1.d.

Distionctions between cupla aquiliana and Culpa Contractual:

culpa contractual; Defense of employer for
―On the other hand, the liability of masters and
negligence of employee
employers for the negligent acts or omissions of
Culpa Aquiliana Culpa contractual their servants or agents, when such acts or
When an injury is If the defendant is a omissions cause damages which amount to the
caused by the common carrier and breach of a contract, is not based upon a mere
negligence of a sued on this basis, it presumption of the master‘s negligence in their
servant/employee, there cannot escape liability selection or control, and proof of exercise of the
arises a rebuttable by proving that it has utmost diligence and care in this regard does not
presumption of law of exercised due diligence relieve the master of his liability for the breach of
negligence on the part in the selection and
his contract.‖
of the employer; that supervision of its
the employer must employees. Is there an intersection?
relieve itself of by
proving that he has As proof of the Article 2176. Whoever by act or omission causes
exercised the care and employer‘s negligence damage to another, there being fault or
diligence of a good is not required, the negligence, is obliged to pay for the damage done.
father of a family in: employer cannot raise Such fault or negligence, if there is no pre-existing
(1) supervising and (2) the defense that the contractual relation between the parties, is called
selecting the employee breach was caused by quasi-delict. (1092a)
the negligence of his
employees.1 Cangco v. Manila Railroad (supra)
Doctrine: The field of non-contractual obligation
Quasi-delict/Culpa Aquiliana: is much more broader than that of contractual
obligation, comprising as it does, the whole extent
―From this article [Article 1903, Old Civil Code2], of juridical human relations.
two things are apparent:
These two fields, figuratively concentric; that is to
(1) That when an injury is caused by the say, the mere fact that a person is bound to
negligence of a servant or employee, there another by contract does not relieve him from
instantly arises a presumption of law that here was extra-contractual liability to such person.
negligence on the part of the master or employer
either in the selection of the servant or employee, When such a contractual relation exists, the
or in supervision over him after the selection, or obligor may break the contract under such
both; and conditions that the same act which constitutes a
breach of the contract would have constituted the
(2) That that presumption is juris tantum3 and not source of an extra-contractual obligation had no
et de jure4, and consequently, may be rebutted. It contract existed between the parties.
follows necessarily that if the employer shows to
the satisfaction of the court that in selection and
supervision he has exercised the care and  Based on Article 2176, the fault or
diligence of a good father of a family, the negligence accompanying the act or
presumption is overcome and he is relieved from omission of a person that caused damage
liability.‖ (Cangco v. Manila Railroad) to another is called a quasi-delict if there
is no pre-existing contractual relation
between the parties.
1
This said defense isn’t available to quasi-delicts either; the
only viable defense being due diligence in the selection and
supervision of the employees.
2
This is in reference to quasi-delict
3
Latin for ―rebuttable presumption‖
4
Latin for ―conclusive presumption of law‖
  While the jeep was descending Sta. Mesa
 The question becomes: What happens if bridge at an excessive speed, Luga lost
there is a pre-existing contractual control of it, causing it to swerve and hit
relationship? There are two options: the bridge wall

o (1) There is no quasi-delict; and

therefore no cause of action for  Five passengers were injured, including
damages based on quasi-delict; or Miranda, who suffered a fracture in his
arm (upper right humerus)
o (2) The cause of action exists but it
cannot be called a quasi-delict o He was taken to the National
Orthopedic Hospital, where he
 Jurisprudence does not offer a clear answer underwent 3 surgeries
to the above question; there is a line of
cases which provides that there can be no  At the time of the trial, Miranda had not
quasi-delict when there is a pre-existing yet recovered the use of his right arm
contract, and there is another that provides
 The driver was charged with serious
there cannot.
physical injuries through reckless
imprudence
Cases that say that there can be NO quasi-delict
when there is a pre-existing contract: o Upon pleading guilty, the driver
was sentenced accordingly

Fores v. Miranda (1959)  Petitioner contended the following:

o The evidence did not sufficiently

Doctrine: The definition of quasi-delict in Art. establish the identity of the vehicle
2176 of the Code expressly excludes the cases
where there is a pre-existing contractual relation o The jeep was registered in the
between the parties. (xxx) name of Paz Fores (herein
petitioner), who allegedly sold it
The difference in conditions, defences, and proof,
the day before the accident to a
as well as the codal concept of quasi-delict as certain Carmen Sackerman
essentially extra contractual negligence, compel us
to differentiate between action ex contractu, and
actions quasi ex delicto, and prevent us from  CFI Manila: P10,000 actual damages
viewing the action for breach of contract as
simultaneously embodying an action on tort5.  CA: reduced actual damages to P2,000;
awarded P3,000 attorney‘s fees6 and
Nature of petition: review  CA Decision: 10,000
awarding to the plaintiff-respondent Ireneo
Miranda P5,000 via actual damages and counsel
fees + P10,000 via moral damages, with costs. o The reduction was on the ground
that a review of the records failed
Facts: to disclose a sufficient basis for the
amount
 Respondent Ireneo Miranda was one of the
passengers on a jeep driven by Eugenio
o Rejected the contention that the
Luga.
evidence didn‘t establish the
5 vehicle‘s identity; there was an
Casis: Although the term tort was used, it is actually
saying that an action for quasi-delict cannot simultaneously
6
embody an action for a breach of contract. They make up the P5,000 in the Nature of petition
 identifiable plate number and even
had the inscription “Dona Paz”
painted below on its windshield
 Hence this instant appeal
Issue #1: W/N the approval of the Public Service
Commission is necessary for the sale of a public
service vehicle even without conveying the
authority to operate the same – Yes, it is
 Sec. 20 of the Public Service Act7 clearly
prohibits the sale, alienation, lease, or
encumbrance of the property, franchise,
certificate, privileges or rights, or any part
thereof of the owner or operator of the
public service without the approval or
authorization of the Public Service
Commission
 Such transfer, if done without the approval
of the Commission, is not effective and
binding insofar as the responsibility of the
grantee under the franchise in relation to
the public is concerned. 8
 The proviso contained in the forequoted
law9, to the effect that ―nothing herein
shall be construed to prevent the
transaction from being negotiated or
completed before its approval‖, means
7
SEC. 20. Subject to established limitations and saving
provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee or operation thereof, without
the previous approval and authority of the Commission
previously had—
(g) To sell, alienate, mortgage, encumber or lease its
property, franchise, certificates, privileges, or rights, or any
part thereof; or merge or consolidate its property, franchises
privileges or rights, or any part thereof, with those of any
other public service. The approval herein shall be given,
after notice to the public and after hearing the person
interested at a public hearing, (xxx)
8
Montoya v. Ignacio, Timbol v. Osias et al., Medina v.
Cresencia
9
SEC. 20. – (xxx)
Provided, however, That nothing herein contained shall be
construed to prevent the transaction from being negotiated
or completed before its approval or to prevent the sale,
alienation, or lease by any public service of any of its
property in the ordinary course of its business.
only that the sale without the required
approval is still valid and binding between
the parties
o The phrase “in the ordinary course
of its business” found in the other
proviso “or to prevent the sale,
alienation, or lease by any public
service of any of its property” 
property that may be conceivably
disposed of the carrier in the
ordinary course of its business
 Ex: junked equipment or
spare parts
 There may be nunc pro tunc10
authorization, but such outcome cannot
prejudice rights intervening in the
meantime
o Regardless, it appears that no such
approval was given by the
Commission before the accident
occurred
Issue #3: W/N attorney‘s fees may be awarded—
Yes, they may.
 Petitioner contends that the same cannot be
awarded by the CA, because the CFI didn‘t
provide for itCA can‘t award it motu
proprio11
 However, attorney‘s fees are included in
the concept of actual damages under the
Civil Code and may be awarded whenever
the court deems it just and equitable12
10
Latin for ―now for then‖; a nunc pro tunc ruling applies
retroactively
11
Latin for ―on his own impulse‖
12
Article 2208 (11). In the absence of stipulation, attorney‘s
fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(11) In any other case where the court deems it just and
equitable that attorney‘s fees and expenses of litigation
should be recovered
Issue #213: W/N moral damages should be
awarded – No, they may not.
 In the absence of fraud or bad faith on the
part of the carrier, moral damages are not
recoverable in actions predicated on a
breach of contract of carriage.
 Referring to Arts. 221914 and 222015 of the
Civil Code—when moral damages may be
recovered, it becomes apparent that:
o In case of breach of contract, proof
of bad faith or fraud is essential to
justify an award of moral damages
o The breach of contract cannot be
considered as an ―analogous case‖
in Art. 2219
 Not only because Article
2220 specifically provides
for the damages caused by
contractual breach, but
because the definition of
quasi-delict16 expressly
17
excludes the cases where
there is a pre-existing
contractual relation
between the parties
13
This is the issue pertinent to the subject
14
Article 2219. Moral damages may be recovered in the
following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries
15
Article 2220. Willful injury to property may be a legal
ground for awarding moral damages if the court should find
that, under the circumstance, such damages are justly due.
The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
16
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.
17
Casis: this explanation merely formed part of the
explanation for why a breach of contract cannot be an
analogous case under 2219. Contrast this with footnote [20;
Doctrine]
 The mere carelessness of the carrier‘s
driver does not per se constitute malice or
bad faith;
o In the case at bar, there is no
evidence of such malice to support
an award of moral damages
 The exception to this general rule is a
mishap resulting in the death of a
passenger, in which case Article 176418
makes the common carrier expressly
subject to the rule of Article 2206 19
o Unfortunately, no one died
 The limitation on awarding moral damages
imposed by the New Civil Code can be
explained to some extent by the
advantageous position of a party suing a
carrier for a breach of the contract of
transportation
o The action for breach of contract
imposes on the defendant carrier a
presumption of liability upon mere
proof of injury to the passenger
o The passenger is relieved from the
duty to establish the fault of the
carrier, or of his employees, and
the burden is placed on the carrier
to prove that it was due to an
unforeseen event or force majeure.
(Cangco v. Manila Railroad)
18
Article 1764. Damages in cases comprised in this Section
shall be awarded in accordance with Title XVIII of this
Book, concerning Damages. Article 2206 shall also apply to
the death of a passenger caused by the breach of contract by
a common carrier.
19
Article 2206(3). The amount of damages for death caused
by a crime or quasi-delcit shall be at least Three thousand
pesos, even though there may have been mitigating
circumstances. In addition:
(3) The spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased.

