1.

Macasaet v COA May, 12, 1989

Doctrine:  ID.; OBLIGATIONS; HAVE FORCE OF LAW BETWEEN CONTRACTING

PARTIES AND SHOULD BE COMPLIED WITH IN GOOD FAITH WHEN ARISING
FROM CONTRACT. — The price escalation cost must be deemed included in the final
actual project cost and petitioner held entitled to the payment of its additional
professional fees. Obligations arising from contract have the force of law between the
contracting parties and should be complied with in good faith (Article 1159, Civil Code).

FACTS: Respondent Philippine Tourism Authority (PTA) entered into a Contract for
"Project Design and Management Services for the development of the proposed
Zamboanga Golf and Country Club, Calarian, Zamboanga City" with petitioner
company, but originally with Flavio K. Macasaet alone (hereinafter referred to simply as
the "Contract").

Under the Contract, PTA obligated itself to pay petitioner a professional fee of seven
(7%) of the actual construction cost.

Pursuant to the foregoing Schedule, the PTA made periodic payments of the stipulated
professional fees to petitioner. And, upon completion of the project, PTA paid petitioners
what it perceived to be the balance of the latter’s professional fees.

It turned out, however, that after the project was completed, PTA paid Supra
Construction Company, the main contractor, the additional sum of P3,148,198.26
representing the escalation cost of the contract price due to the increase in the price of
construction materials.

Upon learning of the price escalation, petitioner requested payment of P219,302.47

additional professional fee representing seven (7%) percent of P3,148,198.26.

PTA denied payment on the ground that "the subject price escalation referred to
increased cost of construction materials and did not entail additional work on the part of
petitioner as to entitle it to additional compensation under Article VI of the contract" .

Reconsiderations sought by the petitioner, up to respondent COA, were to no avail. The

latter expressed the opinion that "to allow subject claim in the absence of a showing that
extra or additional services had been rendered by claimant would certainly result in
overpayment to him to the prejudice of the Government"

ISSUE: Whether or not petitioner’s entitlement to additional professional fees,

which, in turn, hinges on whether or not the price escalation should be included
in the "final actual project cost.”

HELD: Yes.
That an escalation clause was not specifically provided for in the Contract is of no
moment either for it may be considered as already "built-in" and understood from the
very terms "actual construction cost," and eventually "final actual project cost."cralaw
virtua1aw library

Article VI of the Contract, supra, has no bearing on the present controversy either. It
speaks of any major change in the planning and engineering aspects necessitating the
award and payment of additional compensation. Admittedly, there was no additional
work by petitioner, which required additional compensation. Rather, petitioner’s claim is
for payment of the balance of its professional fees based on the "final actual project
cost" and not for additional compensation based on Article VI.

The terminologies in the contract being clear, leaving no doubt as to the intention of the
contracting parties, their literal meaning control (Article 1370, Civil Code). The price
escalation cost must be deemed included in the final actual project cost and petitioner
held entitled to the payment of its additional professional fees. Obligations arising from
contract have the force of law between the contracting parties and should be complied
with in good faith (Article 1159, Civil Code).chanrobles law library

WHEREFORE, the ruling of respondent Commission on Audit is hereby SET ASIDE

and respondent Philippine Tourism Authority is hereby ordered to pay petitioner the
additional amount of P219,302.47 to complete the payment of its professional fee under
their Contract for Project Design and Management Services.

2. Locsin II v. Mekeni, G.R. 192105, Dec. 9, 2013;

FACTS: Respondent Mekeni Food Corporation (Mekeni) offered petitioner Antonio

Locsin II the position of Regional Sales Manager to oversee Mekeni’s National Capital
Region Supermarket/Food Service and South Luzon operations. In addition to a
compensation and benefit package, Mekeni offered petitioner a car plan, under which
one-half of the cost of the vehicle is to be paid by the company and the other half to be
deducted from petitioner’s salary. Mekeni’s offer was contained in an Offer Sheet5 which
was presented to petitioner.

Petitioner began his stint as Mekeni Regional Sales Manager. Mekeni furnished
petitioner with a used Honda Civic car valued at P280,000.00, which used to be the
service vehicle of petitioner’s immediate supervisor. Petitioner paid for his 50% share
through salary deductions of P5,000.00 each month.

Subsequently, Locsin resigned. By then, a total of P112,500.00 had been deducted

from his monthly salary and applied as part of the employee’s share in the car plan.
Mekeni supposedly put in an equivalent amount as its share under the car plan. In his
resignation letter, petitioner made an offer to purchase his service vehicle by paying the
outstanding balance thereon. The parties negotiated, but could not agree on the terms
of the proposed purchase. Petitioner thus returned the vehicle to Mekeni.

Petitioner made personal and written follow-ups regarding his unpaid salaries,
commissions, benefits, and offer to purchase his service vehicle. Mekeni replied that the
company car plan benefit applied only to employees who have been with the company
for five years; for this reason, the balance that petitioner should pay on his service
vehicle stood at P116,380.00 if he opts to purchase the same.

Labor Arbiter... rendered a Decision... directing respondents to turn-over to complainant

the subject vehicle upon the said complainant's payment to them... the Labor Arbiter's
Decision was reversed.
The NLRC held that petitioner's amortization payments on his service vehicle amounting
to P112,500.00 should be reimbursed; if not, unjust enrichment would result, as the
vehicle remained in the possession and ownership of Mekeni. In addition, the
employer's share in the monthly... car plan payments should likewise be awarded to
petitioner because it forms part of the latter's benefits under the car plan.
CA assailing the NLRC... saying that the NLRC committed grave abuse of discretion in
holding it liable to petitioner as it had no jurisdiction to resolve petitioner's... claims,
which are civil in nature.
petitioner mainly argues that the CA erred in treating his monthly contributions to the car
plan... as rentals for the use of his service vehicle during his employment; the car plan
which he availed of was... a benefit and it formed part of the package of economic
benefits granted to him when he was hired as Regional Sales Manager.
Mekeni asserts further that the service vehicle was merely a loan which had to be paid
through the monthly salary deductions. If it is not allowed to recover on the loan, this
would constitute unjust enrichment on the part of petitioner.

ISSUE: WON MEKENI HAS AN OBLIGATION TO PETITIONER.

