TORTS CASE DIGESTS (PAGES 1 AND 2 OF SYLLABUS)
3A DIGEST POOL
E. TORT DISTINGUISHED FROM BREACH OF CONTRACT
1. JOSE CANGCO, Plaintiff-Appellant, vs. MANILA RAILROAD CO., Defendant-
Appellee.
FACTS:
Jose Cangco, a clerk of Manila Railroad Company, with a monthly rate of P25 and lives in San
Mateo, Rizal located along the line of the defendant railroad. He was entitled of a pass that he
uses for his transportation to the office free of charge. During the incident, the plaintiff arose
from his seat when the train drew near to his destination.  expression, that article relates only to culpa aquiliana and not to culpa contractual.
When Cangco stepped off, one or both of his feet came in contact with a sack of watermelons,
causing his feet to slip from under him and causing him to fall violently on the platform. His
body rolled from the platform and was drawn under the moving car, where his right arm was
badly crushed and lacerated. It appears that after the plaintiff alighted from the train the car
moved forward possibly six meters before it came to a full stop. The accident occurred
between 7-8pm and the station was dimly lighted by a single light. Objects on the platform
where the accident occurred were difficult to discern especially to a person emerging from a
lighted car.
The presence of a sack of melons on the platform is found in the fact that it was the customary
season for harvesting these melons. They were contained in numerous sacks which has been
piled on the platform in a row one upon another and was so placed of melons and the edge of
platform; and it is clear that the fall of the plaintiff was due to the fact that his foot alighted
upon one of these melons at the moment he stepped upon the platform. 
Cangco then instituted a proceeding in the CFI of Manila to recover damages of the defendant
company, founding his action upon the negligence of the servants and employees of the
defendant in placing the sacks of melons upon the platform and leaving them so placed as to
be a menace to the security of passenger alighting from the company's trains. At the hearing
the trial judge, found the facts substantially as above stated, and drew therefrom his conclusion
to the effect that, although negligence was attributable to the defendant by reason of the fact
that the sacks of melons were so placed as to obstruct passengers passing to and from the cars,
nevertheless, the plaintiff himself had failed to use due caution in alighting from the coach and
was therefore precluded from recovering. Judgment was renderd in favor of the defendant
company, and the plaintiff appealed.
ISSUE/S:  that the fault was morally imputable to defendant's servants.
1.     W/N the defendant company was liable for the damages caused by their employees?
2.     Who has the burden of proof to show negligence?
3.     W/N plaintiff is contributory negligent to the incident?
RULING:
1. Yes. The SC ruled that it can not be doubted that the employees of the railroad company
were guilty of negligence in piling these sacks on the platform in the manner above stated; that
their presence caused the plaintiff to fall as he alighted from the train; and that they therefore
constituted an effective legal cause of the injuries sustained by the plaintiff. It necessarily
follows that the defendant company is liable for the damage thereby occasioned unless
recovery is barred by the plaintiff's own contributory negligence.
The foundation of the legal liability of the defendant is the contract of carriage, and that the
obligation to respond for the damage which plaintiff has suffered arises, if at all, from the
breach of that contract by reason of the failure of defendant to exercise due care in its
performance. Article 1903 of the Civil Code is not applicable to obligations arising ex
contractu, but only to extra-contractual obligations — or to use the technical form of
In case of extra-contractual culpa based upon negligence, it is necessary that there shall have
been some fault attributable to the defendant personally, and that the last paragraph of article
1903 merely establishes a rebuttable presumption, is in complete accord with the authoritative
opinion of Manresa, who says that the liability created by article 1903 is imposed by reason of
the breach of the duties inherent in the special relations of authority or superiority existing
between the person called upon to repair the damage and the one who, by his act or omission,
was the cause of it.
On the other hand, the liability of masters and employers for the negligent acts or omissions of
their servants or agents, when such acts or omissions cause damages which amount to the
breach of a contact, is not based upon a mere presumption of the master's negligence in their
selection or control, and proof of exercise of the utmost diligence and care in this regard does
not relieve the master of his liability for the breach of his contract.
 2.  When the sources of the obligation upon which plaintiff's cause of action depends is a
negligent act or omission, the burden of proof rests upon plaintiff to prove the negligence — if
he does not his action fails. But when the facts averred show a contractual undertaking by
defendant for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused to
perform the contract, it is not necessary for plaintiff to specify in his pleadings whether the
breach of the contract is due to willful fault or to negligence on the part of the defendant, or of
his servants or agents. Proof of the contract and of its nonperformance is sufficient prima facie
to warrant a recovery.
The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry
him in safety and to provide safe means of entering and leaving its trains. That duty, being
contractual, was direct and immediate, and its non-performance could not be excused by proof
3. As to the issue of contributory negligence of the palintiff. In this particular instance, that the
train was barely moving when plaintiff alighted is shown conclusively by the fact that it came
to stop within six meters from the place where he stepped from it. Thousands of person alight
from trains under these conditions every day of the year, and sustain no injury where the
company has kept its platform free from dangerous obstructions. There is no reason to
believe that plaintiff would have suffered any injury whatever in alighting as he did had
it not been for defendant's negligent failure to perform its duty to provide a safe
alighting place.
The SC is of the opinion that the correct doctrine relating to this subject is that expressed in
Thompson's work on Negligence as follows: The test by which to determine whether the
passenger has been guilty of negligence in attempting to alight from a moving railway train, is
that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent
person, of the age, sex and condition of the passenger, would have acted as the passenger acted
under the circumstances disclosed by the evidence. 
Or if the Court decides to adop the mode of exposition used in Picart vs. Smith, the test is
whether there was anything in the circumstances surrounding the plaintiff at the time he
alighted from the train which would have admonished a person of average prudence that to get
off the train under the conditions then existing was dangerous? If so, the plaintiff should have
desisted from alighting; and his failure so to desist was contributory negligence.
As pertinent to the question of contributory negligence on the part of the plaintiff in this case
the following circumstances are to be noted: The company's platform was constructed upon a
level higher than that of the roadbed and the surrounding ground. The distance from the steps
of the car to the spot where the alighting passenger would place his feet on the platform was
thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform,
constructed as it was of cement material, also assured to the passenger a stable and even
surface on which to alight. Furthermore, the plaintiff was possessed of the vigor and agility of
young manhood, and it was by no means so risky for him to get off while the train was yet
moving as the same act would have been in an aged or feeble person . In determining the
question of contributory negligence in performing such act — that is to say, whether the
passenger acted prudently or recklessly — the age, sex, and physical condition of the
passenger are circumstances necessarily affecting the safety of the passenger, and should be
considered. Women, it has been observed, as a general rule are less capable than men of
alighting with safety under such conditions, as the nature of their wearing apparel obstructs the
free movement of the limbs. Again, it may be noted that the place was perfectly familiar to
the plaintiff as it was his daily custom to get on and of the train at this station. There
could, therefore, be no uncertainty in his mind with regard either to the length of the
step which he was required to take or the character of the platform where he was
alighting. The court concludes that the conduct of the plaintiff in undertaking to alight
while the train was yet slightly under way was not characterized by imprudence and that
therefore he was not guilty of contributory negligence.
The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as
a copyist clerk, and that the injuries he has suffered have permanently disabled him from
continuing that employment. Defendant has not shown that any other gainful occupation is
open to plaintiff. His expectancy of life, according to the standard mortality tables, is
approximately thirty-three years. We are of the opinion that a fair compensation for the
damage suffered by him for his permanent disability is the sum of P2,500, and that he is also
entitled to recover of defendant the additional sum of P790.25 for medical attention, hospital
services, and other incidental expenditures connected with the treatment of his injuries.
 Alit
2.  JAPAN AIRLINES, petitioner vs. JESUS SIMANGAN, respondent.
G.R. No. 170141
April 22, 2008
REYES R.T., J.
FACTS:
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto
Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A. Respondent
needed to go to the United States to complete his preliminary work-up and donation surgery.
Hence, to facilitate respondent's travel to the United States, UCLA wrote a letter to the
American Consulate in Manila to arrange for his visa. In due time, respondent was issued an
emergency U.S. visa by the American Embassy in Manila. Then, respondent purchased a
round trip plane ticket from petitioner JAL for US$1,485.00 and was issued the corresponding
boarding pass.
On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International
Airport. He was allowed to check-in at JAL's counter. His plane ticket, boarding pass, travel
authority and personal articles were subjected to rigid immigration and security routines. After
passing through said immigration and security procedures, respondent was allowed by JAL to
enter its airplane. While inside the airplane, JAL's airline crew suspected respondent of
carrying a falsified travel document and imputed that he would only use the trip to the United
States as a pretext to stay and work in Japan.
The stewardess asked respondent to show his travel documents. Shortly after, the stewardess
along with a Japanese and a Filipino haughtily ordered him to stand up and leave the plane.
Respondent protested, explaining that he was issued a U.S. visa. Just to allow him to board the
plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in
Narita. His pleas were ignored. He was then constrained to go out of the plane.
Respondent went to JAL's ground office and waited there for three hours. Meanwhile, the
plane took off and he was left behind. Afterwards, he was informed that his travel documents
were, indeed, in order. Respondent was refunded the cost of his plane ticket less the sum of
US$500.00 which was deducted by JAL. Subsequently, respondent's U.S. visa was cancelled.
Respondent filed an action for damages against JAL with the Regional Trial Court (RTC ) in
Valenzuela City. He claimed he was not able to donate his kidney to Loreto; and that he
suffered terrible embarrassment and mental anguish. He prayed that he be awarded P3 million
as moral damages, P1.5 million as exemplary damages and P500,000.00 as attorney's fees.
JAL denied the material allegations of the complaint. It argued, among others, that its failure
to allow respondent to fly on his scheduled departure was due to "a need for his travel
documents to be authenticated by the United States Embassy  because no one from JAL's
airport staff had encountered a parole visa before. It posited that the authentication required
additional time; that respondent was advised to take the flight the following day, July 30,
1992. JAL alleged that respondent agreed to be rebooked on July 30, 1992.
On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in
favor of respondent (plaintiff) ordering the defendant to pay the plaintiff the amount of
P1,000,000.00 as moral damages, the amount of P500,000.00 as exemplary damages and the
amount of P250,000.00 as attorney's fees, plus the cost of suit.
In a Decision dated May 31, 2005, the CA affirmed the decision of the RTC with modification
in that it lowered the amount of moral and exemplary damages and deleted the award of
attorney's fees. Appellant JAPAN AIR LINES is ordered to pay appellee JESUS SIMANGAN
the reduced sums, as follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages,
and Two Hundred Fifty Thousand Pesos (P250,000.00) as exemplary damages.
ISSUES:
(1) whether or not JAL is guilty of contract of carriage;  (2) whether or not respondent is
entitled to moral and exemplary damages; and  (3) whether or not JAL is entitled to its
counterclaim for damages.
RULING:
1.       JAL is guilty of breach of contract of carriage.
JAL justifies its action by arguing that there was "a need to verify the authenticity of
respondent's travel document." It alleged that no one from its airport staff had encountered a
parole visa before. It further contended that respondent agreed to fly the next day so that it
could first verify his travel document, hence, there was novation. It maintained that it was not
guilty of breach of contract of carriage as respondent was not able to travel to the United
States due to his own voluntary desistance. We cannot agree. JAL did not allow respondent to
fly. It informed respondent that there was a need to first check the authenticity of his travel
documents with the U.S. Embassy.56 As admitted by JAL, "the flight could not wait for Mr.
Simangan because it was ready to depart."
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent
no choice but to be left behind. Damage had already been done when respondent was
offered to fly the next day on July 30, 1992. Said offer did not cure JAL's default.
Considering that respondent was forced to get out of the plane and left behind against his will,
he could not have freely consented to be rebooked the next day. In short, he did not agree to
the alleged novation.
Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal
articles already passed the rigid immigration and security routines, JAL, as a common carrier,
ought to know the kind of valid travel documents respondent carried. As provided in Article
1755 of the New Civil Code: "A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances." Thus, We find untenable JAL's defense of
"verification of respondent's documents" in its breach of contract of carriage. It bears
repeating that the power to admit or not an alien into the country is a sovereign act
which cannot be interfered with even by JAL.
In an action for breach of contract of carriage, all that is required of plaintiff is to prove the
existence of such contract and its non-performance by the carrier through the latter's failure to
carry the passenger safely to his destination. Respondent has complied with these twin
requisites.
2.   Respondent is entitled to moral and exemplary damages and attorney's fees
plus legal interest.
As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract for it is not one of the items enumerated under Article 2219 of the Civil
Code.64 As an exception, such damages are recoverable: (1) in cases in which the mishap
results in the death of a passenger, as provided in Article 1764, in relation to Article 2206(3)
of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as
provided in Article 2220.
The acts committed by JAL against respondent amounts to bad faith. As found by the RTC,
JAL breached its contract of carriage with respondent in bad faith. JAL personnel summarily
and insolently ordered respondent to disembark while the latter was already settled in his
assigned seat. He was ordered out of the plane under the alleged reason that the genuineness of
his travel documents should be verified.
Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are
recoverable in suits predicated on breach of a contract of carriage where it is proved that the
carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack of care for the
interests of its passengers who are entitled to its utmost consideration, particularly as to their
convenience, amount to bad faith which entitles the passenger to an award of moral damag es.
What the law considers as bad faith which may furnish the ground for an award of moral
damages would be bad faith in securing the contract and in the execution thereof, as well as in
the enforcement of its terms, or any other kind of deceit.
JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton,
oppressive and malevolent acts against respondent. Exemplary damages, which are awarded
by way of example or correction for the public good, may be recovered in contractual
obligations, as in this case, if defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.68
Exemplary damages are designed by our civil law to permit the courts to reshape behaviour
that is socially deleterious in its consequence by creating negative incentives or deterrents
against such behaviour. In requiring compliance with the standard of extraordinary diligence, a
standard which is, in fact, that of the highest possible degree of diligence, from common
carriers and in creating a presumption of negligence against them, the law seeks to compel
them to control their employees, to tame their reckless instincts and to force them to take
adequate care of human beings and their property.
The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages
in respondent's favor is, in Our view, reasonable and realistic. This award is reasonably
sufficient to indemnify him for the humiliation and embarrassment he suffered. This also
serves as an example to discourage the repetition of similar oppressive acts. With respect to
attorney's fees, they may be awarded when defendant's act or omission has compelled plaintiff
to litigate with third persons or to incur expenses to protect his interest.
The Court, in Construction Development Corporation of the Philippines v. Estrella, citing
Traders Royal Bank Employees Union-Independent v. National Labor Relations Commission,
elucidated thus:
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid
to a lawyer by his client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the
court to be paid by the losing party in a litigation. The basis of this is any of the cases
provided by law where such award can be made, such as those authorized in Article 2208,
Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the
award shall pertain to the lawyer as additional compensation or as part thereof.74
It was therefore erroneous for the CA to delete the award of attorney's fees on the ground that
the record is devoid of evidence to show the cost of the services of respondent's counsel. The
amount is actually discretionary upon the Court so long as it passes the test of reasonableness.
They may be recovered as actual or compensatory damages when exemplary damages are
awarded and whenever the court deems it just and equitable, as in this case. Considering the
factual backdrop of this case, attorney's fees in the amount of P200,000.00 is reasonably
modest. , in addition to the said total amount of P800,000.00, JAL is liable to pay respondent
legal interest. Pursuant to the above ruling of the Court, the legal interest is 6% and it shall be
reckoned from September 21, 2000 when the RTC rendered its judgment. From the time this
Decision becomes final and executory, the interest rate shall be 12% until its satisfaction.
3.   JAL is not entitled to its counterclaim for damages.
This compulsory counterclaim of JAL arising from the filing of the complaint may not be
granted inasmuch as the complaint against it is obviously not malicious or unfounded.  We
reiterate case law that if damages result from a party's exercise of a right, it is damnum absque
injuria.81 Lawful acts give rise to no injury.
During the trial, however, JAL presented a witness who testified that JAL suffered further
damages. Allegedly, respondent caused the publications of his subject complaint against JAL
in the newspaper for which JAL suffered damages.
Nevertheless, JAL's counterclaim cannot be granted. JAL is a common carrier. JAL's business
is mainly with the traveling public. It invites people to avail themselves of the comforts and
advantages it offers.84 Since JAL deals with the public, its bumping off of respondent without
a valid reason naturally drew public attention and generated a public issue. The publications
involved matters about which the public has the right to be informed because they relate to a
public issue. This public issue or concern is a legitimate topic of a public comment that may
be validly published
-JV FERMIN
 
3.
 
RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). vs.COURT OF
APPEALS and LORETO DIONELA,
G.R. No. L-44748 August 29, 1986, PARAS, J.:
FACTS:
The basis of the complaint against the defendant corporation is a telegram sent through its
Manila Office to the offended party, Loreto Dionela, reading as follows:
176 AS JR 1215PM 9 PAID MANDALUYONG JUL 22-66 LORETO
DIONELA CABANGAN LEGASPI CITY
WIRE ARRIVAL OF CHECK FER
LORETO DIONELA-CABANGAN-WIRE ARRIVAL OF CHECK-PER
115 PM
SA IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-
KANG PADALA DITO KAHIT BULBUL MO
Plaintiff-respondent Loreto Dionela alleges that the defamatory words on the telegram sent to
him not only wounded his feelings but also caused him undue embarrassment and affected
adversely his business as well because other people have come to know of said defamatory
words.
Defendant corporation as a defense, alleges that the additional words in Tagalog was a private
joke between the sending and receiving operators and that they were not addressed to or
intended for plaintiff and therefore did not form part of the telegram and that the Tagalog
words are not defamatory.
The trial court in finding for the plaintiff ruled that the additional words in Tagalog are
libelous. They clearly impute a vice or defect of the plaintiff. Whether or not they were
intended for the plaintiff, the effect on the plaintiff is the same. Any person reading the
additional words in Tagalog will naturally think that they refer to the addressee, the plaintiff.
There is no indication from the face of the telegram that the additional words in Tagalog were
sent as a private joke between the operators of the defendant.
The liability of the defendant is predicated not only on Article 33 of the Civil Code of the
Philippines but on Articles 19 and 20. CA affirmed the decision of the RTC
ISSUE: Whether or not CA erred in holding that the liability of petitioner-company-employer
is predicated on Articles 19 and 20 of the Civil Code, Articles on Human Relations.
RULING: NO.
Petitioner's contentions do not merit our consideration. The action for damages was filed in the
lower court directly against respondent corporation not as an employer subsidiarily liable
under the provisions of Article 1161 of the New Civil Code in relation to Art. 103 of the
Revised Penal Code. The cause of action of the private respondent is based on Arts. 19 and 20
of the New Civil Code. As well as on respondent's breach of contract thru the negligence of its
own employees.
Petitioner is a domestic corporation engaged in the business of receiving and transmitting
messages. Everytime a person transmits a message through the facilities of the petitioner, a
contract is entered into. Upon receipt of the rate or fee fixed, the petitioner undertakes to
transmit the message accurately. There is no question that in the case at bar, libelous matters
were included in the message transmitted, without the consent or knowledge of the sender.
There is a clear case of breach of contract by the petitioner in adding extraneous and libelous
matters in the message sent to the private respondent. As a corporation, the petitioner can act
only through its employees. Hence the acts of its employees in receiving and transmitting
messages are the acts of the petitioner. To hold that the petitioner is not liable directly for the
acts of its employees in the pursuit of petitioner's business is to deprive the general public
availing of the services of the petitioner of an effective and adequate remedy. In most cases,
negligence must be proved in order that plaintiff may recover. However, since negligence may
be hard to substantiate in some cases, we may apply the doctrine of RES IPSA LOQUITUR
(the thing speaks for itself), by considering the presence of facts or circumstances surrounding
the injury.
WHEREFORE, premises considered, the judgment of the appellate court is hereby
AFFIRMED. SO ORDERED.
Ina
 
4. JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C.
SYQUIA and ANTHONY C. SYQUIA, petitioners, vs. THE HONORABLE COURT OF
APPEALS, and THE MANILA MEMORIAL PARK CEMETERY, INC., respondents.
G.R. No. 98695 January 27, 1993, CAMPOS, JR., J.:
FACTS:
Juan Syquia, father of the deceased Vicente Syquia, entered in a contract of Deed of Sale and
Interment Order with Manila Memorial Park Cemetery Inc (MMPCI). In the contract, there
contained a provision which stated that the coffin would be placed in a sealed concrete vault to
protect the remains of the deceased from the elements. During the preparation for the transfer
of Vicente’s remains in the newly bought lot in Manila Memorial, it was discovered that there
was a hole approximately 3 inches in diameter in the concrete vault which caused total
flooding inside, damaged the coffin as well as the body of the deceased and covered the same
with filth.
Syquia filed a complaint for recovery of damages arising from breach of contract and/or quasi-
delict against the MMPCI for failure to deliver a defect-free concrete vault to protect the
remains of the deceased. In its defense, MMPCI claimed that the boring of the hole was
necessary in order to prevent the vault from floating when water fills the grave. In dismissing
the complaint, the trial court held that the contract between the parties did not guarantee that
the cement vault would be waterproof; that there could be no quasi-delict because the
defendant was not guilty of any fault or negligence, and because there was a pre-existing
contractual relation between the Syquias and defendant Manila Memorial Park Cemetery , Inc.
The CA affirmed the decision of the trial court. Hence, the present petition.
 ISSUE:
 Whether or not the private respondent is guilty of tort (NO)
 HELD:
 NO. Decision of the CA affirmed.
 We are more inclined to answer the foregoing questions in the negative. There is not enough
ground, both in fact and in law, to justify a reversal of the decision of the respondent Court
and to uphold the pleas of the petitioners. Although a pre-existing contractual relation between
the parties does not preclude the existence of a culpa aquiliana, We find no reason to disregard
the respondent’s Court finding that there was no negligence.
Article 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is
called a quasi-delict x x x.
In this case, it has been established that the Syquias and the Manila Memorial Park Cemetery,
Inc., entered into a contract entitled “Deed of Sale and Certificate of Perpetual Care” on
August 27, 1969. That agreement governed the relations of the parties and defined their
respective rights and obligations. Hence, had there been actual negligence on the part of the
Manila Memorial Park Cemetery, Inc., it would be held liable not for a quasidelict or culpa
aquiliana, but for culpa contractual as provided by Article 1170 of the Civil Code, to wit:
“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.”
Prepared by: Mika Ituriaga
5.
Far East Bank and Trust Company vs The Honorable Court of Appeals, Luis A. Luna and
Clarita S. Luna (1995)
Facts:
Some time in October 1986, private respondent Luis A. Luna applied for, and was accorded, a
FAREASTCARD issued by petitioner Far East Bank and Trust Company ("FEBTC") at its
Pasig Branch. The bank also issued a supplemental card to private respondent Clarita S.
Luna.In August 1988, Clarita lost her credit card. FEBTC was forthwith informed. In order to
replace the lost card, Clarita submitted an affidavit of loss. In cases of this nature, the bank's
internal security procedures and policy would appear to be to meanwhile so record the lost
card, along with the principal card, as a "Hot Card" or "Cancelled Card" in its master file. Luis
tendered lunch for a close friend, at Hotel Intercontinental Manila, Luis presented his
FAREASTCARD. Since the card was not honored, Luis was forced to pay in cash the bil l
amounting to P588.13. Naturally, Luis felt embarrassed by this incident. In a letter, Luis Luna,
through counsel, demanded from FEBTC the payment of damages. Adrian V. Festejo, a vice-
president of the bank, expressed the bank's apologies to Luis. On 05 December 1988, filed a
complaint for damages with the Regional Trial Court ("RTC") of Pasig against FEBTC.
Trial Court’s Ruling: On 30 March 1990, the RTC of Pasig, given the foregoing factual
settings, rendered a decision ordering FEBTC to pay private respondents (a) P300,000.00
moral damages; (b) P50,000.00 exemplary damages; and (c) P20,000.00 attorney's fees.
CA: The appellate court affirmed the decision of the trial court.
M .R.: Its motion for reconsideration having been denied by the appellate court, FEBTC has
come to this Court with this petition for review.
Issue: WON FEBTC can be held liable for moral damages.  F. TORT DISTINGUISHED FROM CIVIL LIABILITY ARISING FROM CRIME
Decision:  7. The People of the Philippines vs Rogelio Ligon y Trias and Fernando Gabat y Almera
There is merit in this appeal.  and Fernando Gabat y Almera (1987)
In culpa contractual, moral damages may be recovered where the defendant is shown to
have acted in bad faith or with malice in the breach of the contract.
 The Civil Code provides:
"Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if
the court should find that, under the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.
Bad faith, in this context, includes gross, but not simple, negligence. Exceptionally, in a
contract of carriage, moral damages are also allowed in case of death of a passenger
attributable to the fault (which is presumed) of the common carrier.
Concededly, the bank was remiss in indeed neglecting to personally inform Luis of his own
card's cancellation. Nothing in the findings of the trial court and the appellate court, however,
can sufficiently indicate any deliberate intent on the part of FEBTC to cause harm to private
respondents. Neither could FEBTC's negligence in failing to give personal notice to Luis be
considered so gross as to amount to malice or bad faith.
The Court has not in the process overlooked another rule that a quasi-delict can be the cause
for breaching a contract that might thereby permit the application of applicable principles on
tort even where there is a pre-existing contract between the plaintiff and the defendant. This
doctrine, unfortunately, cannot improve private respondents' case for it can aptly govern only
where the act or omission complained of would constitute an actionable tort independently of
the contract. The test (whether a quasi-delict can be deemed to underlie the breach of a
contract) can be stated thusly: Where, without a pre-existing contract between two
parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact
that the parties are contractually bound is no bar to the application of quasi-delict
provisions to the case. Here, private respondents' damage claim is predicated solely on their
contractual relationship; without such agreement, the act or omission complained of cannot by
itself be held to stand as a separate cause of action or as an independent actionable tort.  Gabat, and later they would come back to the scene of the incident. However, while the Kombi
Nevertheless, the bank's failure, even perhaps inadvertent, to honor its credit card issued to
private respondent Luis should entitle him to recover a measure of damages sanctioned under
Article 2221 (Nominal Damages) of the Civil Code.
The appealed decision is MODIFIED by deleting the award of moral and exemplary damages
to private respondents; in its stead, petitioner is ordered to pay private respondent Luis A.
Luna an amount of P5,000.00 by way of nominal damages.
Edited by Zarina
 
Facts:
On October 23, 1983, the accused, Fernando Gabat (Gabat), was riding in a 1978 Volkswagen
Kombi owned by his father, Antonio Gabat, and driven by the other accused, Rogelio Ligon
(Ligon). The Kombi was coming from Espana Street going towards the direction of Quiapo.
Fernando Gabat was seated beside the driver, in the front seat by the window on the right side
of the Kombi. At the intersection of Quezon Boulevard and Lerma Street before turning left
towards the underpass at C.M. Recto Avenue, the Kombi had to stop as the traffic light was
red. While waiting for the traffic light to change, Fernando Gabat beckoned a cigarette vendor,
Jose Rosales y Ortiz (Rosales), the victim, to buy some cigarettes from him. Rosales
approached the Kombi and handed Gabat two sticks of cigarettes. While this transaction was
occurring, the traffic light changed to green, and the Kombi driven by Rogelio Ligon suddenly
moved forward. Rosales clung to the window of the Kombi but apparently lost his grip and fell
down on the pavement. Rosales was rushed by some bystanders to the Philippine General
Hospital, where he was treated for multiple physical injuries and was confined thereat until his
death on October 30, 1983. In an autopsy, it was stated that the cause of death of Rosales was
"pneumonia hypostatic, bilateral, secondary to traumatic injuries of the head."
The prosecution claimed that Gabat grabbed the box of cigarettes from Rosales and moved
loose the latter's hand from the window of the Kombi, resulting in the latter falling down and
hitting the pavement. The defense, however, claims that as the vehicle sped onward, the
cigarette box which was squeezed between the right arm of Gabat and the window frame fell
inside the Kombi. Rosales then ran beside the vehicle and clung to the windowsill of the
moving vehicle. Gabat testified that when he saw the cigarette vendor clinging on the side of
the front door, he told Ligon to veer to the right in order that Rosales could get off at the
sidewalk. However, Gabat declared, that Ligon said that it could not be done because of the
moving vehicular traffic. Then, while the vehicle slowed down and Ligon was maneuvering to
the right in an attempt to go toward the sidewalk, Rosales lost his grip on the window frame
and fell to the pavement of Quezon Boulevard. Gabat allegedly shouted at Ligon to stop but
Ligon replied that they should go on to Las Pinas and report the incident to the parents of
was speeding along Dewey Boulevard, it was blocked by the taxi of Prudencio Castillo and a
jeep driven by policemen. Gabat and Ligon were brought to police headquarters, but neither of
them executed any written statement.
Issue: WON the accused who was acquitted from any criminal liability is free from any civil
liability.
Decision: It does not follow that a person who is not criminally liable is also free from civil
liability.
While the guilt of the accused in a criminal prosecution must be established beyond reasonable
doubt, only a preponderance of evidence is required in a civil action for damages. The
judgment of acquittal extinguishes the civil liability of the accused only when it includes a
declaration that the facts from which the civil liability might arise did not exist.
The reason for the provisions of Article 29 of the Civil Code, which provides that the acquittal
of the accused on the ground that his guilt has not been proved beyond reasonable doubt does
not necessarily exempt him from civil liability for the same act or omission, has been
explained by the Code Commission as follows:
The old rule that the acquittal of the accused in a criminal case also releases him from civil
liability is one of the most serious flaws in the Philippine legal system. It has given rise to
numberless instances of miscarriage of justice, where the acquittal was due to a reasonable
doubt in the mind of the court as to the guilt of the accused. The reasoning followed is that
inasmuch as the civil responsibility is derived from the criminal offense, when the latter is not
proved, civil liability cannot be demanded.
This is one of those cases where confused thinking leads to unfortunate and deplorable
consequences. Such reasoning fails to draw a clear line of demarcation between criminal
liability and civil responsibility, and to determine the logical result of the distinction.   The two
liabilities are separate and distinct from each other. One affects the social order and the other,
private rights. One is for the punishment or correction of the offender while the other is for
reparation of damages suffered by the aggrieved party. The two responsibilities are so
different from each other that Article 1813 of the present (Spanish) Civil Code reads thus:
"There may be a compromise upon the civil action arising from a crime; but the public action
for the imposition of the legal penalty shall not thereby be extinguished." It is just and proper
that, for the purposes of the imprisonment of or fine upon the accused, the offense should be
proved beyond reasonable doubt. But for the purpose of indemnifying the complaining party,
why should the offense also be proved beyond reasonable doubt? Is not the invasion or
violation of every private right to be proved only by a preponderance of evidence? Is the right
of the aggrieved person any less private because the wrongful act is also punishable by the
criminal law?
For these reasons, the Commission recommends the adoption of the reform under discussion.
It will correct a serious defect in our law. It will close up an inexhaustible source of injustice a
cause for disillusionment on the part of the innumerable persons injured or wronged.
In the instant case, we find that a preponderance of evidence exists sufficient to establish the
facts from which the civil liability of Gabat arises. On the basis of the trial court's evaluation
of the testimonies of both prosecution and defense witnesses at the trial and applying the
quantum of proof required in civil cases, we find that a preponderance of evidence establishes
that Gabat by his act and omission with fault and negligence caused damage to Rosales and
should answer civilly for the damage done. Gabat's wilfull act of calling Rosales, the cigarette
vendor, to the middle of a busy street to buy two sticks of cigarettes set the chain of events
which led to the death of Rosales. Through fault and negligence, Gabat (1) failed to prevent
the driver from moving forward while the purchase was completed; (2) failed to help Rosales
while the latter clung precariously to the moving vehicle, and (3) did not enforce his order to
the driver to stop. Finally, Gabat acquiesced in the driver's act of speeding away, instead of
stopping and picking up the injured victim. These proven facts taken together are firm bases
for finding Gabat civilly liable under the Civil Code for the damage done to Rosales.
8. Rufo Mauricio Construction and/or Rufo Mauricio vs Hon. Intermediate Appellate
Court and People of the Philippines (1987)                              
Extinction of criminal liability and the corresponding civil liability arising from crime (ex
delicto) does not preclude recovery of civil liability from the ER.
Facts:
On September 20, 1979, Illustre Cabiliza, driver of Isuzu dump truck owned by RUFO
MAURICIO CONSTRUCTIONS, was charged before the RTC of Legazpi City with
homicide and damage to property through reckless imprudence. The dump truck that he was
driving sideswipe and hit a Colt Gallant driven and owned by the late Judge Arsenio Solidum,
thereby inflicting injuries upon him which directly caused his untimely death and further
causing damage to the said vehicle and likewise causing damage to the house owned by Pablo
Navarro.
Cabiliza filed a Notice of Appeal but he died and did not live to pursue his appeal. Hence, the
lower court issued an Order requiring the heirs of Cabiliza to appear and to substitute him with
respect to the civil aspect of the case. However, Cabiliza was found insolvent evidenced by a
certificate of insolvency. The victim’s widow Mrs. Aurora Solidum filed a motion for issuance
of a subsidiary writ of execution to be enforced against the employer, Rufo Mauricio, which
was granted.
Petitioner filed MR but it was denied for lack of merit.
Petitioner contends that ---
1. The dismissal of the criminal case against the accused-employee wipes out not only the
employee’s primary civil liability, but also the employer’s subsidiary liability because:
a. The criminal case is based on Article 100 of RPC wherein criminal liability and
exemption of criminal liability implies exemption from civil liability arising from
crime.
b. The civil liability of the employer is based, if any, on quasidelict, since the
accused was exempted from criminal liability.
2. Exemplary damages cannot be imposed upon employer who at the time of the alleged
incident was not present nor inside the vehicle.
3. The petitioner-employer cannot be condemned to pay an exorbitant amount of damages
without giving him opportunity to cross examine the witness and opportunity to adduce
evidence to resist the claim.
4. The IAC misapplied the facts contrary to the physical evidence relied on conjectures that
depicted a different picture of the accident when the evidence shows that it was the victim who
was negligent at the time of the accident. (by invading the proper lane of the dump truck)
Issue: WON Rufo Mauricio Construction is subsidiarily liable
Decision:
The first contention of petitioner that the death of the accused-employee wipes out not only the
employee's primary civil liability but also his employer's subsidiary liability is without merit.
The death of the accused during the pendency of his appeal or before the judgment of
conviction (rendered against him by the lower court) became final and executory extinguished
his criminal liability meaning his obligation to serve the imprisonment imposed and his
pecuniary liability for fines, but not his civil liability should the liability or obligation arise
(not from a crime, for here, no crime was committed, the accused not having been
convicted by final judgment, and therefore still regarded as innocent) but from a quasi-
delict (See Arts. 2176 and 2177, Civil Code), as in this case.
The liability of the employer here would not be subsidiary but solidary with his driver (unless
said employer can prove there was no negligence on his part at all, that is, if he can prove due
diligence in the selection and supervision of his driver).
Inasmuch as the employer (petitioner herein) was not a party in the criminal case , and to grant
him his day in court for the purpose of cross-examining the prosecution witnesses on their
testimonies on the driver's alleged negligence and the amount of damages to which the heirs of
the victim are entitled, as well as to introduce any evidence or witnesses he may care to
present in his defense, the hearing on the motion to quash the subsidiary writ of execution
must be reopened precisely for the purpose adverted to hereinabove.
PREMISES CONSIDERED, the assailed decision of the appellate court is hereby SET
ASIDE, and this case is REMANDED to the trial court for the hearing adverted to in the next
preceding paragraph.
 
9.  MARIA BENITA A. DULAY, in her own behalf and in behalf of the minor children
KRIZTEEN ELIZABETH, BEVERLY MARIE and NAPOLEON II, all surnamed
DULAY, petitioners, 
vs.
THE COURT OF APPEALS, Former Eighth Division, HON. TEODORO P. REGINO,
in his capacity as Presiding Judge of the Regional Trial Court National Capital Region,
Quezon City, Br. 84, SAFEGUARD INVESTIGATION AND SECURITY CO., INC.,
and SUPERGUARD SECURITY CORPORATION, respondents.
G.R. No. 108017 April 3, 1995 BIDIN, J.:
FACTS: An altercation between Benigno Torzuela and Atty. Napoleon Dulay occurred at the
"Big Bang Sa Alabang," as a result of which Benigno Torzuela, the security guard on duty at
the said carnival, shot and killed Atty. Napoleon Dulay.
Herein petitioner Maria Benita A. Dulay, widow of the deceased Napoleon Dulay, in her own
behalf and in behalf of her minor children, filed an action for damages against Benigno
Torzuela and herein private respondents Safeguard Investigation and Security Co., Inc.,
("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"), alleged employers
of defendant Torzuela. 
Petitioners prayed for actual, compensatory, moral and exemplary damages, and attorney's
fees. Consequently, private respondent SUPERGUARD filed a Motion to Dismiss on the
ground that the complaint does not state a valid cause of action. SUPERGUARD claimed that
Torzuela's act of shooting Dulay was beyond the scope of his duties, and that since the alleged
act of shooting was committed with deliberate intent (dolo), the civil liability therefor is
governed by Article 100 of the Revised Penal Code, which states:
Art. 100. Civil liability of a person guilty of a felony. — Every person criminally
liable for a felony is also civilly liable.
Respondent SUPERGUARD further alleged that a complaint for damages based on negligence
under Article 2176 of the New Civil Code, such as the one filed by petitioners, cannot lie,
since the civil liability under Article 2176 applies only to quasi-offenses under Article 365 of
the Revised Penal Code. In addition, the private respondent argued that petitioners' filing of
the complaint is premature considering that the conviction of Torzuela in a criminal case is a
condition sine qua non for the employer's subsidiary liability.
Petitioners opposed both motions, stating that their cause of action against the private
respondents is based on their liability under Article 2180 of the New 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.
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 an industry.
Meanwhile, an Information charging Benigno Torzuela with homicide was filed before the
Regional Trial Court. Respondent Judge Regino issued an order granting SUPERGUARD'S
motion to dismiss and SAFEGUARD'S motion for exclusion as defendant. The above order
was affirmed by the respondent court and petitioners' motion for reconsideration thereof was
denied.
Petitioners take exception to the assailed decision and insist that quasi-delicts are not limited
to acts of negligence but also cover acts that are intentional and voluntary. They further
contend that under Article 2180 of the New Civil Code, private respondents are primarily
liable for their negligence either in the selection or supervision of their employees. This
liability is independent of the employee's own liability for fault or negligence and is distinct
from the subsidiary civil liability under Article 103 of the Revised Penal Code. Moreover,
petitioners argue that Torzuela's act of shooting Dulay is also actionable under Article 33 of
the New Civil Code, to wit:
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for
damages, entirely separate and distinct from the criminal action, may be brought by
the injured party. Such civil action shall proceed independently of the criminal
prosecution, and shall require only a preponderance of evidence. (Emphasis
supplied)