 The difference in conditions, defenses, and
proofs, as well as the codal concept of
quasi-delict as extra-contractual
negligence makes it necessary to
differentiate between action ex contractu
and actions quasi ex delicto. Thus, an
action for breach of contract cannot
simultaneously be an action on tort. 20
Dispositive Portion: CA Decision is MODIFIED
by eliminating the award of P5,000 by way of
moral damages. AFFIRMED in all other respects.
Note:
On the distinction between fraud, bad faith or
malice
It was also suggested that a carrier‘s violation of
its engagement to safely transport the passenger
involves a breach of the passenger‘s confidence,
and therefore, should be regarded as a breach of
contract in bad faith  justifying moral damages
This theory is untenable; under it, the carrier
would always be deemd in bad faith, in every case
its obligation to the passenger is infringed; the
presumption is that common carriers acted
negligently (not maliciously).
The distinction between fraud, bad faith or malice
in the sense of deliberate or wanton wrong doing
and negligence (as mere carelessness) is too
fundamental in our law to be ignored; their
consequences being clearly differentiated by the
Code:
20
This is the Doctrine;
Casis; the first reason stated was the difference in the
―conditions, defenses and proof‖ between quasi-delict and
breach of contract. But certainly such differences do not
mean that there can be no overlap. The same differences
exist in the case of delicts and quasi-delicts, yet an overlap is
accepted.
Casis (cont’d.): As for the ―codal concept,‖ there is a real
problem. As this case points out, Article 2176 does seem to
exclude the possibility of a quasi-delict existing if there is a
contract between the parties.
Article 2201. (xxx)
In case of fraud, bad faith, malice, or wanton
attitude, the obligor shall be responsible for all
damages which may be reasonably attributed to
the non-performance of the obligation.
It is to be presumed, in the absence of statutory
provision to the contrary, that this difference was
in the mind of the lawmakers when in Art. 2220
they limited recovery of moral damages to
breaches of contract in bad faith.
It is true that negligence may be occasionally so
gross as to amount to malice; but that fact must be
shown in evidence, from a mere finding that the
contract was breached through negligence of the
carrier‘s employees.
PSBA v. CA (1992)
Doctrine: Because the circumstances of the
present case evince a contractual relation, the
rules on quasi-delict do not really govern. A
perusal of Article 2176 shows that obligations
arising from quasi-delicts or tort, also known as
extra-contractual obligations, arise only between
parties not otherwise bound by contract, whether
express or implied.
Facts:
 There was a stabbing incident that caused
the death of Carlitos Bautista, a third year
commerce student, on the second floor
premises of the Philippine School of
Business Administration (PSBA)
o His assailants were not members of
the PSBA academic community
and were elements from outside the
school
 Bautista‘s parents (private respondents)
filed a case for damages against PSBA and
its corporate officers in the Manila RTC
  The suit impleaded the following:
o Juan D. Lim (President)
o Benjamin P. Paulino (Vice-
President)
o Antonio M. Magtalas
(Treasurer/Cashier),
o Col. Pedro Sacro (Chief of
Security)
o Lt. M. Soriano (Assistant Chief of
Security)
 The private respondents sought to make
these officers liable for their son‘s demise
due to their alleged negligence,
recklessness and lack of security
precautions, means and methods before,
during and after the attack of the victim.
 The petitioner filed a motion to dismiss,
alleging that under Article 218021, the
complaint has no action against it because
academic institutions are beyond the ambit
of the rule or Art. 2180.
 TC: denied the motion to dismiss and the
subsequent MR.
 Petitioners appealed to the CA
 CA: Affirmed the TC ruling
 Hence this instant petition
Issue #1: W/N the lower courts erred in ruling in
denying the motion to dismiss-- No, they did not
err in the ruling. However, the appellate court
erronesouly anchored their decision on the law
of quasi-delicts. This is because the case
involves a contract.
 In the cited cases22 where quasi-delict via
Art. 2180 was applied, establishing the
rule of in loco parentis, the damage should
21
Article 2190. 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.
(enumeration of actors and persons vicariously liable)
22
Exconde, Mendoza, Palisoc,& Amadora
have been caused by students of the
educational institution sought to be held
liable for the acts of the students while in
their custody.
o This material fact is different in
this case, since Bautista’s
assailants were not students of
PSBA.
o However, this does not mean that
the petitioner has escaped liability
 A contractual relationship exists between
PSBA and Bautista
o When an academic institution
accepts students for enrolment,
there is established a contract
between them, resulting in bilateral
obligations which both parties are
bound to comply with.
 The following bilateral obligations are
present:
o For the school: Provide student
with education that would equip
him with necessary tools and skills
to pursue higher education of a
profession
o For the student: Abide by school‘s
academic requirements and follow
the rules and regulations
 Furthermore, schools also have an implicit
obligation to provide its students with an
environment conducive to learning.
o These schools must take steps to
ensure maintenance of peace and
order within the campus.
Issue #2: W/N the rules on quasi-delict govern the
case, given that there exists a contractual
relation—No, they do not.
 Art. 2176 only applies when there are NO
pre-existing contractual relations between
the parties.
o As has been established, there is a
contractual relation between PSBA
and Bautista.
o However, this has not prevented
the Court from determining that a
tort exists even there is a contract.
(Air France v. Carroscoso)
o The liability of Air France is one
arising from tort and not that from
a contract of carriage.
o Air France is the authority for the
view that liability from tort may
exists even if there is a contract
because the act that breaks the
contract may also be a tort.
 Further authority for co-existence of
quasi-delict and breach of contract:
―When such a contractual relation exists,
the obligor may break the contract under
such conditions that the same act which
constitutes a breach of the contract would
have constituted the source of an extra-
contractual obligation, had there been no
contract existing between the parties‖
(Cangco v. Manila Railroad)
 However, in the instant case, there is no
finding that the contract between the
school and Bautista had been breached
through the school’s negligence in
providing proper security measures.
o This would be for the trial court to
determine23
23
The Manila RTC was ordered to continue proceedings
o And even if there be a finding of
negligence, the same could give
rise generally to a breach of
contractual obligation only.
 Using the test of Cangco, the negligence of
the school would not be relevant absent a
contract.
o In fact, that negligence becomes
material only because of the
contractual relation between PSBA
and Bautista.24
o In other words, a contractual
relation is a condition sine qua non
to the school's liability in this case.
o The negligence of the school
cannot exist independently on the
contract, unless the negligence
occurs under the circumstances set
out in Article 21 of the Civil
Code25.
 However, this does not mean that the
school has to protect students against all
risks.
o Conceptually, a school, like a
common carrier, cannot be an
insurer of its students against all
risks
24
Digester’s Note: Ang pagkakaintindi ko, hindi ka
puwedeng magka-quasi delict sa dito kasi yung sinasabi sa
mga previous cases kung saan puwede magkaroon, kelangan
‗yung delictual act (kasama negligence) puwede mag-exist
independently of the contract.
Ang kaso nga lang sa kontrata ng PSBA (or ng schools, in
general) saka ng student, ‗yung mga acts of negligence
mismo, laging naka-base sa kontrata.
The negligent acts that a school can commit—unless
contrary to the things Article 21 mentions—will always be
considered a breach of the obligation of the school in the
contract itself; ito ‗yung ―take steps to ensure maintenance
of peace and order within the campus‖.
25
Article 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.
 Facts:
 This is especially true since the school is
 Petitioner: Domestic banking corporation
in the ―University Belt‖, where are a lot of
organized and existing under Philippine laws
incidents occur—gang wars and
hooliganism.
 Private respondent: L.C. Diaz and Company,
CPA‘s; professional partnership engaged in
 It would be not be equitable to expect of
the practice of accounting
schools to anticipate all types of violent
trespass upon their premises

