Torts Digest Page 1-3.docx

TORTS

TORTS DISTINGUISHED FROM BREACH OF CONTRACT CANGCO VS MANILA RAILROAD CO FACTS Jose Cangco was an employee of Manila Railroad Company as clerk. He lived in San Mateo which is located upon the line of the defendant railroad company. He used to travel by trade to the office located in Manila for free. On January 21, 1915, on his way home by rail and when the train drew up to the station in San Mateo, he rose from his seat, making his exit through the door. When he stepped off from the train, one or both of his feet came in contact with a sack of watermelons causing him to slip off from under him and he fell violently on the platform. He rolled and was drawn under the moving car. He was badly crushed and lacerated. He was hospitalized which resulted to amputation of his hand. He filed the civil suit for damages against defendant in CFI of Manila founding his action upon the negligence of the employees of defendant in placing the watermelons upon the platform and in leaving them so placed as to be a menace to the security of passengers alighting from the train. The trial court after having found negligence on the part of defendant, adjudged saying that plaintiff failed to use due caution in alighting from the coach and was therefore precluded from recovering, hence this appeal. ISSUE Is the negligence of the employees attributable to their employer whether the negligence is based on contractual obligation or on torts? HELD YES. It cannot be doubted that the employees of defendant were guilty of negligence in piling these sacks on the platform in the manner stated. It necessarily follows that the defendant company is liable for the damage thereby occasioned unless recovery is barred by the plaintiff’s own contributory negligence. It is to note that the foundation of the legal liability is the contract of carriage. However Art. 1903 relates only to culpa aquiliana and not to culpa contractual, as the Court cleared on the case of Rakes v. Atlantic Gulf. It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves the master

from liability fro the latter’s act. The fundamental distinction between obligation of this character and those which arise from contract, rest upon the fact that in cases of non-contractual obligations it is the wrongful or negligent act or omission itself which creates the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach of the voluntary duty assumed by the parties when entering into the contractual relation. When the source of obligation upon which plaintiff’s cause of action depends is a negligent act or omission, the burden of proof rest upon the plaintiff to prove negligence. On the other hand, in contractual undertaking, proof of the contract and of its nonperformance is suffient prima facie to warrant recovery. The negligence of employee cannot be invoked to relieve the employer from liability as it will make juridical persons completely immune from damages arising from breach of their contracts. Defendant was therefore liable for the injury suffered by plaintiff, whether the breach of the duty were to be regarded as constituting culpa aquiliana or contractual. As Manresa discussed, whether negligence occurs as an incident in the course of the performance of a contractual undertaking or is itself the source of an extra-contractual obligation, its essential characteristics are identical. There is always an act or omission productive of damage due to carelessness or inattention on the part of the defendant. The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to provide safe means of entering and leaving its trains. Contributory negligence on the part of petitioner as invoked by defendant is untenable. In determining the question of contributory negligence in performing such act- that is to say, whether the passenger acted prudently or recklessly- age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of the passenger, and should be considered. It is to be noted that the place was perfectly familiar to plaintiff as it was his daily routine. Our conclusion is there is slightly underway characterized by imprudence and therefore was not guilty of contributory negligence. The decision of the trial court is REVERSED.

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JAPAN AIRLINES VS SIMANGAN

RATIO:

FACTS:

Breach of contract of carriage

Respondent needed to go to the US to donate his kidney to his ailing cousin. Having obtained an emergency US Visa, respondent purchased a round trip ticket from petitioner JAL. He was scheduled to a flight bound for LA via Japan. On the date of his flight, respondent passed through rigid immigration and security routines before being allowed to board a JAL plane.

In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and its non-performance by the carrier through the failure to carry the passenger safely to his destination. Simangan complied with these requisites. Damage was accrued by JAL when Simangan was bumped off despite his protestations and valid travel documents and notwithstanding his contract of carriage with JAL.

While inside the plane, respondent was asked to show his travel documents. After which he was ordered by the crew to leave the plane, imputing that respondent is carrying falsified travel documents. Respondent pleaded but was ignored and under constraint he gets off the plane. The plane took off and respondent was left behind. Respondent was refunded with the cost of his ticket minus 500 USD, when JAL found out eventually that his travel documents were not falsified and in order. Respondent filed an action for damages against JAL. RTC RULING: JAL is liable for beach of contract of carriage, and should pay 1M as MD, 500K as ED, 250K as AF + cost of suit. JAL appealed contending it is not guilty of breach of contract of carriage and not liable for damages. CA RULING: Affirmed RTC decision with modification as to amount of damages for being scandalously excessive. 500K MD, 250K ED and NO AT.