ISSUES:  action against the defendants if, admitting the facts alleged, the court can render a valid
(1)    Whether or not the action for damages will prosper. (YES)
(2)    Whether the complaint at hand states a sufficient cause of action. (YES. Not
related).
RULING:  defendant to the plaintiff for which the latter may maintain an action for recovery of damages.
1.      YES.  The Supreme Court finds for petitioners.
Article 2176 of the New Civil Code provides:  actionable breach on the part of the defendant Torzuela and respondents SUPERGUARD
Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties is called a quasi-
delict and is governed by the provisions of this Chapter.
Contrary to the theory of private respondents, there is no justification for limiting the scope of
Article 2176 of the Civil Code to acts or omissions resulting from negligence. Well-
entrenched is the doctrine that article 2176 covers not only acts committed with negligence,
but also acts which are voluntary and intentional. In the absence of more substantial reasons,
this Court will not disturb the above doctrine on the coverage of Article 2176.
Private respondents further aver that Article 33 of the New Civil Code applies only to injuries
intentionally committed pursuant to the ruling in Marcia v. CA (120 SCRA 193 [1983]), and
that the actions for damages allowed thereunder are ex-delicto. However, the term "physical
injuries" in Article 33 has already been construed to include bodily injuries causing death. It is
not the crime of physical injuries defined in the Revised Penal Code. It includes not only
physical injuries but also consummated, frustrated, and attempted homicide. Although in the
Marcia case (supra), it was held that no independent civil action may be filed under Article 33
where the crime is the result of criminal negligence, it must be noted however, that
Torzuela, the accused in the case at bar, is charged with homicide, not with reckless
imprudence, whereas the defendant in Marcia was charged with reckless imprudence.
Therefore, in this case, a civil action based on Article 33 lies.
It having been established that the instant action is not ex-delicto, petitioners may
proceed directly against Torzuela and the private respondents. Under Article 2180 of the
New Civil Code as aforequoted, when an injury is caused by the negligence of the employee,
there instantly arises a presumption of law that there was negligence on the part of the master
or employer either in the selection of the servant or employee, or in supervision over him after
selection or both. The liability of the employer under Article 2180 is direct and immediate; it
is not conditioned upon prior recourse against the negligent employee and a prior showing of
the insolvency of such employee. Therefore, it is incumbent upon the private respondents to
prove that they exercised the diligence of a good father of a family in the selection and
supervision of their employee.  171 of the Revised Penal Code. The City Prosecutor filed the Information for falsification of
Since Article 2176 covers not only acts of negligence but also acts which are intentional and
voluntary, it was therefore erroneous on the part of the trial court to dismiss petitioner's
complaint simply because it failed to make allegations of attendant negligence attributable to
private respondents. 
2.      YES.
The general rule is that the allegations in a complaint are sufficient to constitute a cause of
judgment upon the same in accordance with the prayer therein. A cause of action exist if the
following elements are present, namely: (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an act or omission on the part of such
defendant violative of the right of the plaintiff or constituting a breach of the obligation of the
This Court finds, under the foregoing premises, that the complaint sufficiently alleged an
and/or SAFEGUARD. It is enough that the complaint alleged that Benigno Torzuela shot
Napoleon Dulay resulting in the latter's death; that the shooting occurred while Torzuela was
on duty; and that either SUPERGUARD and/or SAFEGUARD was Torzuela's employer and
responsible for his acts. This does not operate however, to establish that the defendants below
are liable. Whether or not the shooting was actually reckless and wanton or attended by
negligence and whether it was actually done within the scope of Torzuela's duties; whether the
private respondents SUPERGUARD and/or SAFEGUARD failed to exercise the diligence of a
good father of a family; and whether the defendants are actually liable, are questions which
can be better resolved after trial on the merits where each party can present evidence to prove
their respective allegations and defenses. In determining whether the allegations of a
complaint are sufficient to support a cause of action, it must be borne in mind that the
complaint does not have to establish or allege the facts proving the existence of a cause of
action at the outset; this will have to be done at the trial on the merits of the case. If the
allegations in a complaint can furnish a sufficient basis by which the complaint can be
maintained, the same should not be dismissed regardless of the defenses that may be assessed
by the defendants. To sustain a motion to dismiss for lack of cause of action, the complaint
must show that the claim for relief does not exist rather than that a claim has been defectively
stated, is ambiguous, indefinite or uncertain. Since the petitioners clearly sustained an injury to
their rights under the law, it would be more just to allow them to present evidence of such
injury. 
PREPARED BY:
NICOLE ANN CRYSRA M. ROMERO
10. FRANCIS CHUA, petitioner, vs. HON. COURT OF APPEALS and LYDIA C. HAO,
respondents.
FACTS: 
Private respondent Lydia Hao, treasurer of Siena Realty Corporation, filed a complaint-
affidavit with the City Prosecutor of Manila charging Francis Chua and his wife, Elsa Chua, of
four counts of falsification of public documents pursuant to Article 172 in relation to Article
public document before the MeTC of Manila against Francis Chua but dismissed the
accusation against Elsa.
During the trial, private prosecutors Atty. Sua-Kho and Atty. Rivera appeared as private
prosecutors and presented Hao as their first witness. Chua moved to exclude complainant's
 counsels as private prosecutors in the case on the ground that Hao failed to allege and prove
any civil liability in the case.
The MeTC granted Chua's motion and ordered the complainant's counsels to be excluded from
actively prosecuting the criminal case. Hao filed a petition for certiorari with the RTC of
Manila (SCA No. 99-94846). The RTC granted the petition and reversed the MeTC order.
Chua filed a petition for certiorari before the Court of Appeals. Petitioner argued before the
CA that respondent had no authority to bring a suit in behalf of the Corporation since there
was no Board Resolution authorizing her to file the suit. For her part, respondent Hao claimed
that the suit was brought under the concept of a derivative suit. She maintained that when the
directors or trustees refused to file a suit even when there was a demand from stockholders, a
derivative suit was allowed.
The Court of Appeals held that the action was indeed a derivative suit , for it alleged that
petitioner falsified documents pertaining to projects of the corporation and made it appear that
the petitioner was a stockholder and a director of the corporation. According to the appellate
court, the corporation was a necessary party to the petition filed with the RTC and even if
private respondent filed the criminal case, her act should not divest the Corporation of its right
to be a party and present its own claim for damages.
ISSUES:
1)        Is the criminal complaint in the nature of a derivative suit? (NO)
2)        Is Siena Realty a proper petitioner in the petition for certiorari filed by Hao? (YES)
3)        Should private prosecutors be allowed to actively participate in the trial of the criminal case?
(YES)
RULING:
1)
Under Section 36 of the Corporation Code, read in relation to Section 23, where a corporation
is an injured party, its power to sue is lodged with its board of directors or trustees. An
individual stockholder is permitted to institute a derivative suit on behalf of the corporation
wherein he holds stocks in order to protect or vindicate corporate rights, whenever the officials
of the corporation refuse to sue, or are the ones to be sued, or hold the control of the
corporation. In such actions, the suing stockholder is regarded as a nominal party, with the
corporation as the real party in interest.
A derivative action is a suit by a shareholder to enforce a corporate cause of action. The
corporation is a necessary party to the suit. And the relief which is granted is a judgment
against a third person in favor of the corporation. Similarly, if a corporation has a defense to
an action against it and is not asserting it, a stockholder may intervene and defend on behalf of
the corporation.
Under the Revised Penal Code, every person criminally liable for a felony is also civilly liable.
When a criminal action is instituted, the civil action for the recovery of civil liability arising
from the offense charged shall be deemed instituted with the criminal action, unless the
offended party waives the civil action, reserves the right to institute it separately or institutes
the civil action prior to the criminal action.
In the criminal case, the complaint was instituted by respondent against petitioner for
falsifying corporate documents whose subject concerns corporate projects of Siena Realty
Corporation. Clearly, Siena Realty Corporation is an offended party. Hence, Siena Realty
Corporation has a cause of action. And the civil case for the corporate cause of action is
deemed instituted in the criminal action. However, the board of directors of the corporation in
this case did not institute the action against petitioner. Private respondent was the one who
instituted the action. Private respondent asserts that she filed a derivative suit in behalf of the
corporation. This assertion is inaccurate. Not every suit filed in behalf of the corporation is a
derivative suit. For a derivative suit to prosper, it is required that the minority stockholder
suing for and on behalf of the corporation must allege in his complaint that he is suing on a
derivative cause of action on behalf of the corporation and all other stockholders similarly
situated who may wish to join him in the suit. In the criminal complaint filed by herein
respondent, nowhere is it stated that she is filing the same in behalf and for the benefit of the
corporation. Thus, the criminal complaint including the civil aspect thereof could not be
deemed in the nature of a derivative suit.
2)
In a string of cases, we consistently ruled that only a party-in-interest or those aggrieved may
file certiorari cases. It is settled that the offended parties in criminal cases have sufficient
interest and personality as "person(s) aggrieved" to file special civil action of prohibition and
certiorari.
The recourse of the complainant to the respondent Court of Appeals was proper. The petition
was brought in her own name and in behalf of the Corporation. Although, the corporation was
not a complainant in the criminal action, the subject of the falsification was the corporation's
project and the falsified documents were corporate documents. Therefore, the corporation is a
proper party in the petition for certiorari because the proceedings in the criminal case directly
and adversely affected the corporation.
3)
Generally, the basis of civil liability arising from crime is the fundamental postulate that every
man criminally liable is also civilly liable. When a person commits a crime he offends two
entities namely (1) the society in which he lives in or the political entity called the State whose
law he has violated; and (2) the individual member of the society whose person, right, honor,
chastity or property has been actually or directly injured or damaged by the same punishable
act or omission. An act or omission is felonious because it is punishable by law, it gives rise
to civil liability not so much because it is a crime but because it caused damage to
another.
Rule 111(a) of the Rules of Criminal Procedure provides that, "[w]hen a criminal action is
instituted, the civil action arising from the offense charged shall be deemed instituted with the
criminal action unless the offended party waives the civil action, reserves the right to institute
it separately, or institutes the civil action prior to the criminal action."
Private respondent did not waive the civil action, nor did she reserve the right to institute it
separately, nor institute the civil action for damages arising from the offense charged. Thus,
we find that the private prosecutors can intervene in the trial of the criminal action.
When the civil action is instituted with the criminal action, evidence should be taken of the
damages claimed and the court should determine who are the persons entitled to such
indemnity. The civil liability arising from the crime may be determined in the criminal
proceedings if the offended party does not waive to have it adjudged or does not reserve the
right to institute a separate civil action against the defendant. Accordingly, if there is no
waiver or reservation of civil liability, evidence should be allowed to establish the extent of
injuries suffered.
In the case before us, there was neither a waiver nor a reservation made; nor did the offended
party institute a separate civil action. It follows that evidence should be allowed in the criminal
proceedings to establish the civil liability arising from the offense committed, and the private
offended party has the right to intervene through the private prosecutors.
11. DR. ENCARNACION C. LUMANTAS, M.D. vs. HANZ CALAPIZ,
REPRESENTED BY HIS PARENTS, HILARIO CALAPIZ, JR. AND HERLITA
CALAPIZ
G.R. NO. 163753. January 15, 2014 J. Bersamin
FACTS: Spouses Hilario Calapiz, Jr. and Herlita Calapiz brought a criminal charge against
the petitioner for reckless imprudence resulting to serious physical injuries when their son,
Hanz, had a damaged urethra that could not be fully repaired and reconstructed due to a
trauma believed to be caused by the medical procedures he underwent that were conducted by
the petitioner. The RTC acquitted the petitioner of the crime charged for insufficiency of the
evidence. It held that the Prosecution’s evidence did not show the required standard of care to
be observed by other members of the medical profession under similar circumstances.
Nonetheless, the RTC ruled that the petitioner was liable for moral damages because there was
a preponderance of evidence showing that Hanz had received the injurious trauma from his
circumcision by the petitioner. On appeal, the CA affirmed the RTC decision. It opined that
even if the petitioner had been acquitted of the crime charged, the acquittal did not necessarily
mean that he had not incurred civil liability considering that the Prosecution had
preponderantly established the sufferings of Hanz as the result of the circumcision.
ISSUE: Whether the CA erred in affirming the petitioner’s civil liability despite his acquittal
of the crime of reckless imprudence resulting in serious physical injuries
RULING: It is axiomatic that every person criminally liable for a felony is also civilly liable .
Nevertheless, the acquittal of an accused of the crime charged does not necessarily extinguish
his civil liability. In Manantan v. Court of Appeals, the Court elucidates on the two kinds of
acquittal recognized by our law as well as on the different effects of acquittal on the civil
liability of the accused, viz:
Our law recognizes two kinds of acquittal, with different effects on the civil liability
of the accused. First is an acquittal on the ground that the accused is not the author
of the act or omission complained of. This instance closes the door to civil liability,
for a person who has been found to be not the perpetrator of any act or omission
cannot and can never be held liable for such act or omission. There being no delict,
civil liability ex delicto is out of the question, and the civil action, if any, which may
be instituted must be based on grounds other than the delict complained of. This is
the situation contemplated in Rule 111 of the Rules of Court. The second instance is
an acquittal based on reasonable doubt on the guilt of the accused. In this case,
even if the guilt of the accused has not been satisfactorily established, he is not
exempt from civil liability which may be proved by preponderance of evidence only.
Conformably with the foregoing, therefore, the acquittal of an accused does not prevent a
judgment from still being rendered against him on the civil aspect of the criminal case unless
the court finds and declares that the fact from which the civil liability might arise did not exist.
Although it found the Prosecution’s evidence insufficient to sustain a judgment of conviction
against the petitioner for the crime charged, the RTC did not err in determining and adjudging
his civil liability for the same act complained of based on mere preponderance of evidence. In
this connection, the Court reminds that the acquittal for insufficiency of the evidence did not
require that the complainant’s recovery of civil liability should be through the institution of a
separate civil action for that purpose.
The petitioner’s contention that he could not be held civilly liable because there was no proof
of his negligence deserves scant consideration. The failure of the Prosecution to prove his
criminal negligence with moral certainty did not forbid a finding against him that there was
preponderant evidence of his negligence to hold him civilly liable. With the RTC and the CA
both finding that Hanz had sustained the injurious trauma from the hands of the petitioner on
the occasion of or incidental to the circumcision, and that the trauma could have been avoided,
the Court must concur with their uniform findings. In that regard, the Court need not analyze
and weigh again the evidence considered in the proceedings a quo. The Court, by virtue of its
not being a trier of facts, should now accord the highest respect to the factual findings of the
trial court as affirmed by the CA in the absence of a clear showing by the petitioner that such
findings were tainted with arbitrariness, capriciousness or palpable error.
F. a. Independent Civil Action., Rationale and The Prejudicial Question
Doctrine 
12.SPS. ANTONIO C. SANTOS and ESPERANZA C. SANTOS, NORA BARNALO,
BELINDA LUMACTAD, MARIENELA DY, NIKKA SANTOS and LEONARDO
FERRER, Petitioners, 
 vs. HON. NORMANDIE B. PIZARDO, as Presiding Judge, RTC of Quezon City,
Branch 101, DIONISIO M SIBAYAN, and VIRON TRANSPORTATION COMPANY,
INC., represented by VIRGILIO Q. RONDARIS, President/Chairman, Respondent.
G.R. No. 151452. July 29, 2005
Facts: In an Information dated April 25, 1994, Dionisio M. Sibayan (Sibayan) was charged
with Reckless Imprudence Resulting to Multiple Homicide and Multiple Physical Injuries in
connection with a vehicle collision between a southbound Viron Transit bus driven by Sibayan
and a northbound Lite Ace Van, which claimed the lives of the van’s driver and three (3) of its
passengers, including a two-month old baby, and caused physical injuries to five (5) of the
van’s passengers. After trial, Sibayan was convicted and sentenced to suffer the penalty of
imprisonment for two (2) years, four (4) months and one (1) day to four (4) years and two (2)
months. However, as there was a reservation to file a separate civil action, no pronouncement
of civil liability was made by the municipal circuit trial court in its decision promulgated on
December 17, 1998.
On October 20, 2000, petitioners filed a complaint for damages against Sibayan, Viron Transit
and its President/Chairman, Virgilio Q. Rondaris, with the Regional Trial Court of Quezon
City, pursuant to their reservation to file a separate civil action. They cited therein the
judgment convicting Sibayan.
Viron Transit moved to dismiss the complaint on the grounds of improper service of
summons, prescription and laches, and defective certification of non-forum shopping.
Petitioners opposed the motion to dismiss contending, among others, that the right to file a
separate action in this case prescribes in ten (10) years reckoned from the finality of the
judgment in the criminal action. As there was no appeal of the decision convicting Sibayan,
the complaint which was filed barely two (2) years thence was clearly filed within the
prescriptive period.
The trial court dismissed the complaint on the principal ground that the cause of action had
already prescribed. According to the trial court, actions based on quasi delict, as it construed
petitioners’ cause of action to be, prescribe four (4) years from the accrual of the cause of
action. Hence, notwithstanding the fact that petitioners reserved the right to file a separate civil
action, the complaint ought to be dismissed on the ground of prescription
Petitioners filed a petition for certiorari with the Court of Appeals which dismissed the same
for error in the choice or mode of appeal. The appellate court also denied petitioners’ motion
for reconsideration reasoning that even if the respondent trial court judge committed grave
abuse of discretion in issuing the order of dismissal, certiorari is still not the permissible
remedy as appeal was available to petitioners and they failed to allege that the petition was
brought within the recognized exceptions for the allowance of certiorari in lieu of appeal.
Issue: WON the action has prescribed
Ruling: NO.
Our Revised Penal Code provides that every person criminally liable for a felony is also civilly
liable. Such civil liability may consist of restitution, reparation of the damage caused and
indemnification of consequential damages.  When a criminal action is instituted, the civil
liability arising from the offense is impliedly instituted with the criminal action, subject to
three notable exceptions:
1. When the injured party expressly waives the right to recover damages from the accused;  enforcement of the subsidiary liability of the employer. Once there is a conviction for a felony,
2. When the offended party reserves his right to have the civil damages determined in a
separate action in order to take full control and direction of the prosecution of his cause; and
3. When the injured party actually exercises the right to maintain a private suit against the
offender by instituting a civil action prior to the filing of the criminal case.
Petitioners expressly made a reservation of their right to file a separate civil action as a result
of the crime committed by Sibayan. On account of this reservation, the municipal circuit trial
court, in its decision convicting Sibayan, did not make any pronouncement as to the latter’s
civil liability.
Predicating their claim on the judgment of conviction and their reservation to file a separate
civil action made in the criminal case, petitioners filed a complaint for damages against
Sibayan, Viron Transit and its President/Chairman. Petitioners assert that by the institution of
the complaint, they seek to recover private respondents’ civil liability arising from crime.
Unfortunately, based on its misreading of the allegations in the complaint, the trial court
dismissed the same, declaring that petitioners’ cause of action was based on quasi delict and
should have been brought within four (4) years from the time the cause of action accrued, i.e.,
from the time of the accident.
A reading of the complaint reveals that the allegations therein are consistent with petitioners’
claim that the action was brought to recover civil liability arising from crime. Although there
are allegations of negligence on the part of Sibayan and Viron Transit, such does not
necessarily mean that petitioners were pursuing a cause of action based on quasi delict,
considering that at the time of the filing of the complaint, the cause of action ex quasi delicto
had already prescribed. Besides, in cases of negligence, the offended party has the choice
between an action to enforce civil liability arising from crime under the Revised Penal Code
and an action for quasi delict under the Civil Code.
An act or omission causing damage to another may give rise to two separate civil liabilities on
the part of the offender, i.e., (1) civil liability ex delicto, under Article 100 of the Revised
Penal Code; and (2) independent civil liabilities, such as those (a) not arising from an act or
omission complained of as a felony, e.g., culpa contractual or obligations arising from law
under Article 31 of the Civil Code, intentional torts under Articles 32 and 34, and culpa
aquiliana under Article 2176 of the Civil Code; or (b) where the injured party is granted a
right to file an action independent and distinct from the criminal action under Article 33 of the
Civil Code.  Either of these liabilities may be enforced against the offender subject to the
caveat under Article 2177 of the Civil Code that the plaintiff cannot recover damages twice for
the same act or omission of the defendant and the similar proscription against double recovery
under the Rules above-quoted.
At the time of the filing of the complaint for damages in this case, the cause of action ex quasi
delicto had already prescribed. Nonetheless, petitioners can pursue the remaining avenue
opened for them by their reservation, i.e., the surviving cause of action ex delicto. This is so
because the prescription of the action ex quasi delicto does not operate as a bar to an action to
enforce the civil liability arising from crime especially as the latter action had been expressly
reserved.
The court also held in Mendoza v. La Mallorca Bus Compan (2 cases filed against the driver:
One for reckless imprudence resulting to damage to property with reservation-convicted and
civil action for damage-dismissed), that the dismissal of the action based on culpa aquiliana is
not a bar to the enforcement of the subsidiary liability of the employer. Once there is a
conviction for a felony, final in character, the employer becomes subsidiarily liable if the
commission of the crime was in the discharge of the duties of the employees. This is so
because Article 103 of the Revised Penal Code operates with controlling force to obviate the
possibility of the aggrieved party being deprived of indemnity even after the rendition of a
final judgment convicting the employee.
The court held that the dismissal of the action based on culpa aquiliana is not a bar to the
final in character, the employer becomes subsidiarily liable if the commission of the crime was
in the discharge of the duties of the employees. This is so because Article 103 of the Revised
Penal Code operates with controlling force to obviate the possibility of the aggrieved party
being deprived of indemnity even after the rendition of a final judgment convicting the
employee.
Seen in this light, the trial court should not have dismissed the complaint on the ground of
prescription, but instead allowed the complaint for damages ex delicto to be prosecuted on the
merits, considering petitioners’ allegations in their complaint, opposition to the motion to
dismiss and motion for reconsideration of the order of dismissal, insisting that the action was
to recover civil liability arising from crime.
This does not offend the policy that the reservation or institution of a separate civil action
waives the other civil actions. The rationale behind this rule is the avoidance of multiple suits
between the same litigants arising out of the same act or omission of the offender. However,
since the stale action for damages based on quasi delict should be considered waived, there is
no more occasion for petitioners to file multiple suits against private respondents as the only
recourse available to them is to pursue damages ex delicto. This interpretation is also
consistent with the bar against double recovery for obvious reasons.
-Rysa Almoradie
13.
L.G. Foods Corporation and Victorino Gabor, Vice President and General Manager vs Hon.
Philadelfa B. Pagapong- Agraviador, in her capacity as Presiding Judge of RTC, Br43,
Bacolod City and Sps Florentino and Theresa Vallejera (2006)
Facts:
On Feb. 26, 1996, Charles Vallejera, a 7-yr old son of the spouses Florentino Vallejera and
Theresa Vallejera, died as he was hit by a Ford Fiera van owned by the petitioners and driven
at the time by their employee, Vincent Norman Ferrer. Eventually, an information for
Reckless Imprudence Resulting to Homicide was filed against the driver before the MTCC
Bacolod City. However, as the accused driver committed suicide, the case was dismissed. 
Claiming that the petitioners should be held civilly liable as they failed to exercise the
necessary diligence required of a good father of a family in the selection and supervision of
their employee, the spouses Vallejera later on filed a complaint for damages against them.  14. RAFAEL JOSE-CONSING, JR., Petitioner, vs. PEOPLE OF THE PHILIPPINES,
For their part, the petitioners prayed, by way of an Answer w/ Compulsory Counterclaim, for
the dismissal of the complaint. They argued that they had exercised the required due diligence
and maintained that for their liability to attach their driver must first be convicted. Thus, since
the driver died during the pendency of the criminal action, the sine qua non condition for their
subsidiary liability was not fulfilled. Hence, they argued that there is lack of cause of action on
the part of the Spouses. They also argued that since the Spouses Vallejera did not make a
reservation to institute a separate action for damages when the criminal case was filed, the
damage suit in question is thereby deemed instituted with the criminal action w/c was already
dismissed. The RTC and the CA both denied petitioner’s motion to dismiss. Hence, this
petition for review on certiorari.
Issue:  learned that the title to the property was really TCT No. 114708 in the names of Po Willie Yu
Whether the spouses Vallejeras’ cause of action in the Civil Case for Damages is founded on
Art. 103 of the RPC, as maintained by the petitioners, or derived from Art. 2180 of the Civil
Code, as decided by the lower courts.
Decision:
PETITION Denied.
From the allegations of their complaint, it is clear that quasi- delict was the spouses’ choice of
remedy against the petitioners. An act or omission causing damage to another may give
rise to 2 separate civil liabilities on the part of the offender: 1) civil liability ex delicto and
2) independent civil liabilities, such as those a) not arising from an act or omission
complained of as felony (culpa contractual or obligations arising from law, intentional
torts and culpa aquiliana) or b) where the injured party is granted a right to file an
action independent and distinct from the criminal action. Either of these two possible
liabilities may be enforced against the offender. The victims of negligence or their heirs
have a choice between an action to enforce the civil liability arising from culpa criminal
under Art. 100 of the RPC, and an action for quasi-delict (culpa aquiliana) under Arts
2176- 2194 of the Civil Code. 
If, as in this case, the action chosen is for quasi-delict, the plaintiff may hold the employer
liable for the negligent act of its employee, subject to the employer’s defense of exercise of the
diligence of a good father of the family. On the other hand, if the action chosen is for culpa
criminal, the plaintiff can hold the employer subsidiarily liable only upon proof of prior
conviction of its employee. According to Art. 2177, these are alternative remedies the plaintiff
may choose from in case the obligation has the possibility of arising indirectly from the crime
or directly from tort. The choice is with the plaintiff who makes known his cause of action in
his initiatory pleading or complaint and not with the defendant who can not ask for the
dismissal of the plaintiff’s case of action or lack of it based on the defendant’s perception that
the plaintiff should have opted to file a claim under Art. 103, RPC. Under Art. 2180 of the
CC, the liability of the employer is direct/immediate. It is not considered upon prior
recourse against the negligent employee and a prior showing of insolvency of such
employee. Furthermore, the circumstance that no reservation to institute a separate civil action
for damages was made when the criminal case was filed is of no moment for the simple reason
that the criminal case was dismissed w/o any pronouncement having been made therein . In
reality, it is as if there was no criminal case to speak of in the first place.
Copied. Zarina
Respondent.
G.R. No. 161075, FIRST DIVISION, July 15, 2013, BERSAMIN, J.
FACTS:
Petitioner negotiated with and obtained for himself and his mother, Cecilia de la Cruz (de la
Cruz) various loans totaling ₱18,000,000.00 from Unicapital Inc. (Unicapital). The loans were
secured by a real estate mortgage constituted on a parcel of land registered under the name of
de la Cruz. In accordance with its option to purchase the mortgaged property, Unicapital
agreed to purchase one-half of the property for a total consideration of ₱21,221,500.00. The
other half of the property was purchased by Plus Builders, Inc. (Plus Builders), a joint venture
partner of Unicapital. Before Unicapital and Plus Builders could develop the property, they
and Juanito Tan Teng, the parties from whom the property had been allegedly acquired by de
la Cruz. TCT No. 687599 held by De la Cruz appeared to be spurious.
On its part, Unicapital demanded the return of the total amount of ₱41,377,851.48 as of April
19, 1999 that had been paid to and received by de la Cruz and Consing, but the latter ignored
the demands. Consing filed Civil Case No. 1759 in the Pasig City RTC (Pasig civil case) for
injunctive relief, thereby seeking to enjoin Unicapital from proceeding against him for the
collection of the ₱41,377,851.48 on the ground that he had acted as a mere agent of his
mother.
Unicapital initiated a criminal complaint against Consing and de la Cruz. The Makati City
Prosecutor’s Office filed against Consing and De la Cruz an information for estafa through
falsification of public document in the RTC in Makati City (Criminal Case No. 00-120), which
was assigned to Branch 60 (Makati criminal case).
Unicapital sued Consing in the RTC in Makati City (Civil Case No. 99-1418) for the recovery
of a sum of money and damages, with an application for a writ of preliminary attachment
(Makati civil case).
Consing moved to defer his arraignment in the Makati criminal case on the ground of
existence of a prejudicial question due to the pendency of the Pasig and Makati civil cases. 
The RTC issued an order suspending the proceedings in the Makati criminal case on the
ground of the existence of a prejudicial question, and denied the Prosecution’s motion for
reconsideration.  the Civil Code, the independent civil action may be brought by the offended party. It shall
The State thus assailed in the CA the last two orders of the RTC in the Makati criminal case
via petition for certiorari (C.A.-G.R. SP No. 71252). The CA promulgated its decision in C.A.-
G.R. SP No. 71252, dismissing the petition for certiorari and upholding the RTC’s questioned
orders.
In the meanwhile, Plus Builders commenced its own suit for damages against Consing (Civil
Case No. 99-95381) in the RTC in Manila (Manila civil case).
An information for estafa through falsification of public document was filed against Consing
and De la Cruz in the RTC in Imus, Cavite, docketed as Criminal Case No. 7668-00 and
assigned to Branch 21 (Cavite criminal case). Consing filed a motion to defer the arraignment
on the ground of the existence of a prejudicial question, i.e., the pendency of the Pasig and
Manila civil cases. However, the RTC handling the Cavite criminal case denied Consing’s
motion. Later on, it also denied his motion for reconsideration. Thereafter, Consing
commenced in the CA a special civil action for certiorari with prayer for the issuance of a
TRO and/or writ of preliminary injunction (C.A.-G.R. SP No. 63712), seeking to enjoin his
arraignment and trial in the Cavite criminal case. The CA granted the TRO and later
promulgated its decision granting Consing’ petition for certiorari and setting aside the order of
the RTC, and permanently enjoining the RTC from proceeding with the arraignment and trial
until the Pasig and Manila civil cases had been finally decided.
Not satisfied, the State assailed the decision of the CA in this Court (G.R. No. 148193),
praying for the reversal of the decision of the CA. The Court granted the petition for review in
G.R. No. 148193, and reversed and set aside the decision of the CA, viz:
In the case at bar, we find no prejudicial question that would justify the suspension of the
proceedings in the criminal case (the Cavite criminal case). The issue in Civil Case No. SCA
1759 (the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing) merely
acted as an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381 (the
Manila civil case), for Damages and Attachment, the question is whether respondent and his
mother are liable to pay damages and to return the amount paid by PBI for the purchase of the
disputed lot. Even if respondent is declared merely an agent of his mother in the transaction
involving the sale of the questioned lot, he cannot be adjudged free from criminal liability. An
agent or any person may be held liable for conspiring to falsify public documents. Hence, the
determination of the issue involved in Civil Case No. SCA 1759 for Injunctive Relief is
irrelevant to the guilt or innocence of the respondent in the criminal case for estafa through
falsification of public document.
Likewise, the resolution of PBI’s right to be paid damages and the purchase price of the lot in
question will not be determinative of the culpability of the respondent in the criminal case for
even if PBI is held entitled to the return of the purchase price plus damages, it does not ipso
facto follow that respondent should be held guilty of estafa through falsification of public
document. Stated differently, a ruling of the court in the civil case that PBI should not be paid
the purchase price plus damages will not necessarily absolve respondent of liability in the
criminal case where his guilt may still be established under penal laws as determined by other
evidence.
Moreover, neither is there a prejudicial question if the civil and the criminal action can,
according to law, proceed independently of each other. Under Rule 111, Section 3 of the
Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of
proceed independently of the criminal action and shall require only a preponderance of
evidence. In no case, however, may the offended party recover damages twice for the same act
or omission charged in the criminal action.
In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the
alleged fraud committed by respondent and his mother in selling the disputed lot to PBI is an
independent civil action under Article 33 of the Civil Code. As such, it will not operate as a
prejudicial question that will justify the suspension of the criminal case at bar.
Turning back to the Makati criminal case, the State moved for the reconsideration of the
adverse decision of the CA, citing the ruling in G.R. No. 148193, supra, to the effect that the
Pasig and Manila civil cases did not present a prejudicial question that justified the suspension
of the proceedings in the Cavite criminal case, and claiming that under the ruling in G.R. No.
148193, the Pasig and Makati civil cases did not raise a prejudicial question that would cause
the suspension of the Makati criminal case.
In his opposition to the State’s motion for reconsideration, Consing contended that the ruling
in G.R. No. 148193 was not binding because G.R. No. 148193 involved Plus Builders, which
was different from Unicapital, the complainant in the Makati criminal case. 
The CA amended its decision, reversing itself. It relied upon the ruling in G.R. No. 148193,
and held thusly:
CA-G.R. SP No. 63712 is similar with the case at bench. The transactions in controversy, the
documents involved; the issue of the respondent’s culpability for the questioned transactions
are all identical in all the proceedings; and it deals with the same parties with the exception of
private complainant Unicapital.
However, the Supreme Court, upon review of CA-G.R. SP No. 63712, People of the
Philippines vs. Rafael Jose Consing, Jr. (G.R. No. 148193, January 16, 2003) held that "Civil
Case No. 99-95381, for Damages and attachment on account of alleged fraud committed by
respondent and his mother in selling the disputed lot to Plus Builders, Inc. is an independent
civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial
question that will justify the suspension of the criminal case at bar." In view of the
aforementioned decision of the Supreme Court, We are thus amending Our May 20, 2003
decision granting petitioner’s motion for reconsideration. It reversed the orders issued by the
CA and ordered the CA to proceed with the hearing of Criminal Case No. 00-120. Consing
filed a motion for reconsideration, but the CA denied the motion through the second assailed
resolution of December 11, 2003. Hence, this appeal by petition for review on certiorari.
Petitioner reiterates his contention that the decision in G.R. No. 148193 was not
controlling in relation to C.A.-G.R. No. 71252, which involved Plus Builders, not
Unicapital, the complainant in Criminal Case No. 00-120. He posits that in arriving at its
amended decision, the CA did not consider the pendency of the Makati civil case (Civil
Case No. 99-1418), which raised a prejudicial question, considering that the resolution of
such civil action would include the issue of whether he had falsified a certificate of title or
had willfully defrauded Unicapital, the resolution of either of which would determine his
guilt or innocence in Criminal Case No. 00-120.
ISSUE:
1. Whether or not the Makati criminal case should be suspended pending the resolution
of the Makati civil case that Unicapital had filed. (NO)
2. Whether or not Consing’s being a mere agent of his mother should not be criminally
liable. (NO)
RULING:
1.
NO. Consing has hereby deliberately chosen to ignore the firm holding in the ruling in G.R.
No. 148193 to the effect that the proceedings in Criminal Case No. 00-120 could not be
suspended because the Makati civil case was an independent civil action, while the Pasig civil
case raised no prejudicial question. That was wrong for him to do considering that the ruling
fully applied to him due to the similarity between his case with Plus Builders and his case with
Unicapital.
A perusal of Unicapital’s complaint in the Makati civil case reveals that the action was
predicated on fraud. This was apparent from the allegations of Unicapital in its complaint to
the effect that Consing and de la Cruz had acted in a "wanton, fraudulent, oppressive, or
malevolent manner in offering as security and later object of sale, a property which they do not
own, and foisting to the public a spurious title." As such, the action was one that could proceed
independently of Criminal Case No. 00-120 pursuant to Article 33 of the Civil Code.
It is well settled that a civil action based on defamation, fraud and physical injuries may
be independently instituted pursuant to Article 33 of the Civil Code, and does not
operate as a prejudicial question that will justify the suspension of a criminal case.  the dealership agreement on a non-exclusive basis.
Contrary to Consing’s stance, it was not improper for the CA to apply the ruling in G.R. No.
148193 to his case with Unicapital, for, although the Manila and Makati civil cases involved
different complainants (i.e., Plus Builders and Unicapital), the civil actions Plus Builders and
Unicapital had separately instituted against him were undeniably of similar mold, i.e., they
were both based on fraud, and were thus covered by Article 33 of the Civil Code. Clearly, the
Makati criminal case could not be suspended pending the resolution of the Makati civil case
that Unicapital had filed.
2.
NO. As far as the Pasig civil case is concerned, the issue of Consing’s being a mere agent of
his mother who should not be criminally liable for having so acted due to the property
involved having belonged to his mother as principal has also been settled in G.R. No. 148193 ,
to wit:
In the case at bar, we find no prejudicial question that would justify the suspension of the
proceedings in the criminal case (the Cavite criminal case). The issue in Civil Case No. SCA
1759 (the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing) merely
acted as an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381 (the
Manila civil case), for Damages and Attachment, the question is whether respondent and his
mother are liable to pay damages and to return the amount paid by PBI for the purchase of the
disputed lot. Even if respondent is declared merely an agent of his mother in the transaction
involving the sale of the questioned lot, he cannot be adjudged free from criminal liability. An
agent or any person may be held liable for conspiring to falsify public documents. Hence, the
determination of the issue involved in Civil Case No. SCA 1759 for Injunctive Relief is
irrelevant to the guilt or innocence of the respondent in the criminal case for estafa through
falsification of public document. 
Prepared by: Sherissa Marisse Bernabe
G. PRINCIPLE
1.1 Elements
15. SEA COMMERCIAL COMPANY, INC., petitioner, vs. THE HONORABLE COURT
OF APPEALS, JAMANDRE INDUSTRIES, INC. and TIRSO JAMANDRE, respondents
Facts:
SEACOM is a corporation engaged in the business of selling and distributing agricultural
machinery, products and equipment. SEACOM and JII entered into a dealership agreement
whereby SEACOM appointed JII as its exclusive dealer in the City and Province of Iloilo. The
agreement was subsequently amended to include Capiz in the territorial coverage and to make
JII allegedly incurred a balance of ₱18,843.85 for unpaid deliveries. SEACOM brought action
to recover the amount. JII filed an Answer denying the obligation and interposed a
counterclaim for damages representing unrealized profits. In the counterclaim, JII alleged that
as a dealer in Capiz, JII contracted to sell in 1977 twenty-four (24) units of Mitsubishi power
tillers to a group of farmers, which fact JII allegedly made known to petitioner, but the latter
taking advantage of said information and in bad faith, went directly to FSDC and dealt with it
and sold twenty one (21) units of said tractors, thereby depriving JII of unrealized profits.
SEACOM alleges that the transaction with FSDC was the result of a public bidding. It alleges
that it did not know FSDC’s intent to buy machineries from JII. Moreover, the dealership
agreement is a non-exclusive, therefore, it can still compete in the market against JII.
RTC:
The trial court rendered a decision ordering JII to pay SEACOM P18,843.85 representing its
outstanding obligation. It also granted the JII’s counterclaim for unrealized profits and for
moral and exemplary damages.
CA:
The Court of Appeals affirmed the decision of the trial court stating that while there exists no
agency relationship between SEACOM and JII, SEACOM is liable for damages and
unrealized profits to JII.
Issue:
W/N there was an abuse of right by SEACOM resulting to bad faith when it competed with its
own dealer, JII, as regards the sale of farm machineries to FSDC
Held:
YES.
Petition DENIED. Decision of Court of Appeals affirmed.
The principle of abuse of rights stated in the above article (Art. 19 of NCC), departs from the
classical theory that “he who uses a right injures no one.” The modern tendency is to depart
from the classical and traditional theory, and to grant indemnity for damages in cases where
there is an abuse of rights, even when the act is not illicit. Article 19 was intended to expand
the concept of torts by granting adequate legal remedy for the untold number of moral wrongs
which is impossible for human foresight to provide specifically in statutory law. If mere fault
or negligence in one’s acts can make him liable for damages for injury caused thereby, with
more reason should abuse or bad faith make him liable. The absence of good faith is essential
to abuse of right. Good faith is an honest intention to abstain from taking any unconscientious
advantage of another, even through the forms or technicalities of the law, together with an
absence of all information or belief of fact which would render the transaction
unconscientious. In business relations, it means good faith as understood by men of affairs.
While Article 19 may have been intended as a mere declaration of principle, the “cardinal law
on human conduct” expressed in said article has given rise to certain rules, e.g. that where a
person exercises his rights but does so arbitrarily or unjustly or performs his duties in a
manner that is not in keeping with honesty and good faith, he opens himself to liability. The
elements of an abuse of rights under Article 19 are: (1) there is a legal right or duty; (2)
which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.
Clearly, the bad faith of SEACOM was established. By appointing JII as a dealer of its
agricultural equipment, SEACOM recognized the role and undertaking of JII to promote and
sell said equipment. Under the dealership agreement, JII was to act as a middleman to sell
SEACOM’s products, in its area of operations, i.e. Iloilo and Capiz provinces.
Even if the dealership agreement was amended to make it on a nonexclusive basis, SEACOM
may not exercise its right unjustly or in a manner that is not in keeping with honesty or good
faith; otherwise it opens itself to liability under the abuse of right rule embodied in Article 19
of the Civil Code above-quoted.
1.2. Test when principle may be invoked
GLOBE MACKAY CABLE AND RADIO CORP., and HERBERT C. HENDRY,
Petitioners, vs. THE HONORABLE COURT OF APPEALS and RESTITUTO M.
TOBIAS, Respondents
G.R. No. 81262 August 25, 1989 Cortes, J.
FACTS:
Restituto M. Tobias (TOBIAS) was employed by Globe Mackay Cable and Radio Corporation
(GLOBE MACKAY) in a dual capacity as a purchasing agent and administrative assistant to
the engineering operations manager. 
In 1972, Tobias discovered fictitious purchases and fraudulent transactions which caused the
company to loss several hundreds of thousand pesos. Tobias reported the discovery to his
immediate supervisors, including Herbert Hendry (HENDRY), Globe Mackay’s general
manager. However, Tobias was named as the primary suspect and was ordered to take a one
week forced leave. Upon his return to work, Tobias was called “crook” and “swindler” by
Hendry. 
Thereafter, Tobias underwent a lie detector test and a police investigation, to which he was
found to be clear from any participation in the anomaly. Albeit, Globe Mackay conducted a
private investigation regarding the anomaly and suspended Tobias from work. 
Notwithstanding the negative results of both police report and private investigation, Globe
Mackay filed a complaint for estafa through falsification of commercial documents against
Tobias. And thereafter, dismissed Tobias from work. 
Unemployed, Tobias applied with Republic Telephone Company (RETELCO). However,
Hendry, without any request from RETELCO, sent a letter stating that Tobias was dismmised
by Globe Mackay due to dishonesty. 
Tobias filed a civil case for damages anchored on alleged unlawful, malicious, oppressive, and
abusive acts of Hendry. RTC rendered its judgment in favor of Tobias. On appeal, the CA
affirmed the RTC’s decision in totoo, hence the instant petition for review on certiorari. 
ISSUE:
Whether Globe Mackay and Hendry are liable for damages to Tobias. 
HELD:
Yes, Globe Mackay and Hendry are liable for damages to Tobias. 
Article 19 of the New Civil Code states that: Every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith. 
This article, known to contain what is commonly referred to as the principle of abuse of rights,
sets certain standards which must be observed not only in the exercise of one's rights but also
in the performance of one's duties. These standards are the following: to act with justice; to
give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a
primordial limitation on all rights; that in their exercise, the norms of human conduct set forth
in Article 19 must be observed. A right, though by itself legal because recognized or granted
by law as such, may nevertheless become the source of some illegality. When a right is
exercised in a manner which does not conform with the norms enshrined in Article 19 and
results in damage to another, a legal wrong is thereby committed for which the wrongdoer
must be held responsible. But while Article 19 lays down a rule of conduct for the government
of human relations and for the maintenance of social order, it does not provide a remedy for its
violation. Generally, an action for damages under either Article 20 or Article 21 would be
proper.
Article 20, which pertains to damage arising from a violation of law, provides that: Every
person who contrary to law, wilfully or negligently causes damage to another, shall indemnify
the latter for the same.
However, in the case at bar, petitioners claim that they did not violate any provision of law
since they were merely exercising their legal right to dismiss private respondent. This does
not, however, leave private respondent with no relief because Article 21 of the Civil Code
provides that: Any person who wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the damage.  part, PNB emphasized that whatever rights the Aguilars have under RA 7202 were already
This article, adopted to remedy the "countless gaps in the statutes, which leave so many
victims of moral wrongs helpless, even though they have actually suffered material and moral
injury" [Id.] should "vouchsafe adequate legal remedy for that untold number of moral wrongs
which it is impossible for human foresight to provide for specifically in the statutes" [Id. it p.
40; See also PNB v. CA, G.R. No. L-27155, May 18,1978, 83 SCRA 237, 247].
In determining whether or not the principle of abuse of rights may be invoked, there is no rigid
test which can be applied. While the Court has not hesitated to apply Article 19 whether the
legal and factual circumstances called for its application [See for e.g., Velayo v. Shell Co. of
the Phil., Ltd., 100 Phil. 186 (1956); PNB v. CA, supra; Grand Union Supermarket, Inc. v.
Espino, Jr., G.R. No. L -48250, December 28, 1979, 94 SCRA 953; PAL v. CA, G.R. No. L
-46558, July 31,1981,106 SCRA 391; United General Industries, Inc, v. Paler G.R. No. L
-30205, March 15,1982,112 SCRA 404; Rubio v. CA, G.R. No. 50911, August 21, 1987 , 153
SCRA 183] the question of whether or not the principle of abuse of rights has been violated
resulting in damages under Article 20 or Article 21 or other applicable provision of law,
depends on the circumstances of each case. And in the instant case, the Court, after examining
the record and considering certain significant circumstances, finds that all petitioners have
indeed abused the right that they invoke, causing damage to private respondent and for which
the latter must now be indemnified.
Prepared by: Paola E. Camilon
1.3 Requisites to be liable for Damages under the Principle  known duty due to some motives or interest or ill will that partakes of the nature of fraud.
17. ASTRID A. VAN DE BRUG, MARTIN G. AGUILAR AND GLENN G. AGUILAR,
Petitioners, v. PHILIPPINE NATIONAL BANK, Respondent.
G.R. No. 207004, June 06, 2018, SECOND DIVISION, CAGUIOA, J.
 