 PSBA can avoid liability by proving that it  L.C. Diaz opened a savings account with
wasn‘t negligent by showing that they Petitioner (Savings Account No. S/A 200-
exercised the degree of diligence required 16872-6)
by the nature of the obligation and
corresponding circumstances of persons,  Months after, private respondent, through its
time and place. cashier Mercedes Macaraya, filed up a
savings (cash) deposit slip for P990 and a
Remand to RTC savings (checks) deposit slip for P50.
 At this stage, only the trial court can make
o Macaraya instructed Calapre
such a determination from the evidence
(messenger) to deposit the money
still to unfold, since the proceedings a quo
with Petitioner.
have yet to commence on the substance of
the private respondents’ complaint
o Calapre was also given the
Dispositive Portion: Petition DENIED. The passbook.
court of origin is ORDERED to continue the
proceedings consistent with the herein ruling.  Calapre went to Petitioner and presented to
Teller No. 6 the two deposit slips and the
Consolidated Bank v. CA (1992)
passbook.

Doctrine: The law on quasi-delict or culpa
aquiliana is generally26 applicable when there is
no pre-existing contractual relationship between
the parties.
Nature of petition: Review  CA Decision and
Resolution, reversing Manila RTC Decision, w/c
absolved petitioner Consolidated Bank (now
Solidbank27) of any liability.
The questioned resolution of CA was its denial of
the MR of petitioner, with modification of
deleting the award of exemplary damages,
attorney’s fees, expenses of litigation, and cost of
suit
 The teller acknowledged receipt of the deposit
by returning to Calapre the duplicate copies
of the two deposit slips.
o Teller No. 6 stamped the deposit
slips with the words DUPLICATE
and SAVING TELLER 6
PETITIONER HEAD OFFICE
 Calapre had to make another deposit for L.C.
Diaz with a different bank—Allied Bank, and
the transaction was taking a long time, so he
left the passbook with Petitioner.

26
This term connotes that Consolidated Bank is not as strict
as in the previous cases as it admits of possible exceptions to
the general rule.
27
Bolded and italicized to avoid confusion between the
change of name
 When Calapre went back to claim it, the teller
informed him that someone else got the
passbook.
o Calapre reported the incident to
Macaraya.
 When Macaraya and Calapre went back to
Petitioner, Teller No. 6 said that the person
who got the passbook was shorter than
Calapre.
 Teller No. 6 handed to Macaraya a deposit
slip dated 14 August 1991 for the deposit of a
check for P90,000 drawn on Philippine
Banking Corporation ("PBC"); a check of
L.C. Diaz that it had ―long closed.‖
o The check was dishonored because
of insufficient funds and because
the signature in the check differed
from PBC's specimen signature.
 Luis Diaz (CEO of L.C. Diaz) then told
Petitioner to stop any transaction using the
same passbook until L.C. Diaz could open
a new account.
 He formally wrote to Petitioner the next
day (same request)
 L.C. Diaz then found out of an
unauthorized withdrawal amounting to
P300,000 from its savings account.
o However, such withdrawal slips
had the signatures of the authorized
signatories of L.C. Diaz (Diaz and
Rustico L. Murillio
o A certain Noel Tamayo received
the P300,000
 L.C. Diaz charged its messenger Ilagan and
one Roscon Verdazola with Estafa through
Falsification of Commercial Document
o The RTC, however, dismissed the
criminal case after the City
Prosecutor filed a motion to
dismiss
 L.C. Diaz then, through its counsel,
demanded from Petitioner the return of its
money but the latter refused.
o Thus, L.C. Diaz filed a complaint
for Recovery of a Sum of Money
against petitioner.
RTC Decision
 RTC: after trial, dismissed the complaint and
absolved petitioner, applying the rules on
savings account written on the passbook:
"Possession of this book shall raise the
presumption of ownership and any
payment or payments made by the bank
upon the production of the said book and
entry therein of the withdrawal shall have
the same effect as if made to the depositor
personally."
 Furthermore, signatures on the withdrawal
slip and signature cards were verified by
Manuel and another officer.
o The burden of proof is on L.C.
Diaz to prove that the signatures on
the withdrawal slip were forged.
 Petitioner's act of allowing the withdrawal of
P300,000 was not the direct and proximate
cause of the loss.
 Three facts establish L.C. Diaz's negligence:
o (1) The possession of the passbook
by a person other than the
depositor L.C. Diaz;
o (2) The presentation of a signed
withdrawal receipt by an
unauthorized person; and

