentation is clearly one of tort or quasi-delict, there being no pre-
existing contractual relationship between them. Therefore, it was
incumbent upon Spouses Viloria to prove that CAI was equally at fault.
However, the records are devoid of any evidence by which CAI’s alleged
liability can be substantiated. Apart from their claim that CAI must be held
liable for Mager’s supposed fraud because Holiday Travel is CAI’s agent,
Spouses Viloria did not present evidence that CAI was a party or had
contributed to Mager’s complained act either by instructing or authorizing
Holiday Travel and Mager to issue the said misrepresentation.
It may seem unjust at first glance that CAI would consider Spouses Viloria
bound by the terms and conditions of the subject contracts, which Mager
entered into with them on CAI’s behalf, in order to deny Spouses Viloria’s
request for a refund or Fernando’s use of Lourdes’ ticket for the re-issuance
of a new one, and simultaneously claim that they are not bound by Mager’s
supposed misrepresentation for purposes of avoiding Spouses Viloria’s
claim for damages and maintaining the validity of the subject contracts. It
may likewise be argued that CAI cannot deny liability as it benefited from
Mager’s acts, which were performed in compliance with Holiday Travel’s
obligations as CAI’s agent.
However, a person’s vicarious liability is anchored on his possession of
control, whether absolute or limited, on the tortfeasor. Without such
control, there is nothing which could justify extending the liability to a
person other than the one who committed the tort. As this Court explained
in Cangco v. Manila Railroad Co.:25
With respect to extra-contractual obligation arising from negligence,
whether of act or omission, it is competent for the legislature to elect — and
our Legislature has so elected — to limit such liability to cases in which the
person upon whom such an obligation is imposed is morally culpable or, on
the contrary, for reasons of public policy, to extend that liability, without
regard to the lack of moral culpability, so as to include responsibility for the
negligence of those persons whose acts or omissions are imputable, by a
legal fiction, to others who are in a position to exercise an absolute or
limited control over them. The legislature which adopted our Civil Code has
elected to limit extra-contractual liability — with certain well-defined
exceptions — to cases in which moral culpability can be directly imputed to
the persons to be charged. This moral responsibility may consist in having
failed to exercise due care in one’s own acts, or in having failed to exercise
due care in the selection and control of one’s agent or servants, or in the
control of persons who, by reasons of their status, occupy a position of
dependency with respect to the person made liable for their
conduct.26 (emphasis supplied)
It is incumbent upon Spouses Viloria to prove that CAI exercised control or
supervision over Mager by preponderant evidence. The existence of control
or supervision cannot be presumed and CAI is under no obligation to prove
its denial or nugatory assertion. Citing Belen v. Belen,27 this Court ruled
in J ayme v. Apostol,28 that:
In Belen v. Belen, this Court ruled that it was enough for defendant to deny
an alleged employment relationship. The defendant is under no obligation
to prove the negative averment. This Court said:
“ It is an old and well-settled rule of the courts that the burden of proving
the action is upon the plaintiff, and that if he fails satisfactorily to show the
facts upon which he bases his claim, the defendant is under no obligation to
prove his exceptions. This [rule] is in harmony with the provisions of
Section 297 of the Code of Civil Procedure holding that each party must
prove his own affirmative allegations, etc.” 29 (citations omitted)
Therefore, without a modicum of evidence that CAI exercised control over
Holiday Travel’s employees or that CAI was equally at fault, no liability can
be imposed on CAI for Mager’s supposed misrepresentation.
Even on the assumption that CAI may be held liable for the acts of Mager,
still, Spouses Viloria are not entitled to a refund. Mager’s statement cannot
be considered a causal fraud that would justify the annulment of the subject
contracts that would oblige CAI to indemnify Spouses Viloria and return
the money they paid for the subject tickets.
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the
consent of the contracting parties was obtained through fraud, the contract
is considered voidable and may be annulled within four (4) years from the
time of the discovery of the fraud. Once a contract is annulled, the parties
are obliged under Article 1398 of the same Code to restore to each other the
things subject matter of the contract, including their fruits and interest.
On the basis of the foregoing and given the allegation of Spouses Viloria
that Fernando’s consent to the subject contracts was supposedly secured by
Mager through fraudulent means, it is plainly apparent that their demand
for a refund is tantamount to seeking for an annulment of the subject
contracts on the ground of vitiated consent.
Whether the subject contracts are annullable, this Court is required to
determine whether Mager’s alleged misrepresentation constitutes causal
fraud. Similar to the dispute on the existence of an agency, whether fraud
attended the execution of a contract is factual in nature and this Court, as
discussed above, may scrutinize the records if the findings of the CA are
contrary to those of the RTC.