HELD: YES.
From the evidence on record, it is seen that the Mekeni car plan offered to petitioner
was subject to no other term or condition than that Mekeni shall cover one-half of its
value, and petitioner shall in turn pay the other half through deductions from his monthly
salary. Mekeni has not shown, by documentary evidence or otherwise, that there are
other terms and conditions governing its car plan agreement with petitioner. There is no
evidence to suggest that if petitioner failed to completely cover one-half of the cost of
the vehicle, then all the deductions from his salary going to the cost of the vehicle will be
treated as rentals for his use thereof while working with Mekeni, and shall not be
refunded. Indeed, there is no such stipulation or arrangement between them.
Indeed, the Court cannot allow that payments made on the car plan should be forfeited
by Mekeni and treated simply as rentals for petitioner’s use of the company service
vehicle. Nor may they be retained by it as purported loan payments, as it would have
this Court believe. In the first place, there is precisely no stipulation to such effect in
their agreement. Secondly, it may not be said that the car plan arrangement between
the parties was a benefit that the petitioner enjoyed; on the contrary, it was an absolute
necessity in Mekeni’s business operations, which benefited it to the fullest extent:
without the service vehicle, petitioner would have been unable to rapidly cover the vast
sales territory assigned to him, and sales or marketing of Mekeni’s products could not
have been booked or made fast enough to move Mekeni’s inventory.

 Article 214227 of the same Code likewise clarifies that there are certain lawful, voluntary
and unilateral acts which give rise to the juridical relation of quasi-contract, to the end
that no one shall be unjustly enriched or benefited at the expense of another. In the
absence of specific terms and conditions governing the car plan arrangement between
the petitioner and Mekeni, a quasi-contractual relation was created between them.
Consequently, Mekeni may not enrich itself by charging petitioner for the use of its
vehicle which is otherwise absolutely necessary to the full and effective promotion of its
business. It may not, under the claim that petitioner’s payments constitute rents for the
use of the company vehicle, refuse to refund what petitioner had paid, for the reasons
that the car plan did not carry such a condition; the subject vehicle is an old car that is
substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for the
most part; and any personal benefit obtained by petitioner from using the vehicle was
merely incidental.

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.” The principle of unjust
enrichment requires two conditions: (1) that a person is benefited without a valid basis
or justification, and (2) that such benefit is derived at the expense of another.

The main objective of the principle against unjust enrichment is to prevent one from
enriching himself at the expense of another without just cause or consideration. x x x28

Decision of the National Labor Relations Commission is affirmed in all

respects.chanRoblesvirtualLawlibrary

3. . Dy v. People, G.R. 189081, Aug 10, 2016;

MCCI ( MANDY COMMODITIES CO., INC.)

FACTS: Petitioner, GLORIA S. DY, was the former General Manager of MCCL. In the
course of her employment, petitioner assisted MCCI in its business involving several
properties. One such business pertained to the construction of warehouses over a
property (Numancia Property) that MCCI leased from the Philippine National Bank
(PNB). Sometime in May 1996, in pursuit of MCCI's business, petitioner proposed to
William Mandy (Mandy), President of MCCI, the purchase of a property owned by
Pantranco. As the transaction involved a large amount of money, Mandy agreed to
obtain a loan from the International China Bank of Commerce (ICBC). Petitioner
represented that she could facilitate the approval of the loan. True enough, ICBC
granted a loan to MCCI evidenced by a promissory note. As security, MCCI also
executed a chattel mortgage over the warehouses in the Numancia Property. Mandy
entrusted petitioner with the obligation to manage the payment of the
loan.4chanrobleslaw

Thereafter,  MCCI received a notice of foreclosure over the mortgaged property due to
its default in paying the loan obligation. 5 In order to prevent the foreclosure, Mandy
instructed petitioner to facilitate the payment of the loan. MCCI, through Mandy, issued
13 Allied Bank checks and 12 Asia Trust Bank checks in varying amounts and in
different dates covering the period.

Mandy delivered the checks to petitioner. Mandy claims that he delivered the checks
with the instruction that petitioner use the checks to pay the loan. 7 Petitioner, on the
other hand, testified that she encashed the checks and returned the money to
Mandy.8 ICBC eventually foreclosed the mortgaged property as MCCI continued to
default in its obligation to pay. Mandy claims that it was only at this point in time that he
discovered that not a check was paid to ICBC.9chanrobleslaw

Thus, MCCI, represented by Mandy, filed an Information against petitioner before the
Regional Trial Court (RTC) Manila.

After a full-blown trial, the RTC Manila rendered a decision acquitting petitioner. The
RTC Manila found that while petitioner admitted that she received the checks, the
prosecution failed to establish that she was under any obligation to deliver them to ICBC
in payment of MCCFs loan. The trial court made this finding on the strength of Mandy's
admission that he gave the checks to petitioner with the agreement that she would
encash them. Petitioner would then pay ICBC using her own checks. The trial court
further made a finding that Mandy and petitioner entered into a contract of loan.13 Thus,
it held that the prosecution failed to establish an important element of the crime
of estafa—misappropriation or conversion. However, while the RTC Manila acquitted
petitioner, it ordered her to pay the amount of the checks. 

Petitioner filed an appeal15 of the civil aspect of the RTC Decision with the CA. In the
Assailed Decision,16the CA found the appeal without merit. It held that the acquittal of
petitioner does not necessarily absolve her of civil liability.

The CA said that it is settled that when an accused is acquitted on the basis of
reasonable doubt, courts may still find him or her civilly liable if the evidence so warrant.
The CA explained that the evidence on record adequately prove that petitioner received
the checks as a loan from MCCI. Thus, preventing the latter from recovering the amount
of the checks would constitute unjust enrichment. Hence, the Assailed Decision ruled
ISSUE: WON the propriety of making a finding of civil liability in a criminal case
for estafa when the accused is acquitted for failure of the prosecution to prove all
the elements of the crime charged.

HELD: NO.

A crime is a liability against the state. It is prosecuted by and for the state. Acts
considered criminal are penalized by law as a means to protect the society from
dangerous transgressions. On the other hand, civil liabilities take a less public and more
private nature. Civil liabilities are claimed through civil actions as a means to enforce or
protect a right or prevent or redress a wrong.

Nevertheless, our jurisdiction recognizes that a crime has a private civil component.
Thus, while an act considered criminal is a breach of law against the State, our legal
system allows for the recovery of civil damages where there is a private person injured
by a criminal act. It is in recognition of this dual nature of a criminal act that our Revised
Penal Code provides that every person criminally liable is also civilly liable.21 This is the
concept of civil liability ex delicto.