o (3) The possession by an
unauthorized person of a PBC
check "long closed" by L.C. Diaz,
which check was deposited on the
day of the fraudulent withdrawal.
 RTC debunked L.C. Diaz‘s contention that
petitioner did not follow the precautionary
procedures28 observed by the two parties
whenever the former withdrew significant
amounts from its account
o L.C. Diaz disregarded these
precautions in its past withdrawals
 RTC debunked L.C. Diaz‘s contention that
petitioner did not follow the precautionary
procedures29 observed by the two parties
whenever the former withdrew significant
amounts from its account
 L.C. Diaz‘s case was a last ditch effort to
recover the P300,000 after the dismissal of
the criminal case it filed against its employees
 RTC also granted petitioner‘s counterclaim,
in the amount of P30,000 as attorney‘s fees
CA Decision
 CA: Petitioner’s negligence was the
proximate cause of the unauthorized
withdrawal, applying Article 2176
 It held that the three elements of a quasi-
delict are present in this case:
28
(1) A letter must accompany withdrawals more than
P20,000; (2) The letter must request Solidbank to allow the
withdrawal and convert the amount to a manager‘s check;
(3) The bearer must also have a latter authorizing him to
withdraw the same amount; (4) Another person driving a car
must accompany the bearer so that he would not walk from
Solidbank to the office in making the withdrawal
29
(1) A letter must accompany withdrawals more than
P20,000; (2) The letter must request Solidbank to allow the
withdrawal and convert the amount to a manager‘s check;
(3) The bearer must also have a latter authorizing him to
withdraw the same amount; (4) Another person driving a car
must accompany the bearer so that he would not walk from
Solidbank to the office in making the withdrawal
o (1) damages suffered by the
plaintiff,
o (2) fault or negligence of the
defendant, or some other person for
whose acts he must respond; and
o (3) the connection of cause and
effect between the fault or
negligence of the defendant and the
damage incurred by the plaintiff:
 The teller who received the withdrawal slip—
who was not presented by petitioner during
trial—should have called up the depositor
because the money to be withdrawn was a
significant amount.
 Thus, petitioner is liable for its negligence in
the selection and supervision of its
employees.
 The degree of diligence required from
petitioner is more than that of a good father
of a family
o The business and functions of
banks are affected with public
interest
o Banks are obligated to treat the
accounts of their depositors with
meticulous care, always having in
mind the fiduciary nature of their
relationship with their clients
 CA ordered petitioner to pay L.C. Diaz
P300,000 with interest @ 12%/yr, from the
date of filing the complaint until paid +
P20,000 as exemplary damages + P20,000
attorney‘s fees and expenses of litigation
 CA ordered the dismissal of the P30,000
counterclaim by petitioner
 Petitioner moved for reconsideration
CA Resolution
 Deleted exemplary damages: Since Petitioner
was guilty of simple negligence only, the
award of exemplary damages was not
justified.
 Deleted attorney’s fees: Disallowed pursuant
to Article 220830, as a consequence of having
no exemplary damages
 Deleted expenses of litigation and cost of suit
 Hence this instant petition
o The petition was held partly
meritorious
Issue #1: W/N petitioner is liable for breach of
contract due to negligence or culpa contractual—
Yes, it is. This is opposed to the CA holding
that it was a quasi-delict.
 The law on quasi-delict or culpa aquiliana is
generally applicable when there is no pre-
existing contractual relationship between the
parties. 31
 This case, however, is one of culpa
contractual: there is a debtor (bank) – creditor
(depositor) relationship between the bank and
its depositor.
o The depositor lends the bank
money
o The bank agrees to pay the
depositor on demand.
 The fiduciary nature of banking requires
banks to assume a degree of diligence higher
than that of a good father of a family.
30
Article 2208 (1). In the absence of stipulation, attorney‘s
fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(1) When exemplary damages are awarded.
31
This is the Doctrine
 Section 2 of RA 8791 (General Banking
Law)32 is a statutory affirmation of
jurisprudence that the bank is under
obligation to treat the accounts of its
depositors with meticulous care, always
having in mind the fiduciary nature of their
relationship.
o Although this law took effect nine
years after the unauthorized
withdrawal, jurisprudence at the
time imposed the same high
standard of diligence.
 The fiduciary nature of a bank-depositor
relationship does NOT convert the contract
between the bank and its depositors from a
simple loan to a trust agreement, whether
express or implied.
 Failure by the bank to pay the depositor is
failure to pay a simple loan, and not a
breach of trust.
How petitioner breached its contractual
obligation
 Article 1172 provides that responsibility
arising from negligence in the performance of
every kind of obligation is demandable.
o For breach of the savings deposit
agreement due to negligence, or
culpa contractual, the bank is
liable to its depositor.
 When the passbook is in the possession of
petitioner's tellers during withdrawals, the
law imposes on petitioner and its tellers an
even higher degree of diligence in
safeguarding the passbook.
32
SECTION 2. Declaration of Policy. – The State
recognizes the vital role of banks in providing an
environment conducive to the sustained development of the
national economy and the fiduciary nature of banking that
requires high standards of integrity and performance. (xxx).
  The petitioner must also insure that its
 Petitioner's tellers must exercise a high degree employees likewise exercise ―high standards
of diligence in insuring that they return the of integrity and performance‖, which they
passbook only to the depositor or his failed to do.
authorized representative.
o Petitioner failed to present the
 For failing to return the passbook to Calapre, teller who had the duty to return to
the authorized representative of L.C. Diaz, Calapre the passbook, and thus
Petitioner and Teller No. 6 presumptively failed to prove that this teller
failed to observe such high degree of exercised the ―high standards of
diligence in safeguarding the passbook, and in integrity and performance required
insuring its return to the party authorized to of petitioner‘s employees.
receive the same.
 Proximate cause doesn’t apply to this case
 In culpa contractual, once the plaintiff proves because it is one of culpa contractual, not of
a breach of contract, there is a presumption culpa aquiliana.
that the defendant was at fault or negligent.
Issue #2: W/N the Doctrine of Last Clear Chance
is applicable—No, it isn’t. The doctrine is
o The burden was on petitioner to
inapplicable to culpa contractual. It only
prove that there was no negligence
applies to culpa aquiliana (quasi delict).
on its part or its employees.
 Definition: ―[T]hat where both parties are
 The petitioner failed to discharge said burden. negligent but the negligent act of one is
appreciably later than that of the other, or
 The record does not indicate that Teller No. 6 where it is impossible to determine whose
verified the identity of the person who fault or negligence caused the loss, the one
retrieved the passbook. who had the last clear opportunity to avoid
the loss but failed to do so, is chargeable with
 Petitioner is bound by the negligence of its the loss.‖
employees under the principle of respondeat
superior or command responsibility.  This is a case of culpa contractual, where
neither the contributory negligence of the
o The defense of exercising the plaintiff nor his last clear chance to avoid the
required diligence in the selection loss, would exonerate the defendant from
and supervision of employees is liability.
not a complete defense in culpa
contractual, unlike in culpa
Issue #3: W/N the damages should be
aquiliana.
mitigated.—Yes, they should. L.C. Diaz is guilty
of contributory negligence.
 Article 117233 states that liability for culpa
contractual may be regulated by the courts,
according to the circumstances.

33
Article 1172. Responsibility arising from negligence in
the performance of every kind of obligation is also
demandable, but such liability may be regulated by the
courts, according to the circumstances.

 The above provision means that if the
defendant exercised the proper diligence in
the selection and supervision of its employee,
or if the plaintiff was guilty of contributory
negligence, then the courts may reduce the
award of damages.
o L.C. Diaz was guilty of
contributory negligence in allowing
a withdrawal slip to fall into the
hands of an impostor.
o Petitioner‘s liability should,
therefore, be reduced.
Dispositive Portion34:
CA Decision AFFIRMED
MODIFICATION.
Petitioner Petitioner Corporation shall pay private
respondent L.C. Diazand Company, CPA's ONLY
60% OF THE ACTUAL DAMAGES awarded
by the Court of Appeals.
The remaining 40% of the actual damages shall be
BORNE by private respondent L.C. Diazand
Company, CPA's.
34
The 40-60 ratio is based on Philippine Bank of Commerce
v. CA, where the Court allocated the damages between the
depositor in that ratio.
Cases that say that there can be quasi-delict when
there is a pre-existing contract:
Air France v. Carrascoso (1966)35
Doctrine: Although the relation of passenger and
carrier is contractual both in origin and nature,
nevertheless the act that breaks the contract may
be also a tort.
Nature of petition: Certiorari  CA Decision,
affirming with modification CFI Manila, which
sentenced petitioner t pay respondent:
P25,000 in moral damages
P10,000 in exemplary damages
with
P 3,000 in attorney‘s fees + cost of suit
P393.20 for the difference in fare between first
class and tourist class for the portion of the trip
Bangkok to Rome
With interest at the legal rate, from the date of
filing of the complaint until paid
CA’s modification: lowered the P393.20 to
P383.10
Facts:
● Rafael Carrascoso (respondent), was a
civil engineer, and a member of a group of
48 Filipino pilgrims that left Manila for
Lourdes36.
● Air France (petitioner), through its
authorized agent, Philippine Air Liens, Inc.
(PAL), issued to petitioner a first-class
round trip airplane ticket from Manila to
Rome.
35
Casis: This case is often cited as basis for applying the
rules on quasi-delict even if a contract exists between the
parties.
Note however, that the term used is ―tort‖ and not ―quasi-
delict. It should, therefore, not be used as basis for saying
that an action may be a breach of contract and quasi-delict at
the same time, not unless the term ―tort‖ was meant to refer
to a quasi-delict. (As will be discussed further [in his book],
it does not appear to be the case.)
36
The pilgrimage site of Lourdes is in France. Every year,
it‘s visited by millions of pilgrims, particularly Roman
Catholics.