Under Article 1338 of the Civil Code, there is fraud when, through insidious
words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not have
agreed to. In order that fraud may vitiate consent, it must be the causal
(dolo causante), not merely the incidental (dolo incidente), inducement to
the making of the contract.30 In Samson v. Court of Appeals,31 causal
fraud was defined as “ a deception employed by one party prior to or
simultaneous to the contract in order to secure the consent of the other.” 32
Also, fraud must be serious and its existence must be established by clear
and convincing evidence. As ruled by this Court in Sierra v. Hon. Court of
Appeals, et al.,33 mere preponderance of evidence is not adequate:
Fraud must also be discounted, for according to the Civil Code:
Art. 1338. There is fraud when, through insidious words or machinations of
one of the contracting parties, the other is induced to enter into a contract
which without them, he would not have agreed to.
Art. 1344. In order that fraud may make a contract voidable, it should be
serious and should not have been employed by both contracting parties.
To quote Tolentino again, the “ misrepresentation constituting the fraud
must be established by full, clear, and convincing evidence, and not merely
by a preponderance thereof. The deceit must be serious. The fraud is
serious when it is sufficient to impress, or to lead an ordinarily prudent
person into error; that which cannot deceive a prudent person cannot be a
ground for nullity. The circumstances of each case should be considered,
taking into account the personal conditions of the victim.” 34
After meticulously poring over the records, this Court finds that the fraud
alleged by Spouses Viloria has not been satisfactorily established as causal
in nature to warrant the annulment of the subject contracts. In fact,
Spouses Viloria failed to prove by clear and convincing evidence that
Mager’s statement was fraudulent. Specifically, Spouses Viloria failed to
prove that (a) there were indeed available seats at Amtrak for a trip to New
J ersey on August 13, 1997 at the time they spoke with Mager on J uly 21,
1997; (b) Mager knew about this; and (c) that she purposely informed them
otherwise.
This Court finds the only proof of Mager’s alleged fraud, which is
Fernando’s testimony that an Amtrak had assured him of the perennial
availability of seats at Amtrak, to be wanting. As CAI correctly pointed out
and as Fernando admitted, it was possible that during the intervening
period of three (3) weeks from the time Fernando purchased the subject
tickets to the time he talked to said Amtrak employee, other passengers
may have cancelled their bookings and reservations with Amtrak, making it
possible for Amtrak to accommodate them. Indeed, the existence of fraud
cannot be proved by mere speculations and conjectures. Fraud is never
lightly inferred; it is good faith that is. Under the Rules of Court, it is
presumed that “ a person is innocent of crime or wrong” and that “ private
transactions have been fair and regular.” 35 Spouses Viloria failed to
overcome this presumption.
Assuming the contrary, Spouses Viloria are nevertheless deemed to have
ratified the subject contracts.
Even assuming that Mager’s representation is causal fraud, the subject
contracts have been impliedly ratified when Spouses Viloria decided to
exercise their right to use the subject tickets for the purchase of new ones.
Under Article 1392 of the Civil Code, “ ratification extinguishes the action to
annul a voidable contract.”
Ratification of a voidable contract is defined under Article 1393 of the Civil
Code as follows:
Art. 1393. Ratification may be effected expressly or tacitly. It is understood
that there is a tacit ratification if, with knowledge of the reason which
renders the contract voidable and such reason having ceased, the person
who has a right to invoke it should execute an act which necessarily implies
an intention to waive his right.
Implied ratification may take diverse forms, such as by silence or
acquiescence; by acts showing approval or adoption of the contract; or by
acceptance and retention of benefits flowing therefrom.36
Simultaneous with their demand for a refund on the ground of Fernando’s
vitiated consent, Spouses Viloria likewise asked for a refund based on CAI’s
supposed bad faith in reneging on its undertaking to replace the subject
tickets with a round trip ticket from Manila to Los Angeles.
In doing so, Spouses Viloria are actually asking for a rescission of the
subject contracts based on contractual breach. Resolution, the action
referred to in Article 1191, is based on the defendant’s breach of faith, a
violation of the reciprocity between the parties37 and in Solar Harvest, Inc.
v. Davao Corrugated Carton Corporation,38 this Court ruled that a claim
for a reimbursement in view of the other party’s failure to comply with his
obligations under the contract is one for rescission or resolution.
However, annulment under Article 1390 of the Civil Code and rescission
under Article 1191 are two (2) inconsistent remedies. In resolution, all the
elements to make the contract valid are present; in annulment, one of the
essential elements to a formation of a contract, which is consent, is absent.