These two proceedings involve two different standards of proof. A criminal action
requires proof of guilt beyond reasonable doubt while a civil action requires a lesser
quantum of proof, that of preponderance of evidence. 

The Civil Code states that when an accused in a criminal prosecution is acquitted on the
ground that his guilt has not been proven beyond reasonable doubt, a civil action for
damages for the same act or omission may be filed. In the latter case, only
preponderance of evidence is required.

 This is supported by the Rules of Court which provides that the extinction of the
criminal action does not result in the extinction of the corresponding civil action.28 The
latter may only be extinguished when there is a "finding in a final judgment in the
criminal action that the act or omission from which the civil liability may arise did not
exist."29 Consistent with this, the Rules of Court requires that in judgments of acquittal
the court must state whether "the evidence of the prosecution absolutely failed to prove
the guilt of the accused or merely failed to prove his guilt beyond reasonable doubt. In
either case, the judgment shall determine if the act or omission from which the civil
liability might arise did not exist."30chanrobleslaw

Thus, whether an exoneration from the criminal action should affect the corresponding
civil action depends on the varying kinds of acquittal. 

Hence, a civil action filed for the purpose of enforcing civil liability ex delicto, even if
mandatorily instituted with the corresponding criminal action, survives an acquittal when
it is based on the presence of reasonable doubt. In these instances, while the evidence
presented does not establish the fact of the crime with moral certainty, the civil action
still prevails for as long as the greater weight of evidence tilts in favor of a finding of
liability. This means that while the mind of the court cannot rest easy in penalizing the
accused for the commission of a crime, it nevertheless finds that he or she committed or
omitted to perform acts which serve as a separate source of obligation. There is no
sufficient proof that the act or omission is criminal beyond reasonable doubt, but there is
a preponderance of evidence to show that the act or omission caused injury which
demands compensation.

In this case, the RTC Manila acquitted petitioner because the prosecution failed to
establish by sufficient evidence the element of misappropriation or conversion. There
was no adequate evidence to prove that Mandy gave the checks to petitioner with the
instruction that she will use them to pay the ICBC loan. Citing Mandy's own testimony in
open court, the RTC Manila held that when Mandy delivered the checks to petitioner,
their agreement was that it was a "sort of loan."36 In the dispositive portion of the RTC
Decision, the RTC Manila ruled that the prosecution "failed to establish the guilt of the
accused beyond reasonable doubt."37 It then proceeded to order petitioner to pay the
amount of the loan.

The situation envisioned in the foregoing cases, as in this case, is civil liability ex
contractu where the civil liability arises from an entirely different source of obligation.
Therefore, it is not the type of civil action deemed instituted in the criminal case, and
consequently must be filed separately. This is necessarily so because whenever the
court makes a finding that the elements of estafa do not exist, it effectively says that
there is no crime. There is no act or omission that constitutes criminal fraud. Civil
liability ex delicto cannot be awarded as it cannot be sourced from something that does
not exist.

When the court finds that the source of obligation is in fact, a contract, as in a contract
of loan, it takes a position completely inconsistent with the presence of estafa. In estafa,
a person parts with his money because of abuse of confidence or deceit. In a contract, a
person willingly binds himself or herself to give something or to render some
service.50 In estafa, the accused's failure to account for the property received amounts
to criminal fraud. In a contract, a party's failure to comply with his obligation is only a
contractual breach. Thus, any finding that the source of obligation is a contract
negates estafa. The finding, in turn, means that there is no civil liability ex delicto.
Thus, the rulings in the foregoing cases are consistent with the concept of fused civil
and criminal actions, and the different sources of obligations under our laws.

Petitioner was acquitted by the RTC Manila because of the absence of the element of
misappropriation or conversion. The RTC Manila, as affirmed by the CA, found that
Mandy delivered the checks to petitioner pursuant to a loan agreement. Clearly, there is
no crime of estafa. There is no proof of the presence of any act or omission constituting
criminal fraud. Thus, civil liability ex delicto cannot be awarded because there is no act
or omission punished by law which can serve as the source of obligation. Any civil
liability arising from the loan takes the nature of a civil liability ex contractu. It does not
pertain to the civil action deemed instituted with the criminal case.

4. CARPIO VS DOROJA, DEC.5, 1989

FACTS: Sometime on October 1985, Accused-respondent Edwin Ramirez, while driving

a passenger Fuso Jitney owned and operated by Eduardo Toribio, bumped Dionisio
Carpio, a pedestrian crossing the street, as a consequence of which the latter suffered
from a fractured left clavicle as reflected in the medico-legal certificate and sustained
injuries which required medical attention for a period of (3) three months.

An information for Reckless Imprudence Resulting to Serious Physical Injuries was filed
against Edwin Ramirez with the Municipal Trial Court. The accused voluntarily pleaded
guilty to a lesser offense and was accordingly convicted for Reckless Imprudence
Resulting to Less Serious Physical Injuries under an amended information punishable
under Article 365 of the Revised Penal Code. 

At the early stage of the trial, the private prosecutor manifested his desire to present
evidence to establish the civil liability of either the accused driver or the owner-operator
of the vehicle. Accused’s counsel moved that the court summon the owner of the
vehicle to afford the latter a day in court, on the ground that the accused is not only
indigent but also jobless and thus cannot answer any civil liability that may be imposed
upon him by the court. The private prosecutor, however, did not move for the
appearance of Eduardo Toribio.

The civil aspect of the above-quoted decision was appealed by the private prosecutor to
the Regional Trial Court, appellant praying for moral damages, compensatory damages,
and attorney’s.

Thereafter, a writ of was duly served upon the accused but was, however, returned
unsatisfied due to the insolvency of the accused as shown by the sheriff’s return. Thus,
complainant moved for a subsidiary writ of execution against the subsidiary liability of
the owner-operator of the vehicle. The same was denied by the trial court on two
grounds, namely, the decision of the appellate court made no mention of the subsidiary
liability of Eduardo Toribio, and the nature of the accident falls under "culpa-aquiliana"
and not "culpa-contractual." A motion for reconsideration of the said order was
disallowed for the reason that complainant having failed to raise the matter of subsidiary
liability with the appellate court, said court rendered its decision which has become final
and executory and the trial court has no power to alter or modify such decision.

Hence, the instant petition.

ISSUE: Whether or not the subsidiary liability of the owner-operator may be

enforced in the same criminal proceeding against the driver where the award as
given, in a separate civil action.
HELD: Yes.