FACTS:
       The late spouses Aguilar used to be borrowing clients of PNB, Victoria Branch. The
late spouses Aguilar's sugar crop loans, which were obtained sometime between the late 1970's
and the early 1980's,were secured by REM over four registered parcels of land. However, for
failure of the late spouses Aguilar to pay their obligations with PNB, the mortgage was
foreclosed in 1985 and subsequently, ownership of the subject four pieces of property was
consolidated under the name of PNB.
       With the enactment of RA 7202 the late Aguilar wrote PNB on asking for a
reconsideration of their account based on the Sugar Restitution Law the Aguilars claimed that
they complied with the stated requirements, and that subsequently, inasmuch as the subject
agricultural lots were already conveyed voluntarily by PNB to DAR, they were advised by
PNB to follow-up the payment for these pieces of realty with the LBP in order to apply the
proceeds of the sale to the account of the late spouses Aguilar. They were assured by PNB that
if the proceeds from LBP would exceed the obligations of the late spouses Aguilar, the excess
amount would be returned to the Aguilars, including the subject residential property. For its
forfeited when they failed to comply with the requirements. The RTC found PNB guilty of
malice and bad faith in not pursuing its duty in helping the Aguilars avail of the benefits of RA
7202. Aggrieved by the RTC Decision, PNB appealed to the CA. The CA reversed the RTC
Decision. The Aguilars filed a Motion for Reconsideration which was denied by the CA.
Hence this petition.
ISSUE: Whether or not PNB violated Art. 19 of the Civil Code (principle of abuse of rights).
RULING:
       NO.
       At the core of the instant case is RA 7202, which was approved on February 29,
1992, and its declared policy is "to restitute the losses suffered by the sugar producers due to
actions taken by government agencies in order to revive the economy in the sugar-producing
areas of the country."
       In order to be liable for damages under the abuse of rights principle, the
following requisites must concur: (a) the existence of a legal right or duty; (b) which is
exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another .
       It should be stressed that malice or bad faith is at the core of Article 19 of the Civil
Code. Good faith is presumed, and he who alleges bad faith has the duty to prove the same.
Bad faith, on the other hand, does not simply connote bad judgment to simple negligence,
dishonest purpose or some moral obloquy and conscious doing of a wrong, or a breach of
Malice connotes ill will or spite and speaks not in response to duty. It implies an intention to
do ulterior and unjustifiable harm.
       To make PNB liable under the principle of abuse of rights, the Aguilars have the
burden to prove the requisites enumerated above. They claim that they are similarly
circumstanced as the spouses Pfleider and there was no reason for PNB to treat them
differently.
       PNB has explained that there are differences in the circumstances of its two sugar
crop loan debtors which, to PNB, justify the different accommodations that it accorded to
them.
       PNB further contends that the Aguilars cannot invoke its Compromise Agreement
with the spouses Pfleider because: (1) the former are not parties thereto; (2) the principle of
relativity of contract would be violated; and (3) PNB 's freedom to enter into contracts would
also be violated if PNB would be compelled to accommodate the Aguilars.
       Given the foregoing explanation by PNB, it was incumbent upon the Aguilars, to
make PNB liable for damages based on the principle of abuse of rights, to prove that PNB
acted in bad faith and that its sole intent was to prejudice or injure them. The Aguilars,
however, failed in this regard. 
Prepared by: Rochelle Nieva D. Curiba
18. NIKKO HOTEL MANILA GARDEN and RUBY LIM, petitioners,  vs. ROBERTO
REYES, a.k.a. "AMAY BISAYA," respondent.
FACTS:
The cause of action before the trial court was one for damages brought under the human
relations provisions of the New Civil Code. Roberto Reyes, known by the screen name "Amay
Bisaya," alleged that in the evening of 13 October 1994, he was spotted by his friend of
several years, Dr. Violeta Filart, who then invited him to join her in a party at the hotel’s
penthouse in celebration of the natal day of the hotel’s manager. Reyes asked if she could
vouch for him for which she replied: "of course." Mr. Reyes then went up with the party of Dr.
Filart carrying the basket of fruits as  a present.  to pay Mr. Reyes (1) exemplary damages in the amount of Two Hundred Thousand Pesos
After a couple of hours, when the buffet dinner was ready, Mr. Reyes lined-up at the buffet
table but, to his great shock, shame and embarrassment, he was stopped by petitioner, Ruby
Lim, who claimed to speak for Hotel Nikko. In a loud voice and within the presence and
hearing of the other guests who were making a queue at the buffet table, Ruby Lim told him to
leave the party ("huwag ka nang kumain, hindi ka imbitado, bumaba ka na lang").Mr. Reyes
tried to explain that he was invited by Dr. Filart. Dr. Filart, who was within hearing distance,
however, completely ignored him thus adding to his shame and humiliation. Not long after,
while he was still recovering from the traumatic experience, a Makati policeman approached
and asked him to step out of the hotel and was escorted out of the party. Mr. Reyes asked for
One Million Pesos actual damages, One Million Pesos moral and/or exemplary damages and
Two Hundred Thousand Pesos attorney’s fees.  Bisaya," to leave the party where he was not invited by the celebrant thereof thereby
Ruby Lim admitted having asked Mr. Reyes to leave the party but not under the ignominious
circumstance painted by the latter. For Mr. Tsuruoka’s party, Ms. Lim generated an exclusive
guest list and extended invitations accordingly. The guest list was limited to approximately 60
of Mr. Tsuruoka’s closest friends and some hotel employees and that Mr. Reyes was not one
of those invited. Mindful of Mr. Tsuruoka’s wishes to keep the party intimate, Ms. Lim
inquired as to the presence of Mr. Reyes and asked several people in the party to ask Mr.
Reyes to leave, but to no avail. When Ms. Lim spotted Mr. Reyes by the buffet table, she
decided to speak to him herself as there were no other guests in the immediate vicinity. When
Mr. Reyes went to a corner and started to eat, Ms. Lim approached him and said: "alam ninyo,
hindi ho kayo dapat nandito. Pero total nakakuha na ho kayo ng pagkain, ubusin na lang
ninyo at pagkatapos kung pwede lang po umalis na kayo." She then turned around trusting that
Mr. Reyes would show enough decency to leave, but to her surprise, he began screaming and
making a big scene, and even threatened to dump food on her. 
Dr. Violeta Filart, the third defendant in the complaint before the lower court, also gave her
version of the story to the effect that she never invited Mr. Reyes to the party. According to
her, it was Mr. Reyes who volunteered to carry the basket of fruits intended for the celebrant
as he was likewise going to take the elevator, not to the penthouse but to Altitude 49. When
they reached the penthouse, she reminded Mr. Reyes to go down as he was not properly
dressed and was not invited. 
The RTC dismissed the complaint, rationating that Mr. Reyes assumed the risk of being
thrown out of the party as he was uninvited. Damages are pecuniary consequences which the
law imposes for the breach of some duty or the violation of some right. Thus, no recovery can
be had against defendants Nikko Hotel and Ruby Lim because he himself was at fault.He
knew that it was not the party of defendant Violeta Filart even if she allowed him to join her
and took responsibility for his attendance at the party. His action against defendants Nikko
Hotel and Ruby Lim must therefore fail. 
The CA  reversed the ruling of the trial court as it found more commanding of belief the
testimony of Mr. Reyes that Ms. Lim ordered him to leave in a loud voice within hearing
distance of several guests. The Court of Appeals likewise ruled that the actuation of Ms. Lim
in approaching several people to inquire into the presence of Mr. Reyes exposed the latter to
ridicule and was uncalled for as she should have approached Dr. Filart first and both of them
should have talked to Mr. Reyes in private. The acts of [appellee] Lim are causes of action
which are predicated upon mere rudeness or lack of consideration of one person, which calls
not only protection of human dignity but respect of such dignity. Consequently, the Court of
Appeals imposed upon Hotel Nikko, Ruby Lim and Dr. Violeta Filart the solidary obligation
(P200,000); (2) moral damages in the amount of Two Hundred Thousand Pesos (P200,000);
and (3) attorney’s fees in the amount of Ten Thousand Pesos (P10,000). On motion for
reconsideration, the Court of Appeals affirmed its earlier decision as the argument raised in the
motion had "been amply discussed and passed upon in the decision sought to be
reconsidered." 
ISSUE:
1. 1. Whether the CA erred in not applying the doctrine of volenti non fit injuria
considering that by its own findings, amay bisaya was a gate-crasher.
2. 2. Whether Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. "Amay
becoming liable under Articles 19 and 21 of the Civil Code. 
3. 3. If Ruby Lim were so liable, whether Hotel Nikko, as her employer, is solidarily
liable with her.
RULING:
1. No. The doctrine of volenti non fit injuria ("to which a person assents is not esteemed in law
as injury") refers to self-inflicted injury or to the consent to injury which precludes the
recovery of damages by one who has knowingly and voluntarily exposed himself to danger,
even if he is not negligent in doing so. As formulated by petitioners, however, this doctrine
does not find application to the case at bar because even if respondent Reyes assumed the risk
of being asked to leave the party, petitioners, under Articles 19 and 21 of the New Civil Code,
were still under obligation to treat him fairly in order not to expose him to unnecessary
ridicule and shame.
2. No. As the trial court and the appellate court reached divergent and irreconcilable
conclusions concerning the same facts and evidence of the case, this Court is left without
choice but to use its latent power to review such findings of facts. From an in depth review of
the evidence, the Court finds more credible the lower court’s findings of fact.
The SC puts things in perspective and stated that the court is dealing with a formal party in a
posh, five-star hotel,  or-invitation-only, thrown for the hotel’s former Manager, a Japanese
national. Then came a person who was clearly uninvited and who could not just disappear into
the crowd as his face is known by many, being an actor. Ms. Lim, mindful of the celebrant’s
instruction to keep the party intimate, would naturally want to get rid of the "gate-crasher" in
the most hush-hush manner in order not to call attention to a glitch in an otherwise seamless
affair and, in the process, risk the displeasure of the celebrant, her former boss.  As applied to herein case, Mr. Reyes has not shown that Ms. Lim was driven by animosity
Mr. Reyes, upon whom the burden rests to prove that indeed Ms. Lim loudly and rudely
ordered him to leave, could not offer any satisfactory explanation why Ms. Lim would do that
and risk ruining a formal and intimate affair. On the contrary, Mr. Reyes, on cross-
examination, had unwittingly sealed his fate by admitting that when Ms. Lim talked to him,
she was very close. Close enough for him to kiss.  complaint based on Articles 19 and 21 of the Civil Code must necessarily fail if it has nothing
In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and
expose him to ridicule and shame, it is highly unlikely that she would shout at him from a very
close distance. Ms. Lim having been in the hotel business for twenty years wherein being
polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she acted to the
contrary does not inspire belief and is indeed incredible. Had plaintiff simply left the party as
requested, there was no need for the police to take him out.  exercise of a legitimate right done within the bounds of propriety and good faith, must be his
Moreover, another problem with Mr. Reyes’s version of the story is that it is unsupported. All
his witnesses – Danny Rodinas, Pepito Guerrero and Alexander Silva - proved only that it was
Dr. Filart who invited him to the party.  
3. No. Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he
was not invited, cannot be made liable to pay for damages under Articles 19 and 21 of the
Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its
liability springs from that of its employee.
Article 19, known to contain what is commonly referred to as the principle of abuse of rights,
is not a panacea for all human hurts and social grievances. Article 19 states:
Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
The object of this article is to set certain standards which must be observed not only in the
exercise of one’s rights but also in the performance of one’s duties. These standards are the
following: act with justice, give everyone his due and observe honesty and good faith. Its
antithesis, necessarily, is any act evincing bad faith or intent to injure. Its elements are the
following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole
intent of prejudicing or injuring another.
 When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the
Civil Code. Article 20 pertains to damages arising from a violation of law which does not
obtain herein as Ms. Lim was perfectly within her right to ask Mr. Reyes to leave. Article 21,
on the other hand, states:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.
Article 21 refers to acts contra bonus mores and has the following elements: (1) There is an
act which is legal; (2) but which is contrary to morals, good custom, public order, or public
policy; and (3) it is done with intent to injure. 
A common theme runs through Articles 19 and 21, and that is, the act complained of must be
intentional. 
against him. These two people did not know each other personally, thus, Mr. Reyes had
nothing to offer for an explanation for Ms. Lim’s alleged abusive conduct except the statement
that Ms. Lim, being "single at 44 years old," had a "very strong bias and prejudice against (Mr.
Reyes) possibly influenced by her associates in her work at the hotel with foreign
businessmen." The lameness of this argument need not be belabored. Suffice it to say that a
to recommend it but innuendos and conjectures. Parenthetically, the manner by which Ms.
Lim asked Mr. Reyes to leave was likewise acceptable and humane under the circumstances. 
Not being liable for both actual and moral damages, neither can petitioners Lim and Hotel
Nikko be made answerable for exemplary damages. All told, and as far as Ms. Lim and Hotel
Nikko are concerned, any damage which Mr. Reyes might have suffered through Ms. Lim’s
to bear alone.
 alit
1.4 Factors to be considered whether a case is a Nuisance or Harassment Suit
19. 
JUANITO ANG, for and in behalf of SUNRISE MARKETING (BACOLOD), INC.,*
Petitioner vs. SPOUSES ROBERTO and RACHEL ANG, Respondents.
G.R. No. 201675
 June 19, 2013
CARPIO, J.
FACTS:
Sunrise Marketing (Bacolod), Inc. (SMBI) is a duly registered corporation owned by the Ang
family. Juanito Ang (Juanito) and Roberto Ang (Roberto) are siblings. Anecita Limoco-Ang
(Anecita) is Juanito’s wife and Jeannevie is their daughter. Roberto was elected President of
SMBI, while Juanito was elected as its Vice President. Rachel Lu-Ang (Rachel) and Anecita
are SMBI’s Corporate Secretary and Treasurer, respectively.
On 31 July 1995, Nancy Ang (Nancy), the sister of Juanito and Roberto, and her husband,
Theodore Ang (Theodore), agreed to extend a loan to settle the obligations of SMBI and
other corporations owned by the Ang family. Nancy and Theodore issued a check in the
amount of $1,000,000.00 payable to "Juanito Ang and/or Anecita Ang and/or Roberto Ang
and/or Rachel Ang."  There was no written loan agreement, in view of the close relationship
between the parties. Part of the loan was also used to purchase real properties for SMBI, for
Juanito, and for Roberto.
Thereafter, Juanito claimed that payments to Nancy and Theodore ceased sometime after
2006. On 24 November 2008, Nancy and Theodore, sent a demand letter to "Spouses Juanito
L. Ang/Anecita L. Ang and Spouses Roberto L. Ang/Rachel L. Ang" for payment of the
principal amounting to $1,000,000.00 plus interest at ten percent (10%) per annum, for a total
of $2,585,577.37 within ten days from receipt of the letter. Roberto and Rachel replied to the
letter refusing to comply because they have not personally contracted a loan from Nancy and
Theodore.
On 8 January 2009, Juanito and Anecita executed a Deed of Acknowledgment and
Settlement Agreement (Settlement Agreement) and an Extra-Judicial Real Estate
Mortgage (Mortgage). Under the foregoing instruments, Juanito and Anecita admitted that
they, together with Roberto and Rachel, obtained a loan from Nancy and Theodore for
$1,000,000.00 on 31 July 1995 and such loan shall be secured by: a) Juanito and Anecita’s
fifty percent share over a parcel of land registered in the name of SMBI; b) a parcel of land
registered in the name of Juanito Ang; c) Juanito’s fifty percent share in 7 parcels of land
registered in his and Roberto’s name; d) a parcel of land registered in the name of Roberto; e)
a parcel of land registered in the name of Rachel; and f) Roberto and Rachel’s fifty percent
share in 2 parcels of land registered in the name of their son, Livingstone L. Ang
(Livingstone), and in another lot.
Thereafter, Juanito filed a "Stockholder Derivative Suit with prayer for an ex-parte Writ
of Attachment/Receivership" (Complaint) before the RTC Bacolod on 29 January 2009. He
alleged that "the intentional and malicious refusal of defendant Sps. Roberto and Rachel Ang
to settle their 50% share x x x of the total obligation x x x will definitely affect the financial
viability of plaintiff SMBI."
On 29 January 2009, the RTC Bacolod issued an Order granting the application for an ex-parte
writ of attachment and break open order.  In her Verified Answer Ad Cautelam which was
filed on 10 February 2009, Rachel prayed that the Complaint be dismissed as it was not a
bona fide derivative suit as defined under the Interim Rules.  According to Rachel, the
Complaint, although labelled as a derivative suit, is actually a collection suit since the real
party in interest is not SMBI, but Nancy and Theodore. Rachel also argued that the Complaint
failed to allege that Juanito "exerted all reasonable efforts to exhaust all intra-corporate
remedies”
On 27 September 2010, the RTC Bacolod issued an Order ruling that the present action is a
DERIVATIVE SUIT and the Motion to Dismiss based on Affirmative Defenses raised by
defendants is DENIED for lack of merit. The Order likewise stated that the requirement of
exhaustion of intra-corporate remedies is no longer necessary since Rachel and Roberto
exercised complete control over SMBI.
Aggrieved, Rachel filed a Petition for Certiorari with the CA-Cebu. On 20 September 2011,
the CA-Cebu promulgated its Decision which reversed and set aside the Order of the RTC
Bacolod dated 27 September 2010. According to the CA-Cebu, the Complaint filed by Juanito
should be dismissed because it is a harassment suit, and not a valid derivative suit as defined
under the Interim Rules. The CA-Cebu also found that Juanito failed to exhaust intra-corporate
remedies and that the loan extended by Nancy and Theodore was not SMBI’s corporate
obligation.
ISSUE:
             Whether based on the allegations of the complaint, the nature of the case is one of a
derivative suit or not.
Corollary to the above, whether the Honorable Court of Appeals erred in ordering
the dismissal of the Complaint on the ground that the case is not a derivative suit.
RULING:
             The petition has no merit
             We uphold the CA-Cebu’s finding that the Complaint is not a derivative suit. A
derivative suit is an action brought by a stockholder on behalf of the corporation to enforce
corporate rights against the corporation’s directors, officers or other insiders. Under Sections
23 and 36 of the Corporation Code, the directors or officers, as provided under the by-laws,
have the right to decide whether or not a corporation should sue. Since these directors or
officers will never be willing to sue themselves, or impugn their wrongful or fraudulent
decisions, stockholders are permitted by law to bring an action in the name of the corporation
to hold these directors and officers accountable. In derivative suits, the real party ininterest
is the corporation, while the stockholder is a mere nominal party.
             Section 1, Rule 8 of the Interim Rules imposes the following requirements for
derivative suits:
(1) The person filing the suit must be a stockholder or member at the time the acts
or transactions subject of the action occurred and the time the action was filed;
(2) He must have exerted all reasonable efforts, and alleges the same with
particularity in the complaint, to exhaust all remedies available under the articles
of incorporation, by-laws, laws or rules governing the corporation or partnership to
obtain the relief he desires;
(3) No appraisal rights are available for the act or acts complained of; and
(4) The suit is not a nuisance or harassment suit.
Applying the foregoing, we find that the Complaint is not a derivative suit. The Complaint
failed to show how the acts of Rachel and Roberto resulted in any detriment to SMBI. The
CA-Cebu correctly concluded that the loan was not a corporate obligation, but a personal debt
of the Ang brothers and their spouses. The check was issued to "Juanito Ang and/or
Anecita Ang and/or Roberto Ang and/or Rachel Ang" and not SMBI. The proceeds of the
loan were used for payment of the obligations of the other corporations owned by the Angs as
well as the purchase of real properties for the Ang brothers. SMBI was never a party to the
Settlement Agreement or the Mortgage. It was never named as a co-debtor or guarantor of the
loan. Both instruments were executed by Juanito and Anecita in their personal capacity, and
not in their capacity as directors or officers of SMBI. Thus, SMBI is under no legal obligation
to satisfy the obligation
The fact that Juanito and Anecita attempted to constitute a mortgage over "their" share in a
corporate asset cannot affect SMBI. The Civil Code provides that in order for a mortgage to
be valid, the mortgagor must be the "absolute owner of the thing mortgaged." Corporate assets
may be mortgaged by authorized directors or officers on behalf of the corporation as owner.
However, the wording of the Mortgage reveals that it was signed by Juanito and Anecita in
their personal capacity as the "owners" of a pro-indiviso share in SMBI’s land and not on
behalf of SMBI.
Since damage to the corporation was not sufficiently proven by Juanito, the Complaint cannot
be considered a bona fide derivative suit. A derivative suit is one that seeks redress for injury
to the corporation, and not the stockholder. No such injury was proven in this case. The
Complaint also failed to allege that all available corporate remedies under the articles of
incorporation, by-laws, laws or rules governing the corporation were exhausted, as required
under the Interim Rules.
The CA-Cebu correctly ruled that the Complaint should be dismissed since it is a
nuisance or harassment suit under Section 1(b) of the Interim Rules. Section 1(b) thereof
provides:
b) Prohibition against nuisance and harassment suits. - Nuisance and harassment
suits are prohibited. In determining whether a suit is a nuisance or harassment suit,
the court shall consider, among others, the following:
(1) The extent of the shareholding or interest of the initiating stockholder or
member;
(2) Subject matter of the suit;
(3) Legal and factual basis of the complaint;
(4) Availability of appraisal rights for the act or acts complained of; and
(5) Prejudice or damage to the corporation, partnership, or association in relation
to the relief sought.
In case of nuisance or harassment suits, the court may, motu proprio or upon motion, forthwith
dismiss the case. Records show that Juanito, apart from being Vice President, owns the highest
number of shares, equal to those owned by Roberto. Also, as explained earlier, there appears
to be no damage to SMBI if the loan extended by Nancy and Theodore remains unpaid. The
CA-Cebu correctly concluded that "a plain reading of the allegations in the Complaint would
readily show that the case was mainly filed to collect a debt allegedly extended by the spouses
Theodore and Nancy Ang to [SMBI]. Thus, the aggrieved party is not SMBI but the spouses
Theodore and Nancy Ang, who are not even stockholders.
WHEREFORE, we DENY the petition. We AFFIRM the 20 September 2011 Decision of the
Court of Appeals-Cebu in CA-G.R. SP No. 05546.
-JV FERMIN
 1.5 Other Illustrative cases
20. 
JOSE S. ROQUE, JR., SUBSTITUTED BY HIS WIFE NORMA ROQUE,
PETITIONER, VS. JAIME T. TORRES, SUBSTITUTED BY HIS SON JAMES
KENLEY M. TORRES, AND THE HONORABLE COURT OF APPEALS,
RESPONDENTS.
G.R. NO. 157632, December 06, 2006. CHICO-NAZARIO, J.
FACTS:
The instant case sprang from an action for damages filed by the original petitioner, the late
Jose Roque, Jr., against respondent, the recently deceased Jaime Torres, for injuries sustained
by petitioner allegedly inflicted by the security guards employed by respondent.
Petitioner was the administrator of certain parcels of land in covered by OCT both registered
in the name of his son Rafael Roque. Sometime before the incident, respondent, claiming to be
the owner of said property, hired security guards from Anchor Security and Detective Agency,
namely Cesar Aquino, Alfredo Negro, and Mariano Cabos, who allegedly barred petitioner
from entering the property and threatened him with physical harm should he attempt to tend
the said land. As a result, petitioner filed a case for grave threats against said security guards
before the MTC of Rizal.
Prior to the incident, respondent instituted an Action for cancellation of OCTs in the name of
petitioner's son Rafael Roque before the RTC of Antipolo which was dismissed.
Petitioner maintained that at around four o'clock in the afternoon of 27 August 1989, he,
together with his housemaid Leilyn Saplot Kandt, Magno Imperial, Jose Imperial, and Eliseo
Pesito, visited the said property and was surprised to see seven security guards guarding the
property upon orders of respondent. Said security guards asked him to leave the property and
uttered: "Bakit mo kami kinakalaban? Utos ni Torres na ito'y bantayan pagkat ito'y kanyang
property raw!." Petitioner showed his son's titles to the property but the security guards merely
answered: "Fake 'yan at hindi kayo maaaring pumasok dito. Kayo ay dapat paalisin." A
security guard then cocked his shotgun and warned petitioner to leave the place. Petitioner
offered to settle the dispute in the office of Anchor Security Agency, through its manager,
Mrs. Nassam, but the security guards merely replied: "Wala kaming pakialam kay Nassam.
Lahat ginagawa dito, lahat ay utos ni Torres. At 'yan ay sinusunod naming dahil si Torres ang
bumubuhay sa amin."
When petitioner refused to leave the premises, Cabos threatened petitioner that should he stay
inside, Cabos would shoot him, so petitioner immediately left the place. However, Cabos still
fired at him but missed. Petitioner ran to the back of his makeshift hut and was shot again by
Cabos, hitting petitioner on the back. When petitioner fell, he turned and saw Cabos and
Negro shooting at him. At the same time, Aquino was also firing at the makeshift hut.
As a result of the incident, petitioner was hospitalized and placed under continuous treatment
and medication. Due to the multiple gunshot wounds, hematoma, and contusions sustained by
petitioner, his left eye became 90 to 95% blind and his body was paralyzed from the bustline
down. Consequently, petitioner filed a criminal case for frustrated murder before the RTC of
Antipolo against the security guards. Eventually, after suffering for more than nine years,
petitioner died.
The RTC rendered judgment in favor of petitioner. After a thorough examination of the
evidence presented by both parties, the Court is faced with the issue of: "Whether or not
defendant Torres can be held liable for damages to herein plaintiff as a result of the
injuries inflicted by the security guards deployed in the property in question. The RTC
held that Torres is liable.
RTC ruled that in this simple scenario and in the event that said security guards caused wrong
to others while in their tour of duty, the law provides that the liability falls on the employer
being the principal. On the contrary, for illegal or harmful acts committed by the security
guards as per order of the client or the one who hired them, liability attaches to the latter. In
the instant case, the unlawful act committed by the security guards against the plaintiff is
within the strict compliance of the instruction of the defendant. Hence, defendant Torres is
liable for the unlawful acts committed by the said security guards against herein plaintiff.
CA reversed the RTC judgment and rendered a Decision, the pertinent portions of which read:
It is settled 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 security 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.
 ISSUE: Whether or not CA erred in ruling that Torres is absolved from liability
 RULING: YES.
 We agree with the Court of Appeals' finding that respondent cannot be held liable under
Article 2180 of the Civil Code for the damages suffered by petitioner because respondent is
not the employer of the security guards who inflicted the injuries upon the person of the
petitioner.
 This conclusion, however, does not necessarily preclude this Court from holding respondent
liable under the law for damages resulting from the injuries inflicted on petitioner by the
unlawful acts of the security guards. Assuming arguendo that the security guards are not
respondent's employees, the same does not constitute a valid defense at all. Article 2176 of the
Civil Code provides that a person who, by act or omission, causes damage to another through
fault or negligence may be held liable in damages. By making it appear that he owns the
disputed properties, putting security guards thereat to intimidate, harass or cause the
rightful owner and his representatives and by providing the escape vehicle, more than
sufficient evidence was established on the civil liability of private respondent under
Article 2176 of the Civil Code of the Philippines.
It must be emphasized that private respondent committed all these overt acts despite an earlier
Decision by the RTC affirming Rafael Roque's ownership of the properties and dismissing the
case Torres filed for the cancellation title in Rafael Roque's name. Had he not
misrepresented to the security guards that he owns the properties and had he not hired
these security guards/common thugs to secure the premises which he does not own, then
the untoward incident would not have happened. To allow Torres to escape liability,
despite his misdeeds, will not only result in grave injustice to Jose Roque, Jr. who eventually
died but will likewise result in the implied tolerance by this Honorable Court of private
respondent's disobedience or disrespect of a lawful order/decision of the trial court which he
failed or refused to honor.
Article 2176 of the Civil Code states that "whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the damage done."
Respondent's unwarranted act of posting security guards within the property, which he clearly
knew is registered in the name of another, unduly placed petitioner at harm and deprived him
of his right to fully exercise his privileges and duties as administrator of said property.
Respondent, by his grossly faulty acts, paved the way to the infliction of injuries by the
security guards on petitioner.
WHEREFORE, premises considered, the Petition for Review is hereby GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No. 55895 is hereby REVERSED and SET
ASIDE. The Judgment of the Regional Trial Court of Quezon City, Branch 104, in Civil Case
No. Q-93-14408 ordering respondent Torres to pay petitioner Roque the amount of
P300,000.00 as actual damages; the amount of P1,000,000.00 as moral damages; the amount
of P300,000.00 as exemplary damages; and the amount of P50,000.00 as attorney's fee is
hereby REINSTATED. SO ORDERED.
Ina
21. UNIVERSITY OF THE EAST, petitioner, vs. ROMEO A. JADER,
respondent.
G.R. No. 132344 February 17, 2000, YNARES-SANTIAGO, J.:
FACTS:
Plaintiff was enrolled in the defendants’ College of Law from 1984 up to 1988. In the first
semester of his last year (School year 1987-1988), he failed to take the regular final
examination in Practice Court I for which he was given an incomplete grade. He enrolled for
the second semester as fourth year law student and on February 1, 1988 he filed an application
for the removal of the incomplete grade given him by Professor Carlos Ortega which was
approved by Dean Celedonio Tiongson after payment of the required fee. He took the
examination on March 28, 1988. On May 30, 1988, Professor Carlos Ortega submitted his
grade. It was a grade of five (5).
The 35th Investitures & Commencement Ceremonies for the candidates of Bachelor of Laws
was scheduled on the 16th of April 1988, and in the invitation for that occasion the name of
the plaintiff appeared as one of the candidates. At the foot of the list of the names of the
candidates there is an annotation stating that the same is a tentative list.
The plaintiff attended the investiture ceremonies and he was thereafter handed by Dean
Celedonio a rolled white sheet of paper symbolical of the Law Diploma. He tendered a blow-
out that evening which was attended by neighbors, friends and relatives who wished him good
luck in the forthcoming bar examination. He thereafter prepared himself for the bar
examination. He took a leave of absence without pay from his job from April 20, 1988 to
September 30, 1988 and enrolled at the pre-bar review class in Far Eastern University. Having
learned of the deficiency he dropped his review class and was not able to take the bar
examination.
Consequently, respondent sued petitioner for damages alleging that he suffered moral shock,
mental anguish, serious anxiety, besmirched reputation, wounded feelings and sleepless nights
when he was not able to take the 1988 bar examinations arising from the latter’s negligence.
He prayed for an award of moral and exemplary damages, unrealized income, attorney’s fees,
and costs of suit.
Lower court ruled in favor of defendant. CA affirmed it with modification. CA ordered
petitioner to pay respondent P50,000 for moral damages.
ISSUE:
Whether an educational institution shall be held liable for damages for misleading a student
into believing that the latter had satisfied all the requirements for graduation when such is not
the case (YES)
RULING:
When a student is enrolled in any educational or learning institution, a contract of education is
entered into between said institution and the student. The professors, teachers or instructors
hired by the school are considered merely as agents and administrators tasked to perform the
school's commitment under the contract. It is the contractual obligation of the school to timely
inform and furnish sufficient notice and information to each and every student as to whether
he or she had already complied with all the requirements for the conferment of a degree or
whether they would be included among those who will graduate. Petitioner, in belatedly
informing respondent of the result of the removal examination, particularly at a time when he
had already commenced preparing for the bar exams, cannot be said to have acted in good
faith. The negligent act of a professor who fails to observe the rules of the school, for instance
by not promptly submitting a student's grade, is not only imputable to the professor but is an
act of the school, being his employer.
Considering further, that the institution of learning involved herein is a university which is
engaged in legal education, it should have practiced what it inculcates in its students, more
specifically the principle of good dealings enshrined in Articles 19 and 20 of the Civil Code
which states:
Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good
faith.
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for the same.
Art. 19 was intended to expand the concept of torts by granting adequate legal remedy for the
untold number of moral wrongs which is impossible for human foresight to provide
specifically in statutory law.
However, while petitioner was guilty of negligence and thus liable to respondent for the latter's
actual damages, we hold that respondent should not have been awarded moral damages. We
do not agree with the Court of Appeals' findings that respondent suffered shock, trauma and
pain when he was informed that he could not graduate and will not be allowed to take the bar
examinations. At the very least, it behooved on respondent to verify for himself whether he
has completed all necessary requirements to be eligible for the bar examinations. As a senior
law student, respondent should have been responsible enough to ensure that all his affairs,
specifically those pertaining to his academic achievement, are in order.
WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with
MODIFICATION. Petitioner is ORDERED to PAY respondent the sum of Thirty-five
Thousand Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per annum
computed from the date of filing of the complaint until fully paid; the amount of Five
Thousand Pesos (P5,000.00) as attorney's fees; and the costs of the suit. The award of moral
damages is DELETED.
Prepared by: Mika Ituriaga
22. G.R. No. 165569. July 29, 2010.
GLENDA A. VARGAS, MA. SOCORRO S. GUANHING, in their capacities as Dean
and Assistant Dean, respectively, of the College of Nursing of the University of Santo
Tomas, and RODOLFO N. CLAVIO, in his capacity as Registrar of the University of
Santo Tomas, petitioners, vs. DANES B. SANCHEZ, respondent.
FACTS 
In his Complaint, respondent alleged that he graduated from UST on April 2, 2002 with a
Bachelor’s Degree of Science in Nursing. He was included in the list of candidates for
graduation and attended graduation ceremonies.
The respondent sought to secure a copy of his ToR with the UST Registrar’s Office, paid the
required fees, but was only given a Certificate of Graduation by the Registrar. Despite
repeated attempts by the respondent to secure a copy of his ToR, and submission of his class
cards as proof of his enrollment, UST refused to release his records, making it impossible for
him to take the nursing board examinations, and depriving him of the opportunity to make a
living. The respondent prayed that the RTC order UST to release his ToR and hold UST liable
for actual, moral, and exemplary damages, attorney’s fees, and the costs of suit.
Petitioners filed a Motion to Dismiss where they claimed that they refused to release
respondent’s ToR because he was not a registered student, since he had not been enrolled in
the university for the last three semesters. They claimed that the respondent’s graduation,
attendance in classes, and taking/passing of examinations were immaterial because he ceased
to be a student when he failed to enroll during the second semester of school year 2000-2001.
Petitioners filed a Supplement to their Motion to Dismiss, alleging that respondent sought
administrative recourse before the Commission on Higher Education (CHED) through a letter-
complaint dated January 21, 2003. Thus, petitioners claimed that the CHED had primary
jurisdiction to resolve matters pertaining to school controversies, and the filing of the instant respondent’s water service connection without prior notice was arbitrary, injurious and
case was premature. prejudicial to the latter justifying the award of damages under Article 19 of the Civil Code.