In resolution, the defect is in the consummation stage of the contract when
the parties are in the process of performing their respective obligations; in
annulment, the defect is already present at the time of the negotiation and
perfection stages of the contract. Accordingly, by pursuing the remedy of
rescission under Article 1191, the Vilorias had impliedly admitted the
validity of the subject contracts, forfeiting their right to demand their
annulment. A party cannot rely on the contract and claim rights or
obligations under it and at the same time impugn its existence or validity.
Indeed, litigants are enjoined from taking inconsistent positions.39
Contracts cannot be rescinded for a slight or casual breach.
CAI cannot insist on the non-transferability of the subject tickets.
Considering that the subject contracts are not annullable on the ground of
vitiated consent, the next question is: “ Do Spouses Viloria have the right to
rescind the contract on the ground of CAI’s supposed breach of its
undertaking to issue new tickets upon surrender of the subject tickets?”
Article 1191, as presently worded, states:
The power to rescind obligations is implied in reciprocal ones, in case one
of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfilment and the rescission of
the obligation, with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388 and
the Mortgage Law.
According to Spouses Viloria, CAI acted in bad faith and breached the
subject contracts when it refused to apply the value of Lourdes’ ticket for
Fernando’s purchase of a round trip ticket to Los Angeles and in requiring
him to pay an amount higher than the price fixed by other airline
companies.
In its March 24, 1998 letter, CAI stated that “ non-refundable tickets may be
used as a form of payment toward the purchase of another Continental
ticket for $75.00, per ticket, reissue fee ($50.00, per ticket, for tickets
purchased prior to October 30, 1997).”
Clearly, there is nothing in the above-quoted section of CAI’s letter from
which the restriction on the non-transferability of the subject tickets can be
inferred. In fact, the words used by CAI in its letter supports the position of
Spouses Viloria, that each of them can use the ticket under their name for
the purchase of new tickets whether for themselves or for some other
person.
Moreover, as CAI admitted, it was only when Fernando had expressed his
interest to use the subject tickets for the purchase of a round trip ticket
between Manila and Los Angeles that he was informed that he cannot use
the ticket in Lourdes’ name as payment.
Contrary to CAI’s claim, that the subject tickets are non-transferable cannot
be implied from a plain reading of the provision printed on the subject
tickets stating that “ [t]o the extent not in conflict with the foregoing
carriage and other services performed by each carrier are subject to: (a)
provisions contained in this ticket, x x x (iii) carrier’s conditions of carriage
and related regulations which are made part hereof (and are available on
application at the offices of carrier) x x x.” As a common carrier whose
business is imbued with public interest, the exercise of extraordinary
diligence requires CAI to inform Spouses Viloria, or all of its passengers for
that matter, of all the terms and conditions governing their contract of
carriage. CAI is proscribed from taking advantage of any ambiguity in the
contract of carriage to impute knowledge on its passengers of and demand
compliance with a certain condition or undertaking that is not clearly
stipulated. Since the prohibition on transferability is not written on the face
of the subject tickets and CAI failed to inform Spouses Viloria thereof, CAI
cannot refuse to apply the value of Lourdes’ ticket as payment for
Fernando’s purchase of a new ticket.
CAI’s refusal to accept Lourdes’ ticket for the purchase of a new ticket for
Fernando is only a casual breach.
Nonetheless, the right to rescind a contract for non-performance of its
stipulations is not absolute. The general rule is that rescission of a contract
will not be permitted for a slight or casual breach, but only for such
substantial and fundamental violations as would defeat the very object of
the parties in making the agreement.40 Whether a breach is substantial is
largely determined by the attendant circumstances.41
While CAI’s refusal to allow Fernando to use the value of Lourdes’ ticket as
payment for the purchase of a new ticket is unjustified as the non-
transferability of the subject tickets was not clearly stipulated, it cannot,
however be considered substantial. The endorsability of the subject tickets
is not an essential part of the underlying contracts and CAI’s failure to
comply is not essential to its fulfillment of its undertaking to issue new
tickets upon Spouses Viloria’s surrender of the subject tickets. This Court
takes note of CAI’s willingness to perform its principal obligation and this is
to apply the price of the ticket in Fernando’s name to the price of the round
trip ticket between Manila and Los Angeles. CAI was likewise willing to
accept the ticket in Lourdes’ name as full or partial payment as the case
may be for the purchase of any ticket, albeit under her name and for her
exclusive use. In other words, CAI’s willingness to comply with its
undertaking under its March 24, 1998 cannot be doubted, albeit tainted
with its erroneous insistence that Lourdes’ ticket is non-transferable.