The law involved in the instant case is Article 103 in relation to Article 100, both of the
Revised Penal Code, which reads thus:

"Art. 103. Subsidiary civil liability of other persons.

The subsidiary liability established in the net preceding article shall apply to employers,
teachers, persons, and corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices, or employees in the
discharge of their duties.

In order that an employer may be held subsidiarily liable for the employee’s civil liability
in the criminal action, it should be shown (1) that the employer, etc. is engaged in any
kind of industry, (2) that the employee committed the offense in the discharge of his
duties and (3) that he is insolvent (Basa Marketing Corp. v. Bolinao, 117 SCRA 156).
The subsidiary liability of the employer, however, arises only after conviction of the
employee in the criminal action. All these requisites present, the employer becomes
ipso facto subsidiarily liable upon the employee’s conviction and upon proof of the
latter’s insolvency. Needless to say, the case at bar satisfies all these requirements.

Furthermore, we are not convinced that the owner-operator has been deprived of his
day in court, because the case before us is not one wherein the operator is sued for a
primary liability under the Civil Code but one in which the subsidiary civil liability incident
to and dependent upon his employee’s criminal negligence is sought to be enforced.
Considering the subsidiary liability imposed upon the employer by law, he is in
substance and in effect a party to the criminal case. 

The argument that the owner-operator cannot be held subsidiarily liable because the
matter of subsidiary liability was not raised on appeal and in like manner, the appellate
court’s decision made no mention of such subsidiary liability is of no moment. As
already discussed, the filing of a separate complaint against the operator for recovery of
subsidiary liability is not necessary since his liability is clear from the decision against
the accused. Such being the case, it is not indispensable for the question of subsidiary
liability to be passed upon by the appellate court. Such subsidiary liability is already
implied from the appellate court’s decision.

Finally, the position taken by the respondent appellate court that to grant the motion for
subsidiary writ of execution would in effect be to amend its decision which has already
become final and executory cannot be sustained. Compelling the owner-operator to pay
on the basis of his subsidiary liability does not constitute an amendment of the judgment
because in an action under Art. 103 of the Revised Penal Code, once all the requisites
as earlier discussed are met, the employer becomes ipso facto subsidiarily liable,
without need of a separate action
5. De Llana v. Biong, G.R. 182356, Dec. 4, 2013;

FACTS: Juan dela Llana was driving a 1997 Toyota Corolla car along North Avenue,
Quezon City.4

His sister, Dra. dela Llana, was seated at the front passenger seat while a certain
Calimlim was at the backseat.5

Juan stopped the car across the Veterans Memorial Hospital when the signal light
turned red. A few seconds after the car halted, a dump truck containing gravel and sand
suddenly rammed the car’s rear end, violently pushing the car forward. Due to the
impact, the car’s rear end collapsed and its rear windshield was shattered. Glass
splinters flew, puncturing Dra. dela Llana. Apart from these minor wounds, Dra. dela
Llana did not appear to have suffered from any other visible physical injuries.6

The traffic investigation identified the truck driver as Joel Primero. It stated that Joel was
recklessly imprudent in driving the truck.7

Joel later revealed that his employer was respondent Rebecca Biong, doing business
under the name and style of "Pongkay Trading" and was engaged in a gravel and sand
business.8

In the first week of May 2000, Dra. dela Llana began to feel mild to moderate pain on
the left side of her neck and shoulder. The pain became more intense as days passed
by. Her injury became more severe. Her health deteriorated to the extent that she could
no longer move her left arm. THEREAFTER, she consulted with Dr. Rosalinda Milla, a
rehabilitation medicine specialist, to examine her condition. Dr. Milla told her that she
suffered from a whiplash injury, an injury caused by the compression of the nerve
running to her left arm and hand. Dr. Milla required her to undergo physical therapy to
alleviate her condition. Dra. dela Llana’s condition did not improve despite three months
of extensive physical therapy.9

She then consulted other doctors in search for a cure. Dr. Flores, a neuro-surgeon,
finally suggested that she undergo a cervical spine surgery to release the compression
of her nerve. Thereafter, Dr. Flores operated on her spine and neck, between the C5
and the C6 vertebrae.10

The operation released the impingement of the nerve, but incapacitated Dra. dela Llana
from the practice of her despite the surgery.11
Dra. dela Llana demanded from Rebecca compensation for her injuries, but Rebecca
refused to pay.12

 Dra. dela Llana sued Rebecca for damages before the RTC. She alleged that she lost
the mobility of her arm as a result of the vehicular accident and claimed ₱150,000.00 for
her medical expenses (as of the filing of the complaint) and an average monthly income.
She further prayed for actual, moral, and exemplary damages as well as attorney’s
fees.13

In defense, Rebecca maintained that Dra. dela Llana had no cause of action against her
as no reasonable relation existed between the vehicular accident and Dra. dela Llana’s
injury. She pointed out that Dra. dela Llana’s illness became manifest one month and
one week from the date of the vehicular accident. As a counterclaim, she demanded the
payment of attorney’s fees and costs of the suit.

Meanwhile, Joel testified that his truck hit the car because the truck’s brakes got stuck.

RTC ruled in favor of Dra. dela Llana and held that the proximate cause of Dra. dela
Llana’s whiplash injury to be Joel’s reckless driving.

The CA reversed the RTC ruling. It held that Dra. dela Llana failed to establish a
reasonable connection between the vehicular accident and her whiplash injury by
preponderance of evidence.

ISSUE: WON REBECCA HAS AN OBLIGATION TO DRA. DE LLANA, HENCE,

LIABLE.

HELD: NO.

Article 2176 of the Civil Code provides that "[w]hoever 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 a quasi-delict." Under this provision, the elements necessary to establish
a quasi-delict case are:

(1) damages to the plaintiff;

(2) negligence, by act or omission, of the defendant or by some person for whose
acts the defendant must respond, was guilty; and

(3) the connection of cause and effect between such negligence and the
damages.28

These elements show that the source of obligation in a quasi-delict case is the breach
or omission of mutual duties that civilized society imposes upon its members, or which
arise from non-contractual relations of certain members of society to others.29
Based on these requisites, Dra. dela Llana must first establish by preponderance of
evidence the three elements of quasi-delict before we determine Rebecca’s liability as
Joel’s employer.

She should show the chain of causation between Joel’s reckless driving and her
whiplash injury.