● From Manila to Bangkok, petitioner
travelled in first class.
o However, at Bangkok, the manager
of the Air France forced
Carrascoso to vacate his first class
seat because there was a white man
who had a better right to the seat
● Petitioner refused, and told the manager
that his seat would be ―taken over his dead
body.‖
● A commotion ensued, and fellow Filipinos
went to petitioner to pacify him, and to
give his seat to the white man.
● Soon after, petitioner brought an action
against respondent for recovery of
damages
● CFI: granted the action; CA: affirmed with
slight modification as to ticket price
refund37
● Hence this instant appeal
o Respondent argues that petitioner‘s
action was based on culpa
contractual; to authorize an award
for moral damages, there must be
an averment of fraud or bad faith
o Respondent claims that the CA
failed to make a finding of bad
faith
Issue #1: W/N there was bad faith in the
breach of obligation—Yes, there was.
Although there is no specific mention of the
term bad faith in the complaint, the
inference of bad faith is present.
● The inference of bad faith may be drawn
from the facts and circumstances set forth
in the complaint.
o The contract was averred to
establish the relationship between
37
Refer to Nature of petition to see the amounts
the parties, but the stress of the
action is put on wrongful
expulsion.
● Air France argues that the first-class ticket
given to petitioner does not guarantee that
a passenger will get a first-class seat; it
will have to depend on the availability of
first-class seats
o This argument, however, is
unconvincing; if it were to be
accepted that a first-class ticket
holder is not always guaranteed a
first-class seat, then airline
passengers will have no security as
regards the services that they are
entitled to based on their purchase.
o Besides, there was no evidence to
prove that the ―white man‖ made a
prior reservation with the airline
● If the employees of Air France sold to the
white man a first-class ticket in Bangkok,
despite all first-class seats being already
taken, there is no reason why the petitioner
should suffer the humiliation and indignity
of being kicked-out of his seat for a
mistake that the ticketing officer of Air
France made.
● Air France also failed to substantiate the
reason the white man had a "better right"
to a first-class seat which would justify
kicking Carrasco out of his first-class seat
● By preventing Carrasco from enjoying the
seat which he paid for and imposing upon
him their arbitrary will, Air France acted
in bad faith
Issue #2: W/N Air France is liable for the acts of
its employees in paying for moral damages—Yes,
it is.
● Article 2138 in relation to Article 218039
with Article 2219 (10) 40 of the Civil Code
supports the assertion that an employer is
responsible for the tortious acts of its
employees.
● The contract of air carriage generates a
relation attended with a public duty.
o Neglect or malfeasance of the
carrier‘s employees, naturally,
could give ground for an action for
damages.
● Passengers do not contract with airlines
merely for transportation; they have a right
to be treated by the carrier‘s employees
with kindness, respect, courtesy and due
consideration
o They are entitled to be protected
against personal misconduct,
injurious language, indignities and
abuses from such employees
o This is why any rude or
discourteous conduct on the part of
employees towards a passenger
gives the latter an action for
damages against the carrier.
38
Article 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.
39
Article 2180 (Paragraph 4). 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. (xxx)
(xxx) The owners and managers of an establishment or
enterprise are likewise responsible for damages caused by
their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.
40
Article 2219(10). Moral damages may be recovered in the
following analogous cases:
o Although the relation between
passenger and carrier is contractual
both in origin and nature, the act
that breaks the contract may be
also a tort.
● The point of pespondent‘s action is placed
upon his wrongful expulsion from his first-
class seat.
o This is a violation of a public duty
by the petitioner—a case of quasi-
delict. Damages are proper.
Dispositive Portion: CA Decision AFFIRMED.
Prof. Casis’ critique on Air France as authority
for holding that the same act can both be a culpa
aquiliana and culpa contractual
The case is often cited for its Doctrine:
―Although the relation of passenger and carrier is
contractual both in origin and nature, nevertheless
the act that breaks the contract may be also a
tort.‖
But, on a closer scrutiny of the case, it seems that
the statement cannot serve as legal basis for
arguing that the same act can be both a quasi-
delict and a tort. Here‘s why:
1. The issue in Air France was W/N the award of
moral damages based on the alleged breach of
contract was proper.
The Court ruled that there was sufficient
allegation of bad faith in the complaint and in the
lower court‘s decision.
Therefore, the statement had nothing to do with
the Court‘s ruling. It‘s not part of the ratio
decidendi.

(10) Acts and actions referred to in Articles 21, 26, 27, 28,
29, 30, 32, 34, and 35

2. Taking the Court‘s statement at face value, it
would seem that the Court is saying that an act can
be both a breach of contract and a tort at the same
time.
It does NOT say that an act can be both a breach
of contract (culpa contractual) and a quasi-delict
(culpa aquiliana) at the same time.
The term ―tort‖ cannot be interpreted as quasi-
delict because the Court cited Article 21 and not
Article 2176 as basis of the responsibility.
--
Assuming that the discussion on Article 21 is not
obiter dictum, at best, Air France can only be
cited for the rule that: an act that breaches a
contract can also be a violation of Article 21.
--
Syquia v. CA (1959)41
Doctrine: A pre-existing contractual relation
between the parties does not preclude the
existence of a culpa aquiliana.
Facts:
 Juan Syquia and Corazon Syquia, Carlota
Syquia, Anthony Siquia and Carlos Syquia
are the parents and sibling, respectively, of
the deceased Vicente Juan Syquia.
 They filed a complaint against private
respondent Manila Memorial Park
Cemetery for recovery of damages arising
from breach of contract and/or quasi-
delict.
o Contract: Deed of Sale (Contract
No. 6885) & Certificate of
Perpetual Care
o These were executed between
petitioner Juan Syquia and private
respondents Manila Memorial Park
Cemetery, Inc.
41
As compared to Air France, Syquia and further cases
explicitly rule that an action for culpa aquiliana can be
made despite the existence of a contract between the parties
 The contracts authorized and instructed
Manila Memorial Park Cemetery to inter
the remains of the deceased
 Preparatory to transferring the said
remains to a newly purchased family plot
also at the Manila Memorial Park
Cemetery, the concrete vault encasing the
coffin of the deceased was removed from
its niche underground
 As the concrete vault was being raised to
the surface, petitioners found out that the
concrete vault encasing the coffin had a
hole approximately three inches in
diameter, and water drained out of it
 Because of the said discovery, petitioners
became agitated and upset with concern
that the water water had collected inside
the vault might have risen
 The water in fact did rise, to the level of
the coffin and flooded the same as well as
the remains of the deceased.
 Upon opening of the vault, petitioners,
together with licensed morticians and
certain personnel of private respondent
discovered the following:
o The interior walls showed evidence
of total flooding
o Coffin was entirely damaged by
water, filth and silt
o The entire lining of the coffin, the
clothing of the deceased and the
exposed parts of the deceased
remains were damaged and soiled
by water and silt and were also
coated with filth
 This prompted the petitioners to file an
action against the private respondents
before the Municipal Court of Paranaque
 Petitioners prayed that judgment be
rendered, ordering private respondents to
pay them:
o P30,000 for actual damages,
o P500,000 for moral damages,
o Exemplary damages to be
determined by the court
o 20% of the private respondent‘s
total liability as attorney‘s fees
o Expenses of litigation and costs of
suit
 Petitioners anchored their prayer on two
causes of action (one for culpa
contractual and one for culpa aquiliana):
o Contractual: Due to the alleged
unlawful and malicious breach by
the private respondents of its
obligation to deliver a defect-free
concrete vault designed to protect
the remains of the deceased and the
coffin against the elements which
resulted in the desecration of
deceased‘s grave; and in the
alternative
o Aquiliana: Due to private
respondent‘s gross negligence, in
conformity with Article 2176 of the
New Civil Code in failing to seal
the concrete vault
 TC: dismissed the complaint, holding that:
o The contract between the parties
did not guarantee that the cement
vault would be waterproof.
o Juan Syquia himself chose the
gravesite despite knowing that said
area had to be constantly sprinkled
and that water would eventually
seep through the vault.
 The petitioners appealed to the CA
 CA: affirmed TC dismissal.
 Hence this instant petition
Issue #1: W/N the Manila Memorial Park
Cemetery, Inc. breached its contract with
petitioners; or alternatively, whether private
respondent was guilty of tort—No, neither of the
alternative claims hold.
No culpa aquiliana
 “Although a pre-existing contractual
relation between the parties does not
preclude the existence of a culpa
aquiliana, there is no reason to disregard
the lower courts‘ findings
 Petitioners and respondent entered into a
contract entitled ―Deed of Sale and
Certificate of Perpetual Care‖.
o These contracts governed the
relations of the parties and defined
their respective rights and
obligations.
o Therefore, there being a contract,
had there been actual negligence
on the part of the Manila Memorial
Park Cemetery, it would not be
held liable for quasi-delict or
culpa-aquiliana but for culpa
contractual.‖42
42
Casis: This ruling may be interpreted in consonance with
the Far East v. CA test to determine whether there can be a
quasi-delict despite the existence of a contract.
This test provides that: A quasi-delict can be deemed to
underlie the breach of a contract if without a pre-existing
contract between two parties, an act or omission can
nonetheless amount to an actionable tort by itself.
Thus, the existence of contract will not prevent an action
based on quasi-delict if an action based on quasi-delict could
be filed without the contract.