Moreover, Spouses Viloria’s demand for rescission cannot prosper as CAI
cannot be solely faulted for the fact that their agreement failed to
consummate and no new ticket was issued to Fernando. Spouses Viloria
have no right to insist that a single round trip ticket between Manila and
Los Angeles should be priced at around $856.00 and refuse to pay the
difference between the price of the subject tickets and the amount fixed by
CAI. The petitioners failed to allege, much less prove, that CAI had obliged
itself to issue to them tickets for any flight anywhere in the world upon their
surrender of the subject tickets. In its March 24, 1998 letter, it was clearly
stated that “ [n]on-refundable tickets may be used as a form of payment
toward the purchase of another Continental ticket” 42 and there is nothing
in it suggesting that CAI had obliged itself to protect Spouses Viloria from
any fluctuation in the prices of tickets or that the surrender of the subject
tickets will be considered as full payment for any ticket that the petitioners
intend to buy regardless of actual price and destination. The CA was correct
in holding that it is CAI’s right and exclusive prerogative to fix the prices for
its services and it may not be compelled to observe and maintain the prices
of other airline companies.43
The conflict as to the endorsability of the subject tickets is an altogether
different matter, which does not preclude CAI from fixing the price of a
round trip ticket between Manila and Los Angeles in an amount it deems
proper and which does not provide Spouses Viloria an excuse not to pay
such price, albeit subject to a reduction coming from the value of the
subject tickets. It cannot be denied that Spouses Viloria had the
concomitant obligation to pay whatever is not covered by the value of the
subject tickets whether or not the subject tickets are transferable or not.
There is also no showing that Spouses Viloria were discriminated against in
bad faith by being charged with a higher rate. The only evidence the
petitioners presented to prove that the price of a round trip ticket between
Manila and Los Angeles at that time was only $856.00 is a newspaper
advertisement for another airline company, which is inadmissible for being
“ hearsay evidence, twice removed.” Newspaper clippings are hearsay if they
were offered for the purpose of proving the truth of the matter alleged. As
ruled in Feria v. Court of Appeals,:44
[N]ewspaper articles amount to “ hearsay evidence, twice removed” and are
therefore not only inadmissible but without any probative value at all
whether objected to or not, unless offered for a purpose other than proving
the truth of the matter asserted. In this case, the news article is admissible
only as evidence that such publication does exist with the tenor of the news
therein stated.45 (citations omitted)
The records of this case demonstrate that both parties were equally in
default; hence, none of them can seek judicial redress for the cancellation
or resolution of the subject contracts and they are therefore bound to their
respective obligations thereunder. As the 1st sentence of Article 1192
provides:
Art. 1192. In case both parties have committed a breach of the obligation,
the liability of the first infractor shall be equitably tempered by the courts.
If it cannot be determined which of the parties first violated the contract,
the same shall be deemed extinguished, and each shall bear his own
damages. (emphasis supplied)
Therefore, CAI’s liability for damages for its refusal to accept Lourdes’
ticket for the purchase of Fernando’s round trip ticket is offset by Spouses
Viloria’s liability for their refusal to pay the amount, which is not covered
by the subject tickets. Moreover, the contract between them remains,
hence, CAI is duty bound to issue new tickets for a destination chosen by
Spouses Viloria upon their surrender of the subject tickets and Spouses
Viloria are obliged to pay whatever amount is not covered by the value of
the subject tickets.
This Court made a similar ruling in Central Bank of the Philippines v. Court
of Appeals.46 Thus:
Since both parties were in default in the performance of their respective
reciprocal obligations, that is, Island Savings Bank failed to comply with its
obligation to furnish the entire loan and Sulpicio M. Tolentino failed to
comply with his obligation to pay his P17,000.00 debt within 3 years as
stipulated, they are both liable for damages.
Article 1192 of the Civil Code provides that in case both parties have
committed a breach of their reciprocal obligations, the liability of the first
infractor shall be equitably tempered by the courts. WE rule that the
liability of Island Savings Bank for damages in not furnishing the entire
loan is offset by the liability of Sulpicio M. Tolentino for damages, in the
form of penalties and surcharges, for not paying his overdue P17,000.00
debt. x x x.47
Another consideration that militates against the propriety of holding CAI
liable for moral damages is the absence of a showing that the latter acted
fraudulently and in bad faith. Article 2220 of the Civil Code requires
evidence of bad faith and fraud and moral damages are generally not
recoverable inculpa contractual except when bad faith had been
proven.48 The award of exemplary damages is likewise not warranted.
Apart from the requirement that the defendant acted in a wanton,
oppressive and malevolent manner, the claimant must prove his
entitlement to moral damages.49
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.
Bienvenido Reyes.
Antonio Carpio, J ose Portugal Perez, Maria Lourdes Sereno, Estela Perlas-
Bernabe*., J J ., concur.