Only after she has laid this foundation can the presumption - that Rebecca did not
exercise the diligence of a good father of a family in the selection and supervision of
Joel - arise.30

Once negligence, the damages and the proximate causation are established, this Court
can then proceed with the application and the interpretation of the fifth paragraph of
Article 2180 of the Civil Code.31

Under Article 2176 of the Civil Code, in relation with the fifth paragraph of Article 2180,
"an action predicated on an employee’s act or omission may be instituted against the
employer who is held liable for the negligent act or omission committed by his
employee."32

The rationale for these graduated levels of analyses is that it is essentially the wrongful
or negligent act or omission itself which creates the vinculum juris in extra-contractual
obligations.33

In civil cases, a party who alleges a fact has the burden of proving it.

He who alleges has the burden of proving his allegation by preponderance of evidence
or greater weight of credible evidence.34

In the present case, the burden of proving the proximate causation between Joel’s
negligence and Dra. dela Llana’s whiplash injury rests on Dra. dela Llana. She must
establish by preponderance of evidence that Joel’s negligence, in its natural and
continuous sequence, unbroken by any efficient intervening cause, produced her
whiplash injury, and without which her whiplash injury would not have occurred.36

Notably, Dra. dela Llana anchors her claim mainly on three pieces of evidence:

(1) the pictures of her damaged car,

(2) the medical certificate dated November 20, 2000, and

(3) her testimonial evidence.

However, none of these pieces of evidence show the causal relation between the
vehicular accident and the whiplash injury. In other words, Dra. dela Llana, during trial,
did not adduce the factum probans or the evidentiary facts by which the factum
probandum or the ultimate fact can be established, as fully discussed below.37

The medical certificate cannot be 

considered because it was 
not admitted in evidence

Furthermore, the medical certificate, marked as Exhibit "H" during trial, should not be
considered in resolving this case for the reason that it was not admitted in evidence by
the RTC in an order dated September 23, 2004.38

Thus, the CA erred in even considering this documentary evidence in its resolution of
the case. It is a basic rule that evidence which has not been admitted cannot be validly
considered by the courts in arriving at their judgments.

Dra. dela Llana’s opinion that 

Joel’s negligence caused her 
whiplash injury has no probative value

In the present case, Dra. dela Llana’s medical opinion cannot be given probative value
for the reason that she was not presented as an expert witness. As an ordinary witness,
she was not competent to testify on the nature, and the cause and effects of whiplash
injury. Furthermore, we emphasize that Dra. dela Llana, during trial, nonetheless did not
provide a medical explanation on the nature as well as the cause and effects of
whiplash injury in her testimony.

The Supreme Court cannot take

judicial notice that vehicular 
accidents cause whiplash injuries.

Indeed, a perusal of the pieces of evidence presented by the parties before the trial
court shows that Dra. Dela Llana did not present any testimonial or documentary
evidence that directly shows the causal relation between the vehicular accident
and Dra. Dela Llana’s injury. Her claim that Joel’s negligence causes her whiplash
injury was not established because of the deficiency of the presented evidence during
trial. We point out in this respect that courts cannot take judicial notice that vehicular
accidents cause whiplash injuries. 

In sum, Dra. dela Llana miserably failed to establish her cause by preponderance of
evidence. While we commiserate with her, our solemn duty to independently and
impartially assess the merits of the case binds us to rule against Dra. dela Llana’s favor.
Her claim, unsupported by prepondernace of evidence, is merely a bare assertion and
has no leg to stand on.

6. Abrogar v. Cosmos Bottling Corp. G.R. 164749, Mar. 15, 2017;

Facts:

This case involves a claim for damages arising from the negligence causing the death
of a participant in an organized marathon bumped by a passenger jeepney on the route
of the race. The issues revolve on whether the organizer and the sponsor of the
marathon were guilty of negligence, and, if so, was their negligence the proximate
cause of the death of the participant; on whether the negligence of the driver of the
passenger jeepney was an efficient intervening cause; on whether the doctrine of
assumption of risk was applicable to the fatality; and on whether the heirs of the fatality
can recover damages for loss of earning capacity of the latter who, being then a minor,
had no gainful employment.

In the RTC decision, judgment was rendered in favor of plaintiffs-spouses Romulo

Abrogar and Erlinda Abrogar and against defendants Cosmos Bottling Company, Inc.
and Intergames, Inc., ordering both defendants, jointly and severally, to pay and deliver
to the plaintiffs the actual damages; moral damages; exemplary damages and
attorney's fees. On the cross-claim of defendant Cosmos Bottling Company, Inc.,
defendant Intergames, Inc, is hereby ordered to reimburse to the former any and all
amounts which may be recovered by the plaintiffs from it by virtue of this Decision.

The RTC observed that the safeguards allegedly instituted by Intergames in conducting
the marathon had fallen short of the yardstick to satisfy the requirements of due
diligence as called for by and appropriate under the circumstances; that the accident
had happened because of inadequate preparation and Intergames' failure to exercise
due diligence; that the respondents could not be excused from liability by hiding behind
the waiver executed by Rommel and the permission given to him by his parents
because the waiver could only be effective for risks inherent in the marathon, such as
stumbling, heat stroke, heart attack during the race, severe exhaustion and similar
occurrences; that the liability of the respondents towards the participants and third
persons was solidary, because Cosmos, the sponsor of the event, had been the
principal mover of the event, and, as such, had derived benefits from the marathon that
in turn had carried responsibilities towards the participants and the public; that the
respondents' agreement to free Cosmos from any liability had been an agreement
binding only between them, and did not bind third persons; and that Cosmos had a
cause of action against Intergames for whatever could be recovered by the petitioners
from Cosmos.

All parties appealed to the CA. The petitioners contended that the RTC erred in not
awarding damages for loss of earning capacity on the part of Rommel for the reason
that such damages were not recoverable due to Rommel not yet having finished his
schooling; and that it would be premature to award such damages upon the assumption
that he would finish college and be gainfully employed.
Issues:

1. Whether or not the CA gravely erred in reversing the RTC Decision (and) in absolving
respondent Cosmos from liability to petitioners on the sole ground that respondent
Cosmos' contract with respondent Intergames contained a stipulation exempting the
former from liability.

2. Whether or not the CA gravely erred in reversing the RTC Decision and consequently
holding respondents free from liability, (and) in not awarding petitioners with actual,
moral and exemplary damages for the death of their child, Rommel Abrogar.