No culpa contractual; “sealed” =/=
“waterproof”)
 Petitioners claim that the vault provided by
private respondent was not sealed, that is,
not waterproof.
o Consequently, water seeped
through the cement enclosure and
damaged everything inside it.
 However, there was no stipulation in the
contracts that the vault would be
waterproof.
o ―Sealed‖ meant ―closed‖; the
dictionary defines it as ―any of
various closures o fastenings (xxx)
that cannot be opened without
rupture and that serve as a check
against tampering or unauthorized
opening.‖
 Sealed cannot be equated to
waterproof.
 Contracts should be interpreted according
to their literal meaning and should not be
interpreted beyond their obvious
intendment.
o The parties are bound by their
contract which is the law between
them.
 As the trial court held, a contracting party
cannot incur a liability more than what is
expressly specified in his undertaking.
o It cannot be extended by
implication, beyond the terms of
the contract (Rizal Commercial
Banking Corporation vs. Court of
Appeals, supra).
o And as a rule of evidence, where
the terms of an agreement are
reduced to writing, the document
itself, being constituted by the
parties as the expositor of their
intentions, is the only instrument of
evidence in respect of that
agreement which the law will
recognize, so long as its (sic) exists
for the purpose of evidence
No culpa contractual; private respondent did not
breach the tenor of its obligation
 Circumstances show that the assailed act
(boring a hole) actually negates the
allegation of negligence43.
o The Interment Foreman said that a
day before Juan (sic) Syquia was
buried, their personnel dug a grave.
o After digging, a vault was placed in
the grave
o When the vault was placed on the
grave, a hole was placed on the
vault so that water could come into
the vault because it was raining
heavily then;
o If the vault had no hole, it will float
and the grave would be filled with
water and the digging would caved
(sic) in and the earth, the earth
would (sic) caved in and fill up the
grave.
 The private respondent actually exercised
the diligence of a good father of a family
by preventing the accumulation of water
that would have caused the earth to cave.
o Therefore, there is no negligence
and the award of damages is not
proper.
Dispositive Portion: Petition DENIED. CA
Ruling AFFIRMED.
43
The law defines negligence as the ―omission of that
diligence which is required by the nature of the obligation
and corresponds with the circumstances of the persons, of
the time, and of the place. (Abridged version of Article
1173)

Note:
Prof. Casis’ critique on the Court finding no
negligence in private respondent’s act of boring
a hole
Curiously, while admitting that the hole in the
vault allowed the entry of more water and soil, the
Court still found that the act of boring the hole
was not negligence on the part of private
respondents.
Based on the foreman‘s testimony, the hole was
placed so that the water would come into the
vault. Yet the Court also said that private
respondents exercised diligence to prevent
accumulation of water inside the vault.
Far East v. CA (1995)
Doctrine: 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.
Doctrine (Test): 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.
Facts:
 In Oct. 1986, private respondent Luis Luna
applied for and was given a
FAREASTCARD issued by Far East Bank
and Trust Company (FEBTC) Pasig
branch.
o Luis Luna requested that a
supplemental card also be issued to
fellow private respondent Clarita S.
Luna
 In Aug. 1988, Clarita lost her card.
FEBTC was forthwith informed. To
replace the card, she was asked to submit
an affidavit of loss.
o The bank‘s internal policy was to
record the lost card, and the
principal card as a ―Hot Card‖ or
―Cancelled Card‖
 In Oct. 1988, Luis Luna wanted to pay for
a despedida lunch for a close friend, a
Filipino-American, and another guest at
Bahia Rooftop Restaurant. He presented
his card.
o The waiter had it verified to the
bank‘s Credit Card Department but
it was not honored and Luis was
forced to pay in cash for the bill
amounting to P588.13.
 Embarrassed, Luna demanded payment of
damages.
 Adrian Festejo, the VP of FEBTC,
apologized to Luis and stated that they had
failed to inform Luis about the security
policy and the employee of the Credit Card
Department did not consider the possibility
that it may be Luis and not Clarita
presenting the card.
 Festejo also wrote to the Manager of the
restaurant and stated that Luna was a very
valued client of FEBTC.
 Apologies and amends made
notwithstanding, Luna still filed for
damages.
 TC: awarded P300k (moral damages),
P50k (exemplary damages), and P20k
(attorney‘s fees)
 CA: affirmed the TC ruling
 Hence this instant petition
Issue #1: W/N moral damages should have been of the Civil Code to a contractual breach, it
awarded. - No, they may not. However, must be noted that Art. 21 contemplates a
exemplary or corrective damages may be conscious act to cause harm
awarded instead.
o The application of Art. 21 is
 In culpa contractual, moral damages may appropriate when the defendant's
be recovered when defendant acted in bad disregard of his contractual
faith or with malice in breach of contract.44 obligation is so deliberate as to
approximate a degree of
 The bank was indeed remiss in failing to misconduct certainly no less worse
inform Luis Luna of the cancellation than fraud or bad faith.

 The Court has not overlooked that a quasi-

 However, there is nothing in the findings delict can be the cause for breaching a
that can prove that FEBTC wished to contract that might thereby permit the
cause harm to Luis Luna. application of applicable principles on tort
even where there is a pre-existing contract
 Neither can the negligence committed between the plaintiff and the defendant.
cannot be considered so gross as to amount
to malice or bad faith. o However, it cannot be applied in
this case because it can only govern
where the act complained of would
o Malice or bad faith implies a
constitute an actionable tort
conscious and intentional design to
independently of the contract.
do a wrongful act for a dishonest
purpose or moral obliquity;
 Test: Where, without a pre-existing
contract between two parties, an act or
o It is different from the negative
omission can nonetheless amount to an
idea of negligence in that malice or
actionable tort by itself, the fact that the
bad faith contemplates a state of
parties are contractually bound is no bar to
mind affirmatively operating with
the application of quasi-delict provisions
furtive design or ill will
to the case.
 Although previous cases applied Article
o In the present case, private
2145 in relation to Arts. 221746 and 221947
respondents' damage claim is
predicated solely on their
44
Article 2220. Willful injury to property may be a legal contractual relationship;
ground for awarding moral damages if the court should and
that, under the circumstances, such damages are justly due. o Without such agreement, the act or
The same rule applies to breaches of contract where the omission complained of cannot by
defendant acted fraudulently or in bad faith.
itself be held to stand as a separate
45
Article 21. Any person who willfully causes loss or injury cause of action or as an
to another in a manner that is contrary to morals, good independent actionable tort
customs or public policy shall compensate the latter for the
damage.
46
Article 2217. Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if
they are the proximate result of the defendant‘s wrongful act
or omission.
47
Article 2219 (10). Moral damages may be recovered in the
following and analogous cases: (10) Acts and actions referred to in Articles 21, 26, 27, 28,
29, 30, 32, 34, and 35.

 However, Article 222148 on nominal
damages can apply; the bank‘s failure to
honor the credit card should entitle Luis
Luna to recover a measure of damages.
Dispositive Portion: CA Decision MODIFIED.
The award of moral and exemplary damages are
DELETED. Private respondents however, are
entitled to P5,000 nominal damages.
LRT v. Navidad (2003)
Doctrine: A contractual obligation can be
breached by tort and when the same act or
omission causes the injury, one resulting in culpa
contractual and the other in culpa aquiliana,
Article 219449 of the Civil Code can well apply.
Facts:
 Nicanor Navidad, while drunk, entered the
EDSA LRT station after purchasing a
"token" (fare).
 While Navidad was standing on the
platform near the LRT tracks, Junelito
Escartin, the security guard on duty (of
Prudent Security Agency) approached
Navidad.
 An altercation between the two led to a fist
fight
o No evidence was adduced to
indicate how the fight started, who
delivered the first blow or how
Navidad later fell on the LRT
tracks.
 As Navidad fell, an LRT train, operated by
petitioner Rodolfo Roman, was coming in.
48
Article 2221. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized,
and not for the purpose of indemnifying the plaintiff for any
loss suffered by him.
49
Article 2194. The responsibility of two or more persons
who are liable for a quasi-delict is solidary.
 Navidad was struck by the moving train,
and he was killed instantaneously.
 The widow of Nicanor, respondent
Marjorie Navidad, filed a complaint for
damages against Junelito Escartin, Rodolfo
Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and
Prudent for the death of her husband.
 The LRTA and Rodolfo Roman filed a
counterclaim against Navidad and a cross-
claim against Escartin and Prudent.
 Prudent, in its answer, denied liability and
averred that it had exercised due diligence
in the selection and supervision of its
security guards.
 TC: Ruled in favor of the respondents and
against the defendants Prudent Security
and Junelito Escartin ordering the latter to
pay jointly and severally the respondents.
o They held further that complaint
against defendants LRTA and
Rodolfo Roman are dismissed for
lack of merit.
 TC (damages):
o P44,4830 – Actual Damages
o P443, 520 – Compensatory
Damages
o P50,000 – Indemnity for the death
o P50,000 – Moral damages
o P20,000 – Attorney‘s fees
o Costs of suit
 LRTA and Roman‘s
counterclaim are dismissed
 Prudent appealed to the CA
 CA: exonerated Prudent from any liability
for the death of Nicanor Navidad and,
instead, held the LRTA and Roman jointly
and severally liable, holding that:

o ―[A] contract of carriage had
already existed when the victim
entered the place where passengers
were supposed to be after paying
the fare and getting the
corresponding token therefor.‖
o Petitioners failed to prove that
Escartin inflicted fist blows upon
the herein deceased; the evidence
merely established the fact of death
by reason of being hit by the
trained owned and managed by
LRTA and operated at the time by
Roman
o Faulted LRTA for their failure to
present expert evidence to establish
the fact that the application of
emergency brakes could not have
stopped the train.
 CA (damages):
o P44, 830—actual damages
o P50,000—nominal damages
o P50,000—moral damages
o P50,000—indemnity for death
o P20,000—attorney‘s fees
 Hence this instant petition
Issue #1: W/N petitioner LRTA is liable for the
death of Navidad – Yes, it is.
 Law and jurisprudence dictate that a
common carrier, both from the nature of its
business and for reasons of public policy,
is burdened with the duty of exercising
utmost diligence in ensuring the safety of
Issue #251: W/N Prudent is liable for the death of
passengers.50
Navidad – No, it is not.
 The foundation of LRTA‘s liability is the
contract of carriage; its obligation to
indemnify the victim arises from the
breach of that contract by reason of its
50
Refer to Arts. 1755, 1756, 1759, 1763 for the specific
provisions
51
This is where the Doctrine appears
failure to exercise the high diligence
required of the common carrier.
o The law requires common carriers
to use the diligence of very
cautious persons with due regard
for all circumstances.
o In the discharge of its commitment
to ensure the safety of passengers,
a carrier may choose to: (a) hire its
own employees), or (b) avail itself
of the services of an outsider or an
independent firm to undertake the
task.
 In either case, the common
carrier is not relieved of its
responsibilities under the
contract of carriage.
 In case of such death or injury, a carrier is
presumed to have been at fault or been
negligent
o By simple proof of injury, the
passenger is relieved of the duty to
still establish the fault or
negligence of the carrier or of its
employees
o The burden shifts upon the carrier
to prove that the injury is due to an
unforeseen event or to force
majeure.
o In the absence of satisfactory
explanation by the carrier on how
the accident occurred, which
petitioners have failed to show, the
presumption would be that it has
been at fault.
 Liability could only be for tort under the
provisions of Article 2176 and related
provisions, in conjunction with Article
2180 of the Civil Code (employer‘s
liability for the negligence or fault on the
part of employee.

 Once such fault is established, the
employer can then be made liable on the
basis of the presumption juris tantum that
the employer failed to exercise the
diligence of a good father in the selection
and supervision of its employees.
 The liability is primary and can only be
negated by showing due diligence in the
selection and supervision of the
employee—a factual matter that has not
been shown.
o How then must the liability of the
common carrier, on the one hand,
and an independent contractor, on
the other hand, be described?
Issue #3: W/N petitioner Rodolfo Roman can be
held liable.—No, he may not.
 There is no showing that Roman himself is
guilty of any culpable act or omission, so
he must be absolved.
 Needless to say, the contractual tie
between the LRT and Navidad is not itself
a juridical relation between the latter and
Roman
o Thus, Roman can be made liable
only for his own fault or
negligence.
Issue #4: W/N award of nominal damages is
tenable. –No, it is not.

 It would be solidary.  The award of nominal damages in addition

 A contractual obligation can be breached
by tort and when the same act or omission
causes the injury, one resulting in culpa
contractual and the other in culpa
aquiliana.
 A liability for tort may arise even under a
contract, where tort is that which
breaches the contract.
to actual damages is untenable; it is an
established rule that nominal damages
cannot co-exist with compensatory
damages.
Dispositive Portion: Petition DENIED. CA
Decision AFFIRMED with MODIFICATION
in that the award of nominal damages is
DELETED and petitioner Rodolfo Roman is
absolved from liability.

 Stated differently, when an act which

constitutes a breach of contract would
have itself constituted the source of a
quasi-delictual liability had no contract
existed between the parties, the contract
can be said to have been breached by tort,
thereby allowing the rules on tort to apply.
(Cangco v. Manila Railroad)

 Regrettably, for LRT, as well as perhaps

the surviving family of Nicanor Navidad,
the Court is constrained by the factual
finding of the CA that there is nothing to
link Prudent to the death of Nicanor

o This is because the negligence of

its employee, Escartin, has not
been proven.
 Facts:
Orient Freight International, Inc. v. Keihin-
Everett Forwarding (2017)
Doctrine: Article 2176 of the Civil Code does not
apply when the party‘s negligence occurs in the
performance of an obligation. The negligent act
would give rise to a quasi-delict only when it may
be the basis for an independent action were the
parties not otherwise bound by a contract.
Doctrine: Actions based on contractual
negligence and actions based on quasi-delicts
differ in terms of conditions, defenses, and proof.
They generally cannot co-exist. Once a breach of
contract is proved, the defendant is presumed
negligent and must prove not being at fault.
In a quasi-delict, however, the complaining party
has the burden of proving the other party's
negligence.
However, there are instances when Article 2176
may apply even when there is a pre-existing
contractual relation. (xxx) If a contracting party's
act that breaches the contract would have given
rise to an extra-contractual liability had there been
no contract, the contract would be deemed
breached by a tort, and the party may be held
liable under Article 2176 and its related
provisions.
Doctrine (cont.): But if the act complained of
would not give rise to a cause of action for a
quasi-delict independent of the contract, then the
provisions on quasi-delict or tort would be
inapplicable.
In situations where the contractual relation is
indispensable to hold a party liable, there must be
a finding that the act or omission complained of
was done in bad faith and in violation of Article
21 of the Civil Code to give rise to an action based
on tort.
Nature of petition: 45 Certiorari  CA Decision
and Resolution, reversing and setting aside RTC
Decision, which found that petitioner’s negligence
caused the cancellation of respondent’s contract
with Matsushita Communication Industrial
Corporation of the Philippines (Matsushita).
 Respondent entered into a Trucking
Service Agreement (TSA1) with
Matsushita.
o Under the agreement, respondent
would provide services for
Matsushita‘s trucking requirements
o These services were subcontracted
by respondent to petitioner,
through their own Trucking Service
Agreement (TSA2) executed on the
same day.
 When TSA1 expired, respondent executed
an In-House Brokerage Service Agreement
for Matsushita‘s Philippine Economic
Zone Authority export operations.
o Respondent continued to retain the
services of petitioner, which sub-
contracted its work to Schmitz
Transport and Brokerage
Corporation.
 Several months after, Matsushita called
respondent‘s Sales Manager, about a
column in a tabloid newspaper
o This news narrated an interception
by Caloocan City police of a stolen
truck filled with shipment of video
monitors and CCTV systems owned
by Matsushita
 When contacted by the respondent about
the news, petitioner stated that the tabloid
report had exaggerated the situation
o Petitioner claimed that the incident
simply involved the breakdown
and towing of the truck, driven by
Schimtz Transport employees –
driver Ricky Cudas (Cudas), and
truck helper, Rubelito Aquino
(Aquino)