Award of moral damages in breach of contract of carriage. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not enumerated under Art 2219 NCC. As an exception, such damages are recoverable in: 1. Mishaps resulting to a death of a passenger (Art. 1764 NCC) 2. When carrier is guilty of fraud or bad faith (Art. 2220) JAL breached its contract of carriage with respondent in bad faith, when its crew ordered respondent to disembark while the latter is already settled in his assigned seat under the guise of verifying the genuineness of his travel documents. Inattention to and lack of care for the interest of its passengers who are entitled ot its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to award of moral damages.

ISSUE: WON JAL is guilty of breach of contract of carriage. WON Simangan is entitled to moral and exemplary damages.

HELD: JAL is guilty of breach of contract of carriage and is liable for damages. Petition of JAL was denied. CA decision was affirmed with modification. 500K ED, 100K ED, 200K AF.

Award of exemplary damages in breach of contract of carriage. Exemplary damages maybe recovered in contractual obligations as a way of example or correction for the public good.JAL is liable for exemplary damages as its acts constitute wanton, oppressive and malevolent acts against respondent. Passengers have the right to be treated by the carrier’s employees with kindness, respect, courtesy and due consideration and are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees.

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RADIO COMMUNICATIONS VS CA Facts: Loreto Dionela filed a complaint of damages against Radio Communiciations of the Philippines, Inc. (RCPI) due to the telegram sent through its Manila Office to the former, reading as follows: 176 AS JR 1215PM 9 PAID MANDALUYONG JUL 22-66 LORETO DIONELA CABANGAN LEGASPI CITY WIRE ARRIVAL OF CHECK FER LORETO DIONELA-CABANGANWIRE ARRIVAL OF CHECK-PER 115 PM SA IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-KANG PADALA DITO KAHIT BULBUL MO Loreto Dionela alleges that the defamatory words on the telegram sent to him wounded his feelings, caused him undue embarrassment and affected adversely his business because other people have come to know of said defamatory words. RCPI alleges that the additional words in Tagalog was a private joke between the sending and receiving operators, that they were not addressed to or intended for plaintiff and therefore did not form part of the telegram, and that the Tagalog words are not defamatory. The RTC ruled that the additional words are libelous for any person reading the same would logically think that they refer to Dionela, thus RCPI was ordered to pay moral damages in the amount of P40, 000.00. The Court of Appeals affirmed the decision ruling that the company was negligent and failed to take precautionary steps to avoid the occurrence of the humiliating incident, and the fact that a copy of the telegram is filed among other telegrams and open to public is sufficient publication; however reducing the amount awarded to P15, 000.00 Issue: Whether or not the company should answer directly and primarily for the civil liability arising from the criminal act of its employee. Ruling: Yes. The cause of action of the private respondent is based on Arts. 19 and 20 of the New Civil Code, as well as on respondent’s breach of contract thru the negligence of its own employees. By adding extraneous and libelous

matters in the message sent to the private respondent, there is a clear breach of contract; for upon payment of the fixed rate, the company undertakes to transmit the message accurately. In contracts, the negligence of the employee (servant) is the negligence of the employer (master). This is the master and servant rule. As a corporation, the petitioner can act only through its employees. Hence the acts of its employees in receiving and transmitting messages are the acts of the petitioner. To hold that the petitioner is not liable directly for the acts of its employees in the pursuit of petitioner’s business is to deprive the general public availing of the services of the petitioner of an effective and adequate remedy. In most cases, negligence must be proved in order that plaintiff may recover. However, since negligence may be hard to substantiate in some cases, we may apply the doctrine of RES IPSA LOQUITUR (the thing speaks for itself), by considering the presence of facts or circumstances surrounding the injury. The judgment of the CA is affirmed.

SYQUIA VS CA FACTS: 1. Petitioners were the parents and siblings, respectively, of the deceased Vicente Juan Syquia. On March 5, 1979, they filed a complaint in the then Court of First Instance against herein private respondent, Manila Memorial Park Cemetery, Inc. for recovery of damages arising from breach of contract and/or quasi-delict. 2. According to the complaint, the petitioners and respondent to inter the remains of deceased in the Manila Memorial Park Cemetery in the morning of July 25, 1978. They also alleged that the concrete vault encasing the coffin of the deceased had a hole approximately three (3) inches in diameter. Upon opening the vault, it became apparent that there was evidence of total flooding, the coffin was entirely damaged and the exposed parts of the deceased’s remains were damaged. 3. The complaint prayed that judgment be rendered ordering defendant-appellee to pay plaintiffs-appellants P30,000.00 for actual damages, P500,000.00 for moral damages, etc.