Held:

1. No. The sponsorship of the marathon by Cosmos was limited to financing the race.
Cosmos did nothing beyond that, and did not involve itself at all in the preparations for
the actual conduct of the race. This verity was expressly confirmed by Intergames,
through Castro, Jr. The use of the name Cosmos was done for advertising purposes
only; it did not mean that it was an organizer of the said marathon. As pointed out by
Intergames' President, Jose Castro Jr., appellant Cosmos did not even have the right to
suggest the location and the number of runners.

We uphold the finding by the CA that the role of Cosmos was to pursue its corporate
commitment to sports development of the youth as well as to serve the need for
advertising its business. In the absence of evidence showing that Cosmos had a hand
in the organization of the race, and took part in the determination of the route for the
race and the adoption of the action plan, including the safety and security measures for
the benefit of the runners, we cannot but conclude that the requirement for the direct or
immediate causal connection between the financial sponsorship of Cosmos and the
death of Rommel simply did not exist. Indeed, Cosmos' mere sponsorship of the race
was, legally speaking, too remote to be the efficient and proximate cause of the
injurious consequences.

In this case, appellant Cosmos was not negligent in entering into a contract with the
appellant Intergames considering that the record of the latter was clean and that it has
conducted at least thirty (30) road races. 

Also there is no direct or immediate causal connection between the financial

sponsorship and the death of Rommel Abrogar. The singular act of providing financial
assistance without participating in any manner in the conduct of the marathon cannot be
palmed off as such proximate cause. In fact, the appellant spouses never relied on any
representation that Cosmos organized the race. It was not even a factor considered by
the appellants-spouses in allowing their son to join said marathon. 
In view of the fact that both defendants are not liable for the death of Rommel Abrogar,
appellants-spouses are not entitled to actual, moral, exemplary damages as well as for
the "loss of earning capacity" of their son. The third and fourth issues are thus moot and
academic.

2. Yes. Art. 2202. In crimes and quasi-delicts, the defendant shall be liable for all
damages which are the natural and probable consequences of the act or omission
complained of. It is not necessary that such damages have been foreseen or could have
reasonably been foreseen by the defendant.

Accordingly, Intergames was liable for all damages that were the natural and probable
consequences of its negligence. In its judgment, the RTC explained the award of
damages in favor of the petitioners.

Article 2231 of the Civil Code stipulates that exemplary damages are to be awarded in

cases of quasi-delict if the defendant acted with gross negligence. The foregoing
characterization by the RTC indicated that Intergames' negligence was gross. We agree
with the characterization. Gross negligence, according to Mendoza v. Spouses
Gomez,88 is the absence of care or diligence as to amount to a reckless disregard of the
safety of persons or property; it evinces a thoughtless disregard of consequences
without exerting any effort to avoid them. Indeed, the failure of Intergames to adopt the
basic precautionary measures for the safety of the minor participants like Rommel was
in reckless disregard of their safety. Conduct is reckless when it is an extreme departure
from ordinary care, in a situation in which a high degree of danger is apparent; it must
be more than any mere mistake resulting from inexperience, excitement, or confusion,
and more than mere thoughtlessness or inadvertence, or simple inattention.89

The RTC did not recognize the right of the petitioners to recover the loss of earning
capacity of Rommel. It should have, for doing so would have conformed to
jurisprudence whereby the Court has unhesitatingly allowed such recovery in respect of
children, students and other non-working or still unemployed victims. The legal basis for
doing so is Article 2206 (1) of the Civil Code, which stipulates that the defendant "shall
be liable for the loss of the earning capacity of the deceased, and the indemnity shall be
paid to the heirs of the latter; such indemnity shall in every case be assessed and
awarded by the court, unless the deceased on account of permanent physical disability
not caused by the defendant, had no earning capacity at the time of his death." 

Indeed, damages for loss of earning capacity may be awarded to the heirs of a
deceased non-working victim simply because earning capacity, not necessarily actual
earning, may be lost.

Article 2211 of the Civil Code expressly provides that interest, as a part of damages,

may be awarded in crimes and quasi-delicts at the discretion of the court. The rate of
interest provided under Article 2209 of the Civil Code is 6% per annum in the absence
of stipulation to the contrary. The legal interest rate of 6% per annum is to be imposed
upon the total amounts herein awarded from the time of the judgment of the RTC on
May 10, 1991 until finality of judgment.98 Moreover, pursuant to Article 221299 of
the Civil Code, the legal interest rate of 6% per annum is to be further imposed on the
interest earned up to the time this judgment of the Court becomes final and executory
until its full satisfaction.100

Article 2208 of the Civil Code expressly allows the recovery of attorney's fees and
expenses of litigation when exemplary damages have been awarded. Thus, we uphold
the RTC's allocation of attorney's fees in favor of the petitioners equivalent to 10% of
the total amount to be recovered, inclusive of the damages for loss of earning capacity
and interests, which we consider to be reasonable under the circumstances.

7. VALENZUELA VS CA, FEB 7, 1996

Doctrine: 2. CIVIL LAW; QUASI-DELICT; CONTRIBUTORY NEGLIGENCE, DEFINED.

- Contributory negligence is conduct on the part of the injured party, contributing as a
legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection. (Keeton and Dobbs, et al., Prosser and
Keaton On Torts, 451 [1984] citing Second Restatement Of Torts, Sec. 463.)

FACTS:

Plaintiff’s version

 At around 2:00 in the morning of June 1990, plaintiff Ma. Lourdes Valenzuela was
driving a blue Mitsubishi lancer her restaurant at Marcos highway to her home at
Palanza Street, Araneta Avenue. She was travelling along Aurora Blvd. with a
companion, Cecilia Ramon, heading towards the direction of Manila. Before reaching A.
Lake Street, she noticed something wrong with her tires; she stopped at a lighted place
where there were people, to verify whether she had a flat tire and to solicit help if
needed. She parked along the sidewalk, about 1-1/2 feet away, put on her emergency
lights, alighted from the car, and went to the rear to open the trunk. She was standing at
the left side of the rear of her car pointing to the tools to a man who will help her fix the
tire when she was suddenly bumped by a 1987 Mitsubishi Lancer driven by defendant
Richard Li. Because of the impact plaintiff was thrown against the windshield of the car
of the defendant, which was destroyed, and then fell to the ground. She was pulled out
from under defendant's car. She was brought to the UERM Medical Memorial Center
where she was found to have a "traumatic amputation, leg, left up to distal thigh (above
knee)". She was confined in the hospital for twenty (20) days and was eventually fitted
with an artificial leg. The expenses for the hospital confinement and the cost of the
artificial leg were paid by defendants from the car insurance.
In her complaint, plaintiff prayed for moral damages, exemplary damages and other
medical and related expense including loss of expected earnings.