o The truck was promptly released
and did not miss the closing time of
the vessel intended for the
shipment
 Respondent directed petitioner to
investigate the matter
 During its meeting with respondent and
Matsushita, as well as in its letter
addressed to Matsushita, petitioner
reiterated that the truck merely broke down
and had to be towed
 However, when the shipment arrived in
Yokohama, Japan, it was discovered that
10 pallets of the shipment’s 218 cartons
(worth $34,226.14) were missing.
 Respondent independently investigated the
incident, where it obtained a police report
from the Caloocan City Police Station.
o The report stated that before the
incident reported in the tabloid
occurred, Cudas (the truck driver)
told Aquino (the truck helper) to
report engine trouble to petitioner.
o After Aquino made the phone call,
he informed petitioner that the
truck had gone missing.
o When the truck was intercepted by
the police, Cudas escaped and
became the subject of a manhunt.
 When confronted with respondent‘s
findings, petitioner wrote back to admit
that its previous report was erroneous and
that pilferage was apparently proven.
 Matsushita terminated its In-House
Brokerage Service Agreement with
respondent
o Matsushita cited loss of confidence
from the way respondent handled
the incident and its nondisclosure
of this incident‘s relevant facts,
which ―amounted to fraud and
signified an utter disregard of the
rule of law.
 Respondent, by counsel, sent a letter to
petitioner, demanding P2.5M as indemnity
for lost income.
o It argued that petitioner‘s
mishandling of the situation caused
the termination of respondent‘s
contract with Matsushita.
 When petitioner refused to pay, respondent
filed a complaint for damages with the
Manila RTC
o In its complaint, respondent alleged
petitioner‘s ―misrepresentation,
malice, negligence and fraud‖ 
termination of its In-House
Brokerage Service Agreement with
Matsushita
o Respondent prayed for
compensation for lost income, with
legal interest, exemplary damages,
attorney‘s fees, litigation expenses,
and the costs of the suit.
 Petitioner claimed that its initial ruling of
pilferage was in good faith, as manifested
by the information from its employees and
the good condition and the timely shipment
of the cargo
o It also alleged that the contractual
termination was a prerogative of
Matsushita
o Moreover, by its own Audited
Financial Statements on file with
the Securities and Exchange
Commission, respondent derived
income substantially less than what
it sued for

o Petitioner also asserted
counterclaims for compensatory
and exemplary damages, attorney‘s
fees, litigation expenses, and the
costs of the suit
 RTC: ruled in favour of respondent,
applying
o It found that petitioner was
negligent in failing to investigate
properly the incident and to make a
factual report to respondent and
Matsushita, despite having enough
time
o It ruled that petitioner‘s failure to
exercise due diligence in disclosing
the true facts of the incident to
respondent and Matsushita caused
respondent to suffer income losses
due to Matsushita‘s cancellation of
their contract.
o It ordered petitioner to pay
respondent the amount of PHP
1,666,667.00 as actual damages
representing net profit loss
incurred and P50,000 in attorney‘s
fees.
 However, it denied
respondent‘s prayer for
exemplary damages, finding
that petitioner didn’t act
with gross negligence.
 Petitioner appealed to the CA
 CA: affirmed the RTC Decision
o It ruled that the oral and
documentary evidence has
established both: (1) the damage
suffered by respondent and (2) the
petitioner‘s fault or negligence
o It further ruled that petitioner‘s
presentation of respondent‘s
audited financial statement
supported the RTC‘s arrival at the
amount of P1,666,667
 CA: denied the subsequent MR
 Hence this instant petition
o Petitioner argues that the CA
incorrectly found it negligent under
Article 2176 of the Civil Code
o As there was a subsisting TSA1,
petitioner avers that there was a
pre-existing contractual relation
between them, which would
preclude the application of the
laws on quasi-delicts.
Procedural Issue: W/N the failure to state the
names of the parties in this Petition for Review, in
accordance with Rule with Rule 45, Section 4 of
the RoC, is a fatal defect. – No, it isn’t. It’s a
mere formal defect. Besides, the names of the
parties are readily discernable from the
petition’s caption.
Preliminary Discussion: J. Leonen’s Discussion
on Negligence, Culpa Aquiliana, and Culpa
Contractual
 Negligence may either result in culpa
aquiliana or culpa contractual.
o Culpa aquiliana: The wrongful or
negligent act or omission which
creates a juridical tie and gives rise
to an obligation between two
persons not formally bound by any
other obligation; it is governed by
Article 2176
o Culpa contractual: The fault or
negligence incident in the
performance of an obligation which
already existed, and which
increases the liability from such
already existing obligation; it is
governed by Arts. 1170-1174.

 Actions based on contractual negligence
and actions based on quasi-delicts differ in
terms of conditions, defensed, and proof.
They generally cannot co-exist.
Issue #1: W/N the lower courts, considering the
existing contracts in the case, erred in applying
Article 2176 of the Civil Code. – Yes, they did
err. The negligence in this case resulted to
culpa contractual, and not culpa aquiliana.

o Once a breach of contract is

 The obligation to report what happened
proved, the defendant is presumed
during the hijacking incident, does not
negligent and must prove not being
appear on the plain text of the TSA2
at fault.
 Neither the RTC nor the CA relied on the
o In a quasi-delict, however, the
TSA2 to arrive at their respective
complaining party has the burden
conclusions; the breach of TSA2 was
of proving the other party‘s
neither alleged nor proved.
negligence.

 While petitioner and respondent were

 However, there are instances when Article
contractually bound under TSA2 and the
2176 may apply even when there is a pre-
events at the crux of this controversy
existing contractual relation.
occurred during the performance during
the performance of this contract, it is
 If a contracting party‘s act that breaches
apparent that the duty to investigate and
the contract would have given rise to an
report arose subsequent to the TSA2.
extra-contractual liability had there been
no contract, the contract would be deemed
 This means that petitioner‘s negligence in
breached by a tort, and the party may be
reporting the incident did not create the
held liable under Article 2176 and its
juridical tie with the respondent, which
related provisions.
would have otherwise given rise to a
quasi-delict.
o However, if the act complained of
would not give rise to a cause of
o Petitioner‘s duty to respondent
action for a quasi-delict
existed prior to its negligent act.
independent of the contract, then
the provisions on quasi-delict or
tort would be inapplicable.  When respondent contacted petitioner
regarding the news report and asked it to
investigate the incident, petitioner‘s
 In situations where the contractual relation
obligation was created.
is indispensable to hold a party liable,
there must be a finding that the act or
o Thereafter, petitioner was alleged
omission complained of was done in bad
to have performed its obligation
faith and in violation of Article 21 of the
negligently, causing damage to
Civil Code to give rise to an action based
respondent.
on tort.
--  The doctrine ―the act that breaks the
contract may also be a tort‖, on which the
lower courts relied, is inapplicable

o Petitioner‘s negligence, arising as it

does from its performance of its
obligation to respondent, is
dependent on this obligation

 Neither do the facts show that Article 21 of
the Civil Code52 applies in this case, there
being no finding that petitioner‘s act was a
conscious one to cause harm, or be of such
a degree as to approximate fraud or bad
faith.
Issue #2: W/N petitioner was negligent for failing
to disclose the facts surrounding the hijacking
incident, which led to the termination of TSA1. –
Yes, it is.
 Articles 1170, 1172, and 1173 of the Civil
Code on negligence in the performance of
an obligation should apply
o Under Article 1170, liability for
damages arises when those in the
performance of their obligations
are guilty of negligence, among
others.
o Negligence here has been defined
as ―the failure to observe that
degree of care, precaution and
vigilance that the circumstances
just demand, whereby that other
person suffers injury.
 In this case, both the lower courts found
that petitioner was negligent in failing to
adequately report the hijacking incident to
respondent, and not conducting a thorough
investigation despite being directed to do
so.
o This fact found by the trial court, as
affirmed by the CA, are generally
conclusive.
 The RTC found that petitioner’s conduct
showed its negligent handling of the
investigation and its failure to timely
disclose the facts of the incident to
respondent and Matsushita.
52
Article 21. 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.
 The RTC found that the circumstances
should have alerted petitioner to
investigate the incident in a more
circumspect and careful manner.
 Despite the circumstances which would
have cautioned petitioner to act with care
while investigating and reporting the
hijacking incident, petitioner failed to do
so.
 Petitioner is therefore responsible for the
damages that respondent incurred due to
the former‘s negligent performance of its
obligation, provided for by Articles 220053
and 220154
o The lower courts established that
petitioner‘s negligence resulted in
Matsushita cancelling TSA1,
resulting to the loss in profits. (in
reference to Article 2200)
o It could be reasonably foreseen that
the failure to disclose the true facts
of an incident, especially when it
turned out that a crime might have
been committed, would lead to a
loss of trust and confidence in the
party which was bound to disclose
these facts. (in reference to Article
2201)
Issue #3: W/N the trial court erred in the
computation of the awarded actual and pecuniary
loss by basing it on, among others, the Profit and
Loss Statement submitted by respondent. – The
Court cannot rule on this; the amount of the
award of damages is a factual matter generally
not reviewable in a Rule 45 petition.
53
Article 2200. Indemnification for damages shall
comprehend not only the value of the loss suffered, but also
that of the profits which the obligee failed to obtain.
54
Article 2201. In contracts and quasi-contracts, the
damages for which the obligor who acted in good faith is
liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at
the time the obligation was constituted.