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DECISION OF LOWER COURTS: 1. Trial Court: dismissed the complaint. the contract between the parties did not guarantee that the cement vault would be waterproof; that there could be no quasidelict because the defendant was not guilty of any fault or negligence, and because there was a pre- existing contractual relation. Contention of the defense: "The hole had to be bored through the concrete vault because if it has no hole the vault will (sic) float and the grave would be filled with water and the digging would caved (sic) in the earth, the earth would caved (sic) in the (sic) fill up the grave." 2. Court of Appeals: affirmed dismissal. ISSUE: whether the Manila Memorial Park Cemetery, Inc., breached its contract with petitioners; or, alternatively, whether private respondent was guilty of a tort.

There was no stipulation in the Deed of Sale and Certificate of Perpetual Care and in the Rules and Regulations of the Manila Memorial Park Cemetery, Inc. that the vault would be waterproof. 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." In the absence of stipulation or legal provision providing the contrary, the diligence to be observed in the performance of the obligation is that which is expected of a good father of a family. Private respondent has exercised the diligence of a good father of a family in preventing the accumulation of water inside the vault which would have resulted in the caving in of earth around the grave filling the same with earth

FEBTC VS CA RULING: NO, there was no negligent act on the part of the cemetery. Although a pre-existing contractual relation between the parties does not preclude the existence of aculpa aquiliana, We find no reason to disregard the respondent's Court finding that there was no negligence. Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi- delict Syquias and the Manila Memorial Park Cemetery, Inc., entered into a contract entitled "Deed of Sale and Certificate of Perpetual Care" on August 27, 1969. That agreement governed the relations of the parties and defined their respective rights and obligations. Hence, had there been actual negligence on the part of the Manila Memorial Park Cemetery, Inc., it would be held liable not for a quasi-delict or culpa aquiliana, but for culpa contractual as provided by Article 1170 of the Civil Code, to wit: Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

FACTS: Luis Luna has a FAREASTCARD issued by Far East Bank and Trust Company. with a supplemental card issued to Clarita S. Luna. Clarita lost her credit card and informed Far East. She submitted an affidavit of loss. In cases of this nature, the bank would record the lost card, along with the principal card, as a "Hot Card" or "Cancelled Card" in its master file. When Luis had lunch for a close friend at a restaurant in a hotel, the card was not honored then Luis was forced to pay in cash so he felt embarrassed. Luis Luna demanded from Far East the payment of damages. The vicepresident of the bank, expressed the bank's apologies to Luis in a letter. A letter was also sent to the restaurant to assure that Luis was "very valued clients" of Far East. The hotel wrote back to say that the credibility of Luis had never been "in question." Still evidently feeling aggrieved Luis filed a complaint for damages. RTC found Far East liable and ordered to pay Luna. The CA affirmed the decision of the trial court. ISSUE: Whether or not this is an action for quasi-delict. HELD: No. The Court has not in the process overlooked another rule that a quasi-delict can be the cause for breaching a contract that might thereby permit the application of applicable principles on tort even where there is a pre-existing contract between the plaintiff and the defendant (Phil. Airlines vs. Court of Appeals, 106 SCRA 143; Singson vs. Bank of Phil. Islands, 23 SCRA 1117; and Air France vs. Carrascoso, 18 SCRA 155). This 4

doctrine, unfortunately, cannot improve Luna's case for it can aptly govern only where the act or omission complained of would constitute an actionable tort independently of the contract. The test (whether a quasidelict can be deemed to underlie the breach of a contract) can be stated thusly: Where, without a pre-existing contract between two parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact that the parties are contractually bound is no bar to the application of quasi-delict provisions to the case. Here, Luna's damage claim is predicated solely on their contractual relationship; without such agreement, the act or omission complained of cannot by itself be held to stand as a separate cause of action or as an independent actionable tort. WHEREFORE, the appealed decision is MODIFIED by deleting the award of moral and exemplary damages to Luna; in its stead, Far East is ordered to pay an amount of P5,000.00 by way of nominal damages.

REGINO VS PANGASINAN COLLEGES SCIENCE AND TECHNOLOGY

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Thus on the examination dates, she was not allowed by her two teachers, Gamurot and Balalad, to take her final exam on statistics and logic.

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The next day, the teacher announced to the whole class that khristine and another student was not permitted to take the exam because of the failure to buy the tickets then subsequently ejected the two from class.

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Khristine continued to plead with the teachers to allow her but they kept their stand and defended their position saying that they were complying with PCST’s policy.

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Khristine filed in the RTC as a pauper litigant against PCST and her two teachers for damages.

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The respondents filed a motion to dismiss based on the khristine’s failure to exhaust administrative remedies as they are contending that the case should’ve been filed in the CHED (commission of higher education) and not in the RTC

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Khristine on the other hand says that prior exhaustion of administrative remedies was unnecessary, because her action was not administrative in nature, but one purely for damages arising from