Defendant’s version

He was on his way home, travelling at 55 kph; considering that it was raining, visibility
was affected and the road was wet. Traffic was light. He testified that he was driving
along the inner portion of the right lane of Aurora Blvd. towards the direction of Araneta
Avenue, when he was suddenly confronted, in the vicinity of A. Lake Street, San Juan,
with a car coming from the opposite direction, travelling at 80 kph, with "full bright
lights". Temporarily blinded, he instinctively swerved to the right to avoid colliding with
the oncoming vehicle, and bumped plaintiff's car, which he did not see because it was
midnight blue in color, with no parking lights or early warning device, and the area was
poorly lighted. He alleged in his defense that the left rear portion of plaintiff's car was
protruding as it was then "at a standstill diagonally" on the outer portion of the right lane
towards Araneta Avenue (par. 18, Answer). He confirmed the testimony of plaintiff's
witness that after being bumped the car of the plaintiff swerved to the right and hit
another car parked on the sidewalk. Defendants counterclaimed for damages, alleging
that plaintiff was reckless or negligent, as she was not a licensed driver.

Witness

The police investigator who prepared the vehicular accident report and the sketch of the
three cars involved in the accident, testified that the plaintiff's car was "near the
sidewalk"; there was a street light at the corner of Aurora Blvd. and F. Roman, about
100 meters away. It was not mostly dark.

A witness for the plaintiff, defendant's car came approaching very fast ten meters from
the scene; the car was "zigzagging". The rear left side of plaintiff's car was bumped by
the front right portion of defendant's car; as a consequence, the plaintiff's car swerved to
the right and hit the parked car on the sidewalk. Plaintiff was thrown to the windshield of
defendant's car, which was destroyed, and landed under the car. He stated that
defendant was under the influence of liquor as he could "smell it very well".

After trial, the lower court sustained the plaintiff's submissions and found defendant
Richard Li guilty of gross negligence and liable for damages under Article 2176 of the
Civil Code. The trial court likewise held Alexander Commercial, Inc., Li's employer,
jointly and severally liable for damages pursuant to Article 2180. 
the Court of Appeals found that there was "ample basis from the evidence of record for
the trial court's finding that the plaintiff's car was properly parked at the right, beside the
sidewalk when it was bumped by defendant's car."1 Dismissing the defendants'
argument that the plaintiff's car was improperly parked, almost at the center of the road,
the respondent court noted that evidence which was supposed to prove that the car was
at or near center of the right lane was never presented during the trial of the case.
Having come to the conclusion that Li was negligent in driving his company-issued
Mitsubishi Lancer, the next question for us to determine is whether or not Valenzuela
was likewise guilty of contributory negligence in parking her car alongside Aurora
Boulevard, which entire area Li points out, is a no parking zone.

ISSUE: WON Valenzuela was likewise guilty of contributory negligence in parking

her car alongside Aurora Boulevard, which entire area Li points out, is a no
parking zone.

HELD: NO.

Contributory negligence is conduct on the part of the injured party, contributing as a

legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection.14 Based on the foregoing definition, the
standard or act to which, according to petitioner Li, Valenzuela ought to have conformed
for her own protection was not to park at all at any point of Aurora Boulevard, a no
parking zone. We cannot agree.

Under the "emergency rule" adopted by this Court in Gan vs. Court of Appeals,16 an
individual who suddenly finds himself in a situation of danger and is required to act
without much time to consider the best means that may be adopted to avoid the
impending danger, is not guilty of negligence if he fails to undertake what subsequently
and upon reflection may appear to be a better solution, unless the emergency was
brought by his own negligence.17

Under the circumstances described, Valenzuela did exercise the standard reasonably
dictated by the emergency and could not be considered to have contributed to the
unfortunate circumstances which eventually led to the amputation of one of her lower
extremities. The emergency which led her to park her car on a sidewalk in Aurora
Boulevard was not of her own making, and it was evident that she had taken all
reasonable precautions.

Obviously in the case at bench, the only negligence ascribable was the negligence of Li
on the night of the accident. "Negligence, as it is commonly understood is conduct
which creates an undue risk of harm to others."23 It is the failure to observe that degree
of care, precaution, and vigilance which the circumstances justly demand, whereby
such other person suffers injury.

The circumstances established by the evidence adduced in the court below plainly
demonstrate that Li was grossly negligent in driving his Mitsubishi Lancer. It bears
emphasis that he was driving at a fast speed at about 2:00 A.M. after a heavy downpour
had settled into a drizzle rendering the street slippery. There is ample testimonial
evidence on record to show that he was under the influence of liquor. Under these
conditions, his chances of effectively dealing with changing conditions on the road were
significantly lessened. 
the employer's primary liability under the concept of pater familias embodied by Art
2180 (in relation to Art. 2176) of the Civil Code is quasi-delictual or tortious in character.
His liability is relieved on a showing that he exercised the diligence of a good father of
the family in the selection and supervision of its employees. Once evidence is
introduced showing that the employer exercised the required amount of care in
selecting its employees, half of the employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances of employment.