RTC: denied the petitioner’s Motion to Dismiss  Issue: WON THE HONORABLE COURT OF APPEAL[S] CORRECTLY APPLIED THE
CA: affirmed RTC  PROVISION OF ARTICLE 19 OF THE NEW CIVIL CODE WITHOUT CONSIDERING
THE APPLICABLE PROVISION OF ARTICLE 429 OF THE SAME CODE
ISSUE:
Whether or not CHED has jurisdiction over the case for damages and mandamus.  Decision: 
RULING:
The petition is devoid of merit. Article 429 of the Civil Code, relied upon by the petitioner in
The petition is denied for lack of merit. 
justifying its act of disconnecting the water supply of the respondent without prior notice,
reads:
The doctrine of exhaustion of administrative remedies does not apply in this case. The doctrine
does not apply because petitioners failed to demonstrate that recourse to the CHED is
Art. 429. The owner or lawful possessor of a thing has the right to exclude any
mandatory—or even possible—in an action such as that brought by the respondent, which is
person from the enjoyment and disposal thereof. For this purpose, he may use such
essentially one for mandamus and damages. The doctrine of exhaustion of administrative
force as may be reasonable to repel or prevent an actual or threatened unlawful
remedies admits of numerous exceptions, one of which is where the issues are purely
physical invasion or usurpation of his property.
legal and well within the jurisdiction of the trial court, as in the present case. Petitioners’
liability—if any—for damages will have to be decided by the courts, since any judgment
inevitably calls for the application and the interpretation of the Civil Code. As such, A right is a power, privilege, or immunity guaranteed under a Constitution, statute or
exhaustion of administrative remedies may be dispensed with. In addition, the rule on primary decisional law, or recognized as a result of long usage, constitutive of a legally enforceable
jurisdiction applies only where the administrative agency exercises quasi-judicial or claim of one person against the other. 
adjudicatory functions. Thus, an essential requisite for this doctrine to apply is the actual
existence of quasi-judicial power. Concededly, the petitioner, as the owner of the utility providing water supply to certain
consumers including the respondent, had the right to exclude any person from the enjoyment
Prepared by: Zarina and disposal thereof.

24. MWSS vs Act Theatre Inc. However, the exercise of rights is not without limitations. Having the right should not be
confused with the manner by which such right is to be exercised. Article 19 of the Civil Code
sets the norms for the exercise of one’s rights:
Facts:
Art. 19. Every person must, in the exercise of his rights and in the performance of
On September 22, 1988, four employees of the respondent Act Theater, Inc., namely, Rodolfo his duties, act with justice, give everyone his due, and observe honesty and good
Tabian, Armando Aguilar, Arnel Concha and Modesto Ruales, were apprehended by members faith.
of the Quezon City police force for allegedly tampering a water meter in violation of P.D. No.
401, as amended by B.P. Blg. 876. The respondent’s employees were subsequently criminally
 
charged. On account of the incident, the respondent’s water service connection was cut off.
Consequently, the respondent filed a complaint for injunction with damages against the
petitioner MWSS. When a right is exercised in a manner which discards these norms resulting in damage to
another, a legal wrong is committed for which actor can be held accountable. In this case, the
petitioner failed to act with justice and give the respondent what is due to it when the
In the civil case, the respondent alleged in that the petitioneracted arbitrarily, whimsically and 
petitioner unceremoniously cut off the respondent’s water service connection. 
capriciously, in cutting off the respondent’s water service connection without prior notice. Due
to lack of water, the health and sanitation, not only of the respondent’s patrons but in the
surrounding premises as well, were adversely affected. While it is true that MWSS had sent a notice of investigation to plaintiff-appellee prior to the
disconnection of the latter’s water services, this was done only a few hours before the actual
disconnection. Clearly, the plaintiff-appellee was denied due process when it was deprived of
After due trial, the court acquitted the four employees of Act Theater, Inc. in the criminal case.
the water services. As a consequence thereof, Act had to contract another source to provide
In the civil case, the court ordered MWSS to pay Act Theater, Inc. actual damage in the
water for a number of days. Plaintiff-appellee was also compelled to deposit with MWSS the
amount of P25,000 and to return the sum of P200,000.00 deposited by the plaintiff for the
sum of P200,000.00 for the restoration of their water services.
restoration of its water services after its disconnection on September 23, 1988.
25. I.                 Short Title: Manoloto vs. Veloso III          
The petitioner appealed the civil aspect of the decision to the CA. The appellate court,
however, dismissed the appeal. According to the CA, the petitioner’s act of cutting off the
 II.                 FULL TITLE: ERMELINDA C. MANALOTO, AURORA J. CIFRA,
FLORDELIZA J. ARCILLA, LOURDES J. CATALAN, ETHELINDA J. HOLT,
BIENVENIDO R. JONGCO, ARTEMIO R. JONGCO, JR. and JOEL JONGCO,
petitioners, vs. ISMAEL VELOSO III, respondent.
III.               TOPIC: Torts and Damages – Requisites to be liable for Damages under
Abuse of Rights (Illustrative cases in syllabus)  bar. Respondent may not have specifically identified each element, but it may be sufficiently
IV.               STATEMENT OF FACTS:
This case is an off-shoot of an unlawful detainer case filed by [herein petitioners] Ermelinda
C. Manaloto, Aurora J. Cifra, Flordeliza J. Arcilla, Lourdes J. Catalan, Ethelinda J. Holt,
Bienvenido R. Jongco, Artemio R. Jongco, Jr. and Joel Jongco against [herein respondent].
The action was instituted on the ground of [respondent’s] failure to pay rentals on a residential
house in Horseshoe Village, Quezon City despite repeated demands. [Respondent] denied the
non-payment of rentals and alleged that he made an advance payment of P825,000.00 when he
paid for the repairs done on the leased property. MeTC ruled in favor of petitioners. RTC
reversed the MeTC decision. When both parties moved for the reconsideration of the RTC
decision, the RTC issued an Order dated February 23, 2001 modifying its previous ruling by
increasing the value of the improvements introduced by respondent.
V.                 STATEMENT OF THE CASE:
Whilst respondent’s appeal of the Metropolitan Trial Court (MeTC) judgment in the unlawful
detainer case was pending, respondent filed a Complaint for Breach of Contract and Damages
against the petitioners on the basis of two causes of action: The first cause of action was for
damages because the respondent supposedly suffered embarrassment and humiliation when
petitioners distributed copies of the above-mentioned MeTC decision in the unlawful detainer
case to the homeowners of Horseshoe Village while respondent’s appeal was still pending
before the Quezon City RTC-Branch 88. The second cause of action was for breach of
contract since petitioners, as lessors, failed to make continuing repairs on the subject property
to preserve and keep it tenantable. Petitioners argued that respondent had no cause of action
against them because the MeTC decision in the unlawful detainer case was a matter of public
record and its disclosure to the public violated no law or any legal right of the respondent.
RTC dismissed the Breach of Contract case. The Court of Appeals found petitioners liable to
respondent for damages and ruled that the distribution of the court decision during the
pendency of an appeal was clearly intended to cause [respondent] some form of harassment
and/or humiliation and that there was evident bad faith intended to mock [respondent’s] right
to appeal.
Hence, the instant Petition for Review.
VI.                ISSUE:
Whether or not the respondent is entitled to the award of moral and exemplary damages.
 
VII.             RULING:
NO. A cause of action (for damages) exists if the following elements are present: (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is created ; (2) an
obligation on the part of the named defendant to respect or not to violate such right; and (3) an
act or omission on the part of such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of defendant to the plaintiff for which the latter may
maintain an action for recovery of damages. We find that all three elements exist in the case at
determined from the allegations in his complaint.
First, respondent filed the complaint to protect his good character, name, and reputation.
Every man has a right to build, keep, and be favored with a good name. This right is protected
by law with the recognition of slander and libel as actionable wrongs, whether as criminal
offenses or tortuous conduct. Second, petitioners are obliged to respect respondent’s good
name even though they are opposing parties in the unlawful detainer case. As Article 19 of the
Civil Code requires, “[e]very person must, in the exercise of his rights and in the performance
of his duties, act with justice, give everyone his due, and observe honesty and good faith.” A
violation of such principle constitutes an abuse of rights, a tortuous conduct.
The principle of abuse of rights departs from the classical theory that “he who uses a right
injures no one.” The modern tendency is to depart from the classical and traditional theory,
and to grant indemnity for damages in cases where there is an abuse of rights, even when the
act is not illicit.
Article 19 was intended to expand the concept of torts by granting adequate legal remedy for
the untold number of moral wrongs which is impossible for human foresight to provide
specifically in statutory law. If mere fault or negligence in one’s acts can make him liable for
damages for injury caused thereby, with more reason should abuse or bad faith make him
liable. The absence of good faith is essential to abuse of right. Good faith is an honest
intention to abstain from taking any unconscientious advantage of another, even through the
forms or technicalities of the law, together with an absence of all information or belief of fact
which would render the transaction unconscientious. In business relations, it means good faith
as understood by men of affairs.
While Article 19 may have been intended as a mere declaration of principle, the “cardinal law
on human conduct” expressed in said article has given rise to certain rules, e.g. that where a
person exercises his rights but does so arbitrarily or unjustly or performs his duties in a
manner that is not in keeping with honesty and good faith, he opens himself to liability. The
elements of an abuse of rights under Article 19 are: (1) there is a legal right or duty; (2) which
is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.”
Nevertheless, we further declare that the Court of Appeals erred in already awarding moral
and exemplary damages in respondent’s favor when the parties have not yet had the chance to
present any evidence before the RTC-Branch 227. In civil cases, he who alleges a fact has the
burden of proving it by a preponderance of evidence. It is incumbent upon the party claiming
affirmative relief from the court to convincingly prove its claim. Bare allegations,
unsubstantiated by evidence are not equivalent to proof under our Rules. In short, mere
allegations are not evidence. At this point, the finding of the Court of Appeals of bad faith and
malice on the part of petitioners has no factual basis. Good faith is presumed and he who
alleges bad faith has the duty to prove the same.
VIII.           DISPOSITIVE PORTION:
WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The
Decision dated January 31, 2006 of the Court of Appeals in CA-G.R. CV No. 82610 is
AFFIRMED WITH MODIFICATIONS. The award of moral and exemplary damages made
by the Court of Appeals in favor of respondent Ismael Veloso III is DELETED. The complaint
of respondent Ismael Veloso III in Civil Case No. Q-02-48341 is hereby REINSTATED
before Branch 227 of the Regional Trial Court of Quezon City
2. UNJUST ENRICHMENT (SOLUTION INDEBITI)
2.1 REQUISITES AND CONDITIONS
26. H.L. CARLOS CONSTRUCTION, INC., Petitioner, v. MARINA
PROPERTIES CORPORATION, JESUS K. TYPOCO SR. and TAN
YU, Respondents.
G.R. NO. 147614,  January 29, 2004, PANGANIBAN, J.:
FACTS:  b.      the cost of change orders and extra work (YES)
Respondent MARINA PROPERTIES CORPORATION (MPC) is engaged in the business of
real estate development. On May 10, 1988, MPC entered into a contract with [Petitioner] H.
[L.] CARLOS CONSTRUCTION, INC. (HLC) to construct Phase III of a condominium
complex called MARINA BAYHOMES CONDOMINIUM PROJECT within a period of 365
days from receipt of Notice to Proceed. The original completion date of the project was
May 16, 1989, but it was extended to October 31, 1989 with a grace period until
November 30, 1989.
On December 15, 1989, HLC instituted this case for sum of money against not only MPC but
also against the latter’s alleged president, Respondent Jesus K. Typoco, Sr. (Typoco) and
Respondent Tan Yu (Tan), seeking the payment of various sums with an aggregate amount of
P14 million pesos. 
The trial court ruled for Petitioner H.L. CARLOS CONSTRUCTION, INC. and as against
Respondents MARINA PROPERTIES CORPORATION, TAN YU, and JESUS K. TYPOCO,
SR., who are hereby ordered to pay, jointly and severally the petitioner such amount   The Petition is partly meritorious.
representing unpaid labor escalation costs, change orders and material price escalations, 10%
retention money withheld by the respondents from petitioners progress billing, the value of
construction materials, the sum equivalent to 15% of the principal sum as and by way of
attorneys fees, and the costs of this suit.
The counterclaim for liquidated damages, are hereby DISMISSED for lack of evidence.
Liquidated damages can only be awarded under paragraph 2 of the amended construction
contract that extended the completion period and mainly on the finding of the 85% substantial
completion of the project, and that the delay and stoppage of the project was caused by
respondents’ default in payment of the progress billings that would have allowed petitioner to
have the capability to continue and complete the project.
On appeal, the CA held that respondents were not liable for escalations in the cost of labor and
construction materials. Respondents were also absolved from paying for change orders and
extra work. The CA further failed to find any basis for the release of the 10 percent retention
fee. 
Furthermore, the CA ruled that petitioner was liable for actual and liquidated damages. The
latter had abandoned the project prior to its completion; hence, MPC contracted out the work
to another entity and incurred actual damages in excess of the remaining balance of the
contract price. In addition, the Construction Contract had stipulated payment of liquidated
damages in an amount equivalent to 1/1000 of the contract price for each calendar day of
delay.Hence, this Petition. 
ISSUES: 
(1)    Whether petitioner is entitled to:
a.      a price escalation for labor and material cost (YES but to labor
component only)
c.      the release of the 10 percent retention money (NO)
d.       the cost of illegally detained materials (NO)
e.       Attorney’s fees (NO)
(2)    Whether Typoco and Tan are solidarily liable with MPC. (NO)
(3)    Whether petitioner is liable for actual and liquidated damages. (YES)
RULING:
1.       
a.      Price Escalation for Labor and Material Cost (YES)
YES. This Court agrees with petitioner that it is entitled to price escalation, but only for the
labor component of Progress Billing No. 24. Since the Contract allows escalation only of the
labor component, the implication is that material cost escalations are barred . There appears to
be no provision, either in the original or in the amended contract, that would justify billing of
increased cost of materials. Furthermore, no evidence -- like official economic data showing
an increase in the price index of construction materials -- was even adduced by petitioner to
prove that there had indeed been increases in material costs.
·       Petitioner attempts to pass off these cost escalations as a form of damages suffered
by it as a natural consequence of the delay in the payment of billings and claims for
additional work. It argues that the baseless and malicious refusal to pay for those
claims renders respondents liable for damages under Article 2201 of the Civil Code.
The Court disagrees. Without tackling the issue of delay, this Court finds that the contentious
Progress Billing No. 24 contains no claim for material cost escalation. The other unsettled bills
claimed by petitioner are those for change orders or extra work, which have not been shown to
be related to the increase in cost of materials. 
We clarify. The claimed cost of labor escalation pertains to the period September 1 to
December 15, 1989, in the amount of P170,722.10; and December 16 to January 27, 1990,
P45,983.91. During those periods, petitioner had not yet incurred any delay in the project,
originally stipulated to be finished by May 16, 1989. But by mutual agreement, the period was
extended up to October 31, 1989, with a grace period until November 30, 1989. Furthermore,
a legislated wage increase became effective after the expiration of the original period.
Respondents are, therefore, liable for this increase in labor cost, because they allowed
petitioner to continue working on the project until April 20, 1990 (even beyond
November 30, 1989).
·       MPC argues that to allow the claim for labor cost escalation would be to reward
petitioner for incurring delay, thereby breaching a contractual obligation.
This contention is untenable. Before the expiration of the extended period, petitioner was not
yet in delay. It was granted by MPC an extension to complete the project until November 30,
1989. Moreover, despite the expiration of the extended period, MPC allowed it to continue
working on the project until the former took over and awarded that project to another
contractor. Hence, labor costs were actually incurred by petitioner until April 20, 1990. It was
thus entitled to reimbursement for labor cost escalation until that date. Noteworthy is the fact
that MPC paid for the labor cost escalation during the period August 1-15, 1989, which was
past the expiration of the original period. Apparently, it thereafter stopped paying for labor
cost escalation in response to the suit filed against it by petitioner.
·       The CA denied the labor cost escalation claim because, despite having billed MPC
therefor, petitioner accepted payments that did not include such claim. The
appellate court construed the acceptance by petitioner as a waiver of the latter’s
right to be reimbursed for the increased labor cost.
We believe that this position is untenable. The CA mistook Exhibits C-7-B and D-1 as bills
coming from petitioner, when in truth they were Accomplishment Evaluation Sheets issued by
MPC. The notation labor escalation not included in the said Exhibits was an admission on the
part of MPC that it had not paid such amount, upon the advice of Atty. Jose C. Laureta, its
resident counsel. According to him, petitioner should be faulted for having incurred labor cost
increases after the expiration of the original period (after May 16, 1989). Not having waived
such increases, it should thus bear them. To allow MPC to acquire the partially accomplished
project without paying for labor cost escalation validly incurred would constitute unjust
enrichment at the expense of petitioner.
There is unjust enrichment under Article 22 of the Civil Code when (1) a person is
unjustly benefited, and (2) such benefit is derived at the expense of or with damages to
another. Since petitioner had rendered services that were accepted by MPC, then the
former should be compensated for them. Labor cost escalation, in this case, has already
been earned by petitioner.
b.      Change Orders and Extra Work (YES)
YES. This Court sided with petitioner. 
The General Conditions to the Construction Contract provides: 
If the Contractor claims that any construction by drawings or otherwise involve
extra cost under this Contract, he shall give the Owner and/or the Architect, written
notice thereof within a reasonable time after receipt of such instructions, and in any
event before proceeding to execute the work, except in emergency endangering life
or property. No such claim shall be valid unless so made. Extra work for which no
price is provided in the proposal shall be covered by a supplementary agreement to
be signed by both parties before such work is commenced. 
The CA is correct in holding that there is no supplemental agreement covering the claimed
extra work and change orders. MPC, however, never denied having ordered additional
work. Evidence on record further reveals that MPC approved some change order jobs
despite the absence of any supplementary agreement. Petitioner may have failed to show
the construction memoranda covering its claim, but it inarguably performed extra work
that was accepted by MPC. Hence, we will consider Annex C as the proper valuation
thereof.
Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value
of the thing or services rendered despite the lack of a written contract, in order to avoid unjust
enrichment. Quantum meruit means that in an action for work and labor, payment shall be
made in such amount as the plaintiff reasonably deserves. To deny payment for a building
almost completed and already occupied would be to permit unjust enrichment at the expense
of the contractor.
c.      Retention Money
·      The CA denied the claim for the 10 percent retention money, because petitioner had
failed to comply with the conditions under of the Construction Contract. On the
other hand, the latter avers that these conditions were deemed fulfilled under Article
1186 of the Civil Code because, when its contract was terminated, MPC prevented
the fulfillment of those conditions. It would allegedly be unfair and unreasonable for
petitioner to guarantee a project finished by another contractor.
NO. This Court disagrees with the petitioner. In the construction industry, the 10 percent
retention money is a portion of the contract price automatically deducted from the contractors
billings, as security for the execution of corrective work -- if any -- becomes necessary. This
amount is to be released one year after the completion of the project, minus the cost of
corrective work.
None of the foregoing conditions were satisfied. Hence, the CA was correct in forfeiting the
retention fee. The completion of the work was stipulated in the Contract to be within 365 days
from the issuance of a Notice to Proceed or until May 16, 1989. Then the period was extended
up to November 30, 1989. Petitioner worked on the project till April 20, 1990. It was given by
MPC ample time and two extensions to complete the project. The simple truth is that in
failing to finish the project, the former failed to fulfill a prerequisite for the release of the
retention money.
d.      Detained Materials (NO)
·       Petitioner claims cost reimbursement of illegally detained materials, as it was
allowed to withdraw them from the site only after two years from the unilateral
termination of the Contract.  only approximately 80 percent of the project. In other words, it was already in delay at the
NO. This contention has no merit. According to the CAs ruling, the only proof that MPC
detained materials belonging to petitioner was the denial of the request, contained in the
latter’s letter for the release of used form lumber. Aside from that letter, however, no other
attempt was shown to have been made by petitioner to obtain its request. It should have tried
again to do so before claiming that respondents unreasonably prevented it from removing its
construction materials from the premises. As to the other materials, there was absolutely no
attempt to remove them from the construction site. Hence, we cannot say that these were ever
withheld from petitioner.
e.      Attorney’s Fees (NO)
·       Petitioner argues that it is entitled to attorneys fees based on Article 2208 of the
Civil Code, because (1) respondents act or omission has compelled it to litigate with
third persons or to incur expenses to protect its interest; and (2) respondents acted
in gross and evident bad faith in refusing to satisfy its plainly valid, just and
demandable claim.
NO. The grant of some of the claims of petitioner does not change the fact that it did not finish
the project. Attorney’s fees are not granted every time a party prevails in a suit, because no
premium should be placed on the right to litigate. Petitioner is not, after all, blameless in the
present controversy. Just because MPC withheld some payments from petitioner does not
mean that the former was in gross or evident bad faith. MPC had claims that it wanted to offset
with those of the latter.
2.       Agreement (JVA) with Gotesco Properties, Inc. (Gotesco) for the development of their
NO. The Supreme Court concurs with the CA that these two respondents are not liable.  was then represented by respondent Jose Go. It appears, however, that the development project
The personal liability of corporate officers validly attaches only when (a) they assent to a
patently unlawful act of the corporation; or (b) they are guilty of bad faith or gross negligence
in directing its affairs; or (c) they incur conflict of interest, resulting in damages to the
corporation, its stockholders or other persons. 
The records are bereft of any evidence that Typoco acted in bad faith with gross or
inexcusable negligence, or that he acted outside the scope of his authority as company
president. 
Respondent Tan is not an officer or a director of MPC. His participation is limited to an
alleged conversation between him and Engineer Mario Cornista, petitioners project manager.
Supposedly, the former verbally agreed therein to guarantee the payment of the latters
progress billings. We find no satisfactory evidence to show respondents alleged solidary
liability to petitioner.
3.     
YES. In comparison, petitioner did not fulfill its contractual obligations. It could not totally
pass the blame to MPC for hiring a second contractor, because the latter was allowed to
terminate the services of the contractor. As of November 30, 1989, petitioner accomplished
time.
Petitioner was in delay and in breach of contract. Clearly, the obligor is liable for damages that
are the natural and probable consequences of its breach of obligation. Petitioner was already
paid by MPC in the amount of P31,435,187 out of the total contract price of P38,580,609;
thus, only P7,145,422 remained outstanding. In order to finish the project, the latter had to
contract the services of a second construction firm for P11,750,000. Hence, MPC suffered
actual damages in the amount of P4,604,579 for the completion of the project.
Petitioner is also liable for liquidated damages as provided in the Contract . Liquidated
damages are those that the parties agree to be paid in case of a breach. As worded, the amount
agreed upon answers for damages suffered by the owner due to delays in the completion of the
project. Under Philippine laws, these damages take the nature of penalties.  A penal clause is
an accessory undertaking to assume greater liability in case of a breach. It is attached to an
obligation in order to ensure performance.
PREPARED BY: NICOLE ANN CRYSTA M. ROMERO
 
27. SPS. FELIX A. CHUA and CARMEN L. CHUA, et al., Petitioners, 
vs. UNITED COCONUT PLANTERS BANK, et al. Respondents.
FACTS:
On March 3, 1997, petitioner Spouses Felix and Carmen Chua entered into a Joint Venture
property in Lucena City into a mixed use, residential and commercial subdivision. Gotesco
under this JVA did not ultimately materialize. 
Pursuant to the JVA, several deeds of absolute sale were executed over Sps Chua’s 12 parcels
of land situated in Lucena City in favor of Revere, a corporation controlled and represented by
Jose Go. The deeds of absolute sale were complemented by a deed of trust under which it was
confirmed that Revere did not part with any amount in its supposed acquisition of the 12
parcels of land. The deed of trust further confirmed Sps Chua’s absolute ownership of the
properties.  first MOA had not been fully settled.
Prior to the execution of the JVA, Sps Chua and Jose Go had separate outstanding loan
obligations with UCPB.  Spouses Chua executed a real estate mortgage (REM) in favor of
UCPB involving several parcels of land to secure the loans obtained in their personal
capacities and in their capacities as corporate officers and stockholders of the Lucena Grand
Central Terminal, Inc. (LGCTI).  settle the obligations of Jose Go and his group of companies before fully satisfying the
Sps Chua entered into a MOA with UCPB to consolidate the obligations of the Spouses Chua
and LGCTI. Petitioners exchanged their 30 parcels of land to effectively reduce their total
unpaid obligations to only P68,000,000.00. To settle the balance, they agreed to convert it into
equity in LGCTI in case they would default in their payment. To implement the MOA, they
signed the REM drafted by UCPB, which included the properties listed in the MOA as
security for the credit accommodation of P404,597,177.04. Unknown to them, however, Jose
Go, acting in behalf of Revere, likewise executed another REM covering the properties that
Revere was holding in trust for them. When UCPB foreclosed the mortgages, it applied about
P75.09 million out of the P227,700,000.00 proceeds of the foreclosure sale to the obligations
of Revere and Jose Go.  outstanding obligations of the Spouses Chua and LGCTI. In consideration of the premises, the
Spouses Chua wrote UCPB to request an accounting of Jose Go's liabilities that had been
mistakenly secured by the mortgage of petitioners' properties, as well as to obtain a list of all
the properties subject of their REM as well as of the Revere REM for reappraisal by an
independent appraiser. The Spouses Chua further requested that the proceeds of the
foreclosure sale of the properties be applied only to petitioners' obligation and that the rest of
the properties or any excess of their obligations should be returned to them. However, UCPB
did not heed petitioners' requests.
Sps Chua filed their complaint against UCPB, Revere, Jose Go, and the Register of Deeds of
Lucena City in the RTC in Lucena City. The RTC issued a writ of preliminary injunction at
the instance of petitioners and declared Go and Revere in default.  Thereafter, the RTC
rendered a partial judgment against Jose Go and Revere.
 
Meanwhile, Asset Pool A moved to be substituted for UCPB as a party-defendant on February
15, 2006 on the basis that UCPB had assigned to it the rights over petitioners’ ₱68,000,000.00
obligation. The RTC approved the substitution.
 
Thereafter, the RTC rendered judgment in favor of Sps. Chua. The RTC declared the Revere
REM as null and void for having been entered into outside the intent of the J A; and opined
that the Revere REM did not even bear any of Sps Chua’s signatures. It ruled that the
application of the proceeds of the foreclosure sale of petitioners' properties to settle Jose Go's
liabilities was improper, invalid and contrary to the intent of the principal contract of the
parties.
The CA reversed and set aside the judgment of the RTC. The CA made reference to three
REMs: the first, would secure the Spouses Chua' s obligations with UCPB; the second, was
petitioners' REM in connection with the March 21, 2000 MOA; and the Revere REM
executed. It opined that the first REM remained outstanding and was not extinguished as
claimed by petitioners; that the Revere REM was valid based on the application of the
complementary contracts construed together doctrine whereby the accessory contract must be
read in its entirety and together with the principal contract between the parties; that it was the
intention of the parties to extend the benefits of the two REMs under the first MOA in favor of
Jose Go and/or his group of companies; and that petitioners' obligations with UCPB under the
Issues
Did the CA commit reversible errors in finding that the Revere REM was valid and binding on
petitioners, and in upholding the propriety of applying the proceeds of the foreclosure sale to
liabilities of petitioners?
RULING:
Yes. While the RTC and the CA both dealt with and examined the same set of facts and
agreements of the parties, they ended up with totally opposing factual findings. In this regard,
there is a need to review the records to determine which findings by the lower courts should be
preferred for being conformable with the records.
On March 21, 2000, UCPB and petitioners entered into the MOA consolidating the
parties hereto agree as follows:
SECTION 1.0.
CONTRACTUAL INTENT
 
Section 1.1. Intent of the Parties - Subject to the provisions of this Agreement, and
the satisfactory performance by the BORROWER of the obligations and
undertakings set forth herein, the parties hereto declare, confirm and agree that:
(a) title to the Property shall be transferred and conveyed to the BANK; the BANK
shall have the sole discretion to determine and implement the appropriate actions for
the conveyance of such title in favor of the BANK;
(b) the BANK shall: (i) grant the Spouses Chua a continuing right of first refusal
over the Property and (ii) consider entering into and concluding with the Spouses
Chua a contractual arrangement for the development of the Property; and
(c) the parties shall implement the appropriate acts and deeds necessary or required
for the execution, delivery and performance of this Agreement and the completion of
the transactions contemplated herein, conformably with the terms and conditions set
forth hereunder.
 
xxxx
 
SECTION 5.0.
MISCELLANEOUS PROVISIONS
 
Section 5 .1. Binding Effect - This Agreement shall take effect upon its execution
and the rights and obligation contained hereunder shall be valid and binding on the
parties and their respective successors-in-interest.
Section 5.2. Governing Law - The provisions of this Agreement shall be governed,
and be construed in all respects, by the laws of the Philippines.
 Section 5.3. Further Assurance - LGCTI and the Spouses Chua warrant that they
shall execute and deliver any and all additional documents or instruments and do
such acts and deeds as may be necessary to fully implement and consummate the
transactions contemplated under this Agreement.
Section 5.4. Entire Agreement - This Agreement constitutes the entire, complete and
exclusive statement of the terms and conditions of the agreement between the parties
with respect to the subject matter referred to herein. No statement or agreement, oral
or written, made prior to the signing hereof and no prior conduct or practice by
either party shall vary or modify the written terms embodied hereof, and neither
party shall claim any modification of any provision set forth herein unless such
modification is in writing and signed by both parties.  making prior verification of the mortgaged properties' real owners, UCPB became a mortgagee
The Court refuses to subscribe to the CA's declaration that the 1997 REM still subsisted
separately from the consolidated obligations of Sps Chua. As early as the latter part of 1999,
correspondence and negotiation on the matter were already occurring between UCPB, on one
hand, and the Spouses Chua and LGCTI, on the other. Specifically, in its letter to petitioners,
UCPB wrote: "This will formalize our earlier discussions on the manner of settlement of your
personal and that of LGCTI's outstanding obligations. "  and/or by LGCTI, Spouses Chua, and Jose Go."
The outstanding obligations adverted to referred to the Spouses Chua's unsettled, unpaid and
remaining debt with UCPB. In discussing how the Spouses Chua could settle their obligations,
there was no distinction whatsoever between the loans obtained in 1997 and those made in
subsequent years. To be readily inferred from the tenor of the correspondence was that
the Spouses Chua's obligations were already consolidated.
The MOA referred to the outstanding obligations of LGCTI and the Spouses Chua as being in
the amount of ₱204,597,177.04 as of November 30, 1999. This meant that all of the Spouses
Chua's obligations with UCPB on or prior to November 30, 1999 had already been combined.
It was plain enough to see that the MOA constituted the entire, complete and exclusive
agreement between the parties.  G.R. No. 170928
There is no question about the validity of the March 21, 2000 MOA as well as the REM
executed by petitioners in support of this MOA. However, much controversy attended the
Revere REM. There is no proof that plaintiffs have consented to the application of the
properties to the loan obligation of defendant Jose Go. UCPB is therefore lawfully bound
to return to Sps Chua the TCTs.
We have to note that the REM was executed by Revere through Jose Go purportedly in
connection with the March 21, 2000 MOA on the very same day that Sps. Chua’s REM were
executed. Yet, Sps. Chua disclaimed any knowledge or conformity to the Revere REM. With
the two deeds of trust executed in favor of Revere not having been expressly cancelled or
rescinded, the properties mortgaged by Revere to UCPB were still owned by petitioners for all
intents and purposes.
For clarity, deeds of trust expressly provide that:
2. The TRUSTEE hereby acknowledges and obliges itself not to dispose of, sell,
transfer, convey, lease or mortgage the said twelve (12) parcels of land without
the written consent of the TRUSTORS first obtained; (bold emphasis added)
By entering into the Revere REM, therefore, Revere openly breached its undertakings under
the deeds of trust in contravention of the express prohibition therein against the disposition or
mortgage of the properties. It is also worth mentioning that the records are bereft of any
allegation that Revere had obtained the approval of petitioners or that the latter had acquiesced
to the mortgage of the properties in favor of UCPB. 
Additionally, UCPB could not now feign ignorance of the deeds of trust. UCPB's own Vice
President expressly mentioned in writing that UCPB would secure from Jose Go the titles
necessary for the execution of the mortgages. As such, UCPB's actual knowledge of the deeds
of trust became undeniable. In addition, UCPB, being a banking institution whose business
was imbued with public interest, was expected to exercise much greater care and due diligence
in its dealings with the public. By approving the loan application of Revere obviously without
in bad faith. 
The CA pronounced that the parties had intended to extend the benefits of the two REMs
under the first MOA to Jose Go and/or his group of companies. It premised its pronouncement
on the express stipulation in petitioners' REM to the effect that it was "the intention of the
parties to secure as well the payment of all loans, overdrafts xxxx by the MORTGAGORS
  
The imperatives of the parties' obligations under their contracts require the proceeds of the
foreclosure in the total amount of ₱227,700,000.00 be applied, first, to Sps Chua’s obligation,
as agreed upon in the First MOA, and the remaining balance to Jose Go's outstanding
obligations with UCPB. 
 
 alit
2.2 MANIFESTATIONS OF UNJUST ENRICHMENT
28.  VICENTE S. ALMARIO, Petitioner, vs. PHILIPPINE AIRLINES, INC., Respondent.
September 11, 2007
CARPIO MORALES, J.
FACTS:
On October 21, 1988, petitioner, Vicente S. Almario (Almario), was hired by respondent,
Philippine Airlines, Inc. (PAL), as a Boeing 747 Systems Engineer. On April 28, 1995,
Almario, then about 39 years of age and a Boeing 737 (B-737) First Officer at PAL,
successfully bid for the higher position of Airbus 300 (A-300) First Officer. Since said
higher position required additional training, he underwent, at PAL’s expense, more than five
months of training consisting of ground schooling in Manila and flight simulation in
Melbourne, Australia.
After completing the training course, Almario served as A-300 First Officer of PAL, but after
eight months of service as such or on September 16, 1996, he tendered his resignation, for
"personal reasons," effective October 15, 1996.
A letter from PAL was sent to Almario stating that the Company invested heavily on his 
professional training in the estimated amount of PHP786,713.00 on the basis that he continue
to serve the Company for a definite period of time which is approximately three (3) years or
thirty-six (36) months. In view of the foregoing, the company urges Almario to reconsider his 
proposed resignation otherwise he will be required to reimburse the Company an amount
equivalent to the cost of his professional training and the damaged caused to the
Company.
Despite receipt of the letter, Almario pushed through with his resignation. Then, by letter of
October 9, 1996, Almario’s counsel sought PALs explanation behind its September 27, 1996
letter considering that Almario did not sign anything regarding any reimbursement. PAL did
not reply, prompting Almario’s counsel to send two letters following-up PAL’s reply, as well
as the release of Almario’s clearances which he needed to avail of his benefits.
PAL filed a Complaint against Almario before the Makati Regional Trial Court (RTC), for
reimbursement of P851,107 worth of training costs, attorneys fees equivalent to 20% of the
said amount, and costs of litigation. PAL invoked the existence of an innominate contract of
do ut facias (I give that you may do) with Almario in that by spending for his training, he
would render service to it until the costs of training were recovered in at least three (3) years.
Almario having resigned before the 3-year period, PAL prayed that he should be ordered to
reimburse the costs for his training.
Almario denied the existence of any agreement with PAL that he would have to render service
to it for three years after his training failing which he would reimburse the training costs.
Almario thus prayed for the award of actual damages on account of PAL’s withholding of the
necessary clearances which he needed in order to obtain his lawful benefits, and moral and
exemplary damages for malicious prosecution and unjust harassment.
PAL hinges its arguments on its right to be reimbursed for training expenses based on Article
XXIII, Section 1 of the 1991-1994 CBA and which was taken from the decision of the
Secretary of Labor that a pilot should remain in the position where he is upon reaching the age
of fifty-seven (57).
By Decision of October 25, 2000, the RTC, finding no provision in the CBA between PAL
and ALPAP stipulating that a pilot who underwent a training course for the position of A-300
First Officer must serve PAL for at least three years failing which he should reimburse the
training expenses, rendered judgment in favor of Almario. The trial court denied Almario’s
claim for moral damages, however.16 It denied too Almario’s claim for the monetary
equivalent of his family trip pass benefits (worth US$49,824), it holding that the same had
been forfeited as he did not avail of them within one year from the date of his separation.
On appeal by both parties, the Court of Appeals, by Decision dated March 31, 2005, reversed
the trial courts decision. It found Almario liable under the CBA between PAL and ALPAP, , in
any event, under Article 22 of the Civil Code.
ISSUES:
1.       Whether or not PAL is entitled to reimbursement
2.       Whether the Court of Appeals committed reversible error in holding that Article 22 of
the Civil Code can be applied to recover training costs which were never agreed to nor
included as reimbursable expenses under the CBA;
3.       Whether the availing by petitioner of a required training is a legal ground justifying the
entitlement to a benefit and therefore, negating claims of unjust enrichment;
RULING:
             The petition fails.
             The pertinent provision of the CBA and its rationale aside, contrary to Almario’s
claim, Article 22 of the Civil Code which reads:
Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him,
applies.
This provision on unjust enrichment recognizes the principle that one may not enrich himself
at the expense of another. An authority on Civil Law34 writes on the subject, viz:
Enrichment of the defendant consists in every patrimonial, physical, or moral advantage, so
long as it is appreciable in money. It may consist of some positive pecuniary value
incorporated into the patrimony of the defendant, such as: (1) the enjoyment of a thing
belonging to the plaintiff; (2) the benefits from service rendered by the plaintiff to the
defendant; (3) the acquisition of a right, whether real or personal; (4) the increase of value of
property of the defendant; (5) the improvement of a right of the defendant, such as the
acquisition of a right of preference; (6) the recognition of the existence of a right in the
defendant; and (7) the improvement of the conditions of life of the defendant.
The enrichment of the defendant must have a correlative prejudice, disadvantage, or
injury to the plaintiff. This prejudice may consist, not only of the loss of property or the
deprivation of its enjoyment, but also of non-payment of compensation for a prestation or
service rendered to the defendant without intent to donate on the part of the plaintiff, or the
failure to acquire something which the latter would have obtained. The injury to the plaintiff,
however, need not be the cause of the enrichment of the defendant. It is enough that there be
some relation between them, that the enrichment of the defendant would not have been
produced had it not been for the fact from which the injury to the plaintiff is derived.
Admittedly, PAL invested for the training of Almario to enable him to acquire a higher level
of skill, proficiency, or technical competence so that he could efficiently discharge the position
of A-300 First Officer. Given that, PAL expected to recover the training costs by availing of
Almario’s services for at least three years. The expectation of PAL was not fully realized,
however, due to Almario’s resignation after only eight months of service following the
completion of his training course. He cannot, therefore, refuse to reimburse the costs of
training without violating the principle of unjust enrichment.
Following the computation by the appellate court which was arrived at by offsetting the
respective claims of the parties, viz:
Training Cost P851,107.00
Less: Appellee's corresponding 8
months
Service after training [P850,107.00
divided by 36 months (3 years)
= P23,640.86 x 8 months] 189,126.88
Equals
P661,980.12
Less: Accrued Benefits 102,240.22
Net Reimbursable Amount or
Appellee's Outstanding Account
P559,739.9036
*****************
Almario must pay PAL the sum of ₱559,739.90, to bear the legal interest rate of 6% per
annum from the filing of PAL’s complaint on February 11, 1997 until the finality of this
decision.
WHEREFORE, the petition is DENIED and the decision appealed from is AFFIRMED.
JV FERMIN
 29. 
BENGUET CORPORATION, Petitioner, vs. DEPARTMENT OF ENVIRONMENT
AND NATURAL RESOURCES-MINES ADJUDICATION BOARD and J.G. REALTY
AND MINING CORPORATION, Respondents.
G.R. No. 163101, February 13, 2008 VELASCO JR., J.
FACTS:
On June 1, 1987, Benguet and J.G. Realty entered into a Royalty Agreement with Option to
Purchase (RAWOP,) wherein J.G. Realty was acknowledged as the owner of four mining
claims in Camarines Norte. The mining claims were covered by MPSA Application No.
APSA-V-0009 jointly filed by J.G. Realty as claimowner and Benguet as operator.
J.G. Realty relay its intention to develop the mining claims. However, on another date. J.G.
Realty, then sent a letter to the President of Benguet informing the latter that it was
terminating the RAWOP on the following grounds:
a. The fact that your company has failed to perform the obligations set forth in the
RAWOP, i.e., to undertake development works within 2 years from the execution of
the Agreement;
b. Non-payment of the royalties thereon as provided in the RAWOP.
 As to the royalties, Benguet claims that the checks representing payments for the royalties of
J.G. Realty were available for pick-up in its office and it is the latter which refused to claim
them. Benguet then thus concludes that it did not violate the RAWOP for nonpayment of
royalties. Further, Benguet reasons that J.G. Realty has the burden of proving that the former
did not pay such royalties following the principle that the complainants must prove their
affirmative allegations.
With regard to the failure to pursue the MPSA application, alleging that Benguet complied
with its obligations under the RAWOP by investing PhP 42.4 million to rehabilitate the mines,
and that the commercial operation was hampered by the non-issuance of a Mines Temporary
Permit by the Mines and Geosciences Bureau (MGB) which must be considered as force
majeure, entitling Benguet to an extension of time to prosecute such permit.
J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP with the
Legaspi City POA. POA issued a Decision that Benguet violated the RAWOP justifying the
unilateral cancellation of the RAWOP by J.G. Realty.
Benguet filed a Notice of Appeal Department of Environment and Natural Resources-Mining
Adjudication Board  which denied it. MR was also denied by DENR-MAB. Hence, Benguet
filed the instant petition.
ISSUES:
1. Was the cancellation of the RAWOP was supported by evidence (YES)
2. Did the cancellation of the RAWOP amount to unjust enrichment of J.G. Realty at the
expense of Benguet? (NO)
RULING: Note that this case failed to comply with the procedural requirement that a decision
of the MAB must first be appealed to the CA under Rule 43 of the Rules of Court, before
recourse to the SC
1. YES. The cancellation of the RAWOP was supported by evidence 
The cancellation of the RAWOP by the POA was based on two grounds: (1) Benguet’s failure
to pay J.G. Realty’s royalties for the mining claims; and (2) Benguet’s failure to seriously
pursue MPSA Application over the mining claims.
Sec. 14.05 of the RAWOP provides:
14.05 Bank Account
OWNER shall maintain a bank account at ___________ or any other bank from time
to time selected by OWNER with notice in writing to BENGUET where BENGUET
shall deposit to the OWNER’s credit any and all advances and payments which may
become due the OWNER under this Agreement as well as the purchase price herein
agreed upon in the event that BENGUET shall exercise the option to purchase
provided for in the Agreement. Any and all deposits so made by BENGUET shall
be a full and complete acquittance and release to BENGUET from any further
liability to the OWNER of the amounts represented by such deposits.  
Evidently, the RAWOP itself provides for the mode of royalty payment by Benguet. The
fact that there was the previous practice whereby J.G. Realty picked-up the checks from
Benguet is unavailing. The mode of payment is embodied in a contract between the
parties. As such, the contract must be considered as the law between the parties and
binding on both. Thus, after J.G. Realty informed Benguet of the bank account where
deposits of its royalties may be made, Benguet had the obligation to deposit the checks. J.G.
Realty had no obligation to furnish Benguet with a Board Resolution considering that the
RAWOP itself provided for such payment scheme.
Notably, Benguet’s claim that J.G. Realty must prove nonpayment of its royalties is both
illogical and unsupported by law and jurisprudence. Thus, this Court ruled in Jimenez v.
National Labor Relations Commission: As a general rule, one who pleads payment has the
burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that
the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-
payment. The debtor has the burden of showing with legal certainty that the obligation
has been discharged by payment
It should also be borne in mind that MPSA Application No. APSA-V-0009 has been pending
with the MGB for a considerable length of time. Benguet, in the RAWOP, obligated itself to
perfect the rights to the mining claims and/or otherwise acquire the mining rights to the
mineral claims but failed to present any evidence showing that it exerted efforts to speed up
and have the application approved. In fact, Benguet never even alleged that it continuously
followed-up the application with the MGB and that it was in constant communication with the
government agency for the expeditious resolution of the application. Such allegations would
show that, indeed, Benguet was remiss in prosecuting the MPSA application and clearly failed
to comply with its obligation in the RAWOP.
2. NO. There is no unjust enrichment in the instant case
Based on the foregoing discussion, the cancellation of the RAWOP was based on valid
grounds and is, therefore, justified. The necessary implication of the cancellation is the
cessation of Benguet’s right to prosecute MPSA Application and to further develop such
mining claims.
In Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation: We have held
that “there is unjust enrichment when a person unjustly retains a benefit to the loss of another,
or when a person retains money or property of another against the fundamental principles of
justice, equity and good conscience.”
Article 22 of the Civil Code provides that “every person who through an act of performance
by another, or any other means, acquires or comes into possession of something at the expense
of the latter without just or legal ground, shall return the same to him.” 
The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person
is benefited without a valid basis or justification, and (2) that such benefit is derived at
another’s expense or damage.
There is no unjust enrichment when the person who will benefit has a valid claim to such
benefit.  ISSUES:
Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP,
which left Benguet without any legal right to participate in further developing the mining
claims, was brought about by its violation of the RAWOP. Hence, Benguet has no one to
blame but itself for its predicament.
WHEREFORE, we DISMISS the petition, and AFFIRM the December 2, 2002 Decision
and March 17, 2004 Resolution of the DENR-MAB in MAB Case No. 0124-01 upholding the
cancellation of the June 1, 1987 RAWOP. No costs. SO ORDERED.
-Ina.  major item of work and cannot merely be contemplated as a miscellaneous item in a
30. ADVANCED FOUNDATION CONSTRUCTION SYSTEMS CORPORATION
vs. NEW WORLD PROPERTIES AND VENTURES, INC.
G.R. No. 143154 & G.R. No. 143177, June 21, 2006, CHICO-NAZARIO, J.:
FACTS:
New World conducted a bidding for the construction of 69 bored piles which would form the
foundation of the 36-storey World Trade Exchange Building it planned to erect on a parcel of
land it owned in Binondo, Manila. New World notified AFCSC of the acceptance of its bid to
construct the 69 bored piles for the lump sum of Thirty-six Million Pesos (P36,000,000.00).
New World issued to AFCSC the Notice to Proceed Work wherein AFCSC was instructed to
commence work on 27 November 1996 and complete the same by 24 February 1997. Under
said notice, it was stated that in case of delay in the completion of the project, AFCSC would
pay New World liquidated damages in the amount of P36,000.00 per calendar day of delay.
During the subsistence of the contract, New World directed AFCSC to make changes and
additional works. Thereafter, sometime in August 1997, AFCSC billed New World the costs
of the change orders in addition to the original contract price. Included in said billing is the
cost of the removal of underground obstructions in the project site as well as the installation of
sonic pipes to be used to conduct load tests on the bored piling works. AFCSC claimed that
these works were not part of the original contract and should be treated as extra work. New
World informed AFCSC of the former’s rejection of the 21 November 1996 proposal of
AFCSC regarding the exclusion of the removal of underground obstructions from the original
scope of work and AFCSC’s claim for compensation for alleged extra work. New World
maintained that the alleged additional works were all part of the contract signed by both
parties.
The construction of the bored piles were completed only on 27 November 1997, or more than
eight months after the original date of 24 February 1997 contemplated in the contract. New
World, however, refused to pay its outstanding obligations to AFCSC due to the defective
bored piles. Upon New World’s continuous refusal to pay its obligation, AFCSC filed a
Request for Adjudication before the CIAC
(1) Which between New World and AFCSC should shoulder the expenses incurred for the
removal of the underground obstructions and the conduct of the pile tests; and (New World)
(2) Whether or not AFCSC is liable for liquidated damages for its failure to complete the
construction work by 24 February 1997. (YES)
HELD:
(1) In light of the ratiocination of the CIAC that the removal of underground obstruction is a
construction bid and must therefore be considered as extra work, We conclude that there was
nothing in the bid nor in the contract explicitly discussing the obligations of both parties in the
event that the contractor will encounter underground obstructions in the project site and may
be constrained to remove the same.
According to the Court of Appeals, in failing to formally notify New World regarding the
underground obstructions that it has encountered, AFCSC failed to set in motion the
mechanism for a modification of the contract and the equitable adjustment of the contract
price. Thus, for such negligence, the appellate court reduced the original award of the CIAC to
only one-half of the cost of the removal of the underground obstructions.

We do not agree. As explained by the appellate court itself, the experts and CIAC have agreed
that the removal of the underground obstructions was not covered by the scope of work in the
contract. It is not disputed though that the same was a major work entailing additional
expenses and extra working time. Neither was it denied that such major work was indeed
necessary for the successful completion of the project. Indeed, to deny AFCSC relief for the
expenses it incurred in removing said obstructions would result in allowing New World to
unjustly enrich itself at the expense of AFCSC. Equity necessarily dictates that New World be
held liable for the expenses incurred for the extra work conducted for its sole benefit. Further,
it cannot be said that New World was not made aware of the existence of the underground
obstruction nor of the additional expense that would be necessary for its removal. As
heretofore stated, AFCSC, on 21 November 1996, sent a proposal to New World regarding the
additional expenses that would be incurred in the instance that the contractor shall encounter
underground obstructions; however, New World never responded to said proposal until 9
September 1997, when it informed AFCSC of the rejection of said proposal or almost ten (10)
months after said proposal was first offered, and after all the necessary extra work had been
accomplished. Article 22 of the Civil Code states:

Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.

Hence, to allow New World to acquire the finished project at a price far below its actual
construction cost would undoubtedly constitute unjust enrichment for the bank to the prejudice
of AFCSC. Such unjust enrichment, as previously discussed, is not allowed by law. As found
by the CIAC and affirmed by the Court of Appeals, the cost of the removal of the underground
obstructions was P8,025,836.37. Beyond cavil, AFCSC is entitled to full payment of the
expenses incurred for the removal of the underground obstructions.

(2) Finally, with respect to the issue of whether or not AFCSC is liable for liquidated damages
for its failure to complete the construction work by the contract date of 24 February 1997, We
agree with the findings of the CIAC that AFCSC never sent notice to New World regarding a
request for extension of time to finish the work despite the existence of circumstances fairly
entitling it to an extension of the contract period. Thus, AFCSC, must bear some consequences
for the delay in the completion of the project and for disregarding the owner’s right to
determine the length of extension to be given to the contractor and to consequently adjust the
period to finish the extra work.

Prepared by: Mika Ituriaga