8. ORIENT FREIGHT VS EVERETT, AUG 9, 2017

FACTS: On October 16, 2001, Keihin-Everett entered into a Trucking Service

Agreement with Matsushita. Under the Trucking Service Agreement, Keihin-Everett
would provide services for Matsushita's trucking requirements. These services were
subcontracted by Keihin-Everett to Orient Freight, through their own Trucking Service
Agreement executed on the same day.[6]
When the Trucking Service Agreement between Keihin-Everett and Matsushita expired
on December 31, 2001, Keihin-Everett executed an In-House Brokerage Service
Agreement for Matsushita's Philippine Economic Zone Authority export operations.
Keihin-Everett continued to retain the services of Orient Freight, which sub-contracted
its work to Schmitz Transport and Brokerage Corporation.[7]
Thereafter, Matsushita called Keihin-Everett's Sales Manager, Salud Rizada, about a
column in the April 19, 2002 issue of the tabloid newspaper Tempo. This news narrated
the April 17, 2002 interception by Caloocan City police of a stolen truck filled with
shipment of video monitors and CCTV systems owned by Matsushita.[8]
When contacted by Keihin-Everett about this news, Orient Freight stated that the tabloid
report had blown the incident out of proportion. They claimed that the incident simply
involved the breakdown and towing of the truck, which was driven by Ricky Cudas
(Cudas), with truck helper, Rubelito Aquino[9] (Aquino). The truck was promptly released
and did not miss the closing time of the vessel intended for the shipment.[10]
Keihin-Everett directed Orient Freight to investigate the matter. During its meeting with
Keihin-Everett and Matsushita, as well as in the letter addressed to Matsushita, Orient
Freight reiterated that the truck merely broke down and had to be towed.[11]
However, when the shipment arrived in Yokohama, it was discovered that 10 pallets of
the shipment's 218 cartons, worth US$34,226.14, were missing.[12]
Keihin-Everett independently investigated the incident. During its investigation, it
obtained a police report from the Caloocan City Police Station. The report stated,
among others, that at around 2:00 p.m. on April 17, 2002, somewhere in Plaza Dilao,
Paco Street, Manila, Cudas told Aquino to report engine trouble to Orient Freight. After
Aquino made the phone call, he informed Orient Freight that the truck had gone
missing. When the truck was intercepted by the police along C3 Road near the corner of
Dagat-Dagatan Avenue in Caloocan City, Cudas escaped and became the subject of a
manhunt.[13]
When confronted with Keihin-Everett's findings, Orient Freight wrote back on to admit
that its previous report was erroneous and that pilferage was apparently proven.[14]
Matsushita terminated its In-House Brokerage Service Agreement with Keihin-Everett.
Matsushita cited loss of confidence for terminating the contract, stating that Keihin-
Everett's way of handling the said incident and its nondisclosure of this incident's
relevant facts "amounted to fraud and signified an utter disregard of the rule of law."[15]
Keihin-Everett, by counsel demanded P2,500,000.00 as indemnity for lost income. It
argued that Orient Freight's mishandling of the situation caused the termination of
Keihin-Everett's contract with Matsushita.[16]
When Orient Freight refused to pay, Keihin-Everett filed a complaint dated for damages
with the RTC. In its complaint, Keihin-Everett alleged that Orient Freight's
"misrepresentation, malice, negligence and fraud" caused the termination of its In-
House Brokerage Service Agreement with Matsushita. Keihin-Everett prayed for
compensation for lost income, with legal interest, exemplary damages, attorney's fees,
litigation expenses, and the costs of the suit.[18]
Orient Freight claimed, among others, 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. It also alleged that the contractual termination was a
prerogative of Matsushita. Further, by its own Audited Financial Statements on file with
the Securities and Exchange Commission, Keihin-Everett derived income substantially
less than what it sued for. Along with the dismissal of the complaint, Orient Freight also
asserted counterclaims for compensatory and exemplary damages, attorney's fees,
litigation expenses, and the costs of the suit.[19]
The Regional Trial Court rendered Decision,[20] in favor of Keihin-Everett. It found that
Orient Freight was "negligent in failing to investigate properly the incident and make a
factual report to Keihin[-Everett] and Matsushita," despite having enough time to
properly investigate the incident.[21]
The trial court ordered Orient Freight "to pay [Keihin-Everett] actual damages
representing net profit loss incurred" and attorney's fees.[23] However, it denied
respondent's prayer for exemplary damages, finding that petitioner did not act with
gross negligence.[24]
Orient Freight appealed the Regional Trial Court Decision to the Court of Appeals. Court
of Appeals issued its Decision[25] affirming the trial court's decision.
The Court of Appeals ruled that the oral and documentary evidence has established
both the damage suffered by Keihin-Everett and Orient Freight's fault or negligence.
Orient Freight was negligent in not reporting and not thoroughly investigating the
incident despite Keihin-Everett's instruction to do so.[27] . The Court of Appeals held that
the trial court correctly arrived at the amount as the award of lost income.[29]
ISSUE: Whether Orient Freight, Inc. was negligent for failing to disclose the facts
surrounding the hijacking incident which led to the termination of the Trucking Service
Agreement between Keihin-Everett Forwarding Co., Inc. and Matsushita
Communication Industrial Corporation of the Philippines.

HELD: YES.
Negligence may either result in culpa aquiliana or culpa contractual.[46] Culpa aquiliana
is the "the wrongful or negligent act or omission which creates a vinculum juris and
gives rise to an obligation between two persons not formally bound by any other
obligation,"[47] and is governed by Article 2176 of the Civil Code
Actions based on contractual negligence and actions based on quasi-delicts differ in
terms of conditions, defenses, and proof. They generally cannot co-exist.[50] 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. A party may still commit a tort or quasi-delict against
another, despite the existence of a contract between them.
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,[61] and the party may be held liable under Article 2176 and its related
provisions
However, 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
Here, petitioner denies that it was obliged to disclose the facts regarding the hijacking
incident since this was not among the provisions of its Trucking Service Agreement with
respondent. There being no contractual obligation, respondent had no cause of action
against petitioner
The obligation to report what happened during the hijacking incident, admittedly, does
not appear on the plain text of the Trucking Service Agreement. Petitioner argues that it
is nowhere in the agreement. Respondent does not dispute this claim. Neither the
Regional Trial Court nor the Court of Appeals relied on the provisions of the Trucking
Service Agreement to arrive at their respective conclusions. Breach of the Trucking
Service Agreement was neither alleged nor proved.
The doctrine "the act that breaks the contract may also be a tort," on which the lower
courts relied, is inapplicable here. 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 Code applies, 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
Consequently, Articles 1170, 1172, and 1173 of the Civil Code on negligence in the
performance of an obligation should apply.
Under Article 1170 of the Civil Code, liability for damages arises when those in the
performance of their obligations are guilty of negligence, among others. 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."[77] If the law or contract does not provide for the degree of diligence to be
exercised, then the required diligence is that of a good father of a family.[78] The test to
determine a party's negligence is if the party used "the reasonable care and caution
which an ordinarily prudent person would have used in the same situation"[79] when it
performed the negligent act. If the party did not exercise reasonable care and caution,
then it is guilty of negligence. In this case, both the Regional Trial Court and the Court of
Appeals found that petitioner was negligent in failing to adequately report the April 17,
2002 hijacking incident to respondent and not conducting a thorough investigation
despite being directed to do so. The trial court's factual findings, when affirmed by the
Court of Appeals, are binding on this Court and are generally conclusive.
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
responsible for the damages that respondent incurred due to the former's negligent
performance of its obligation.
Principles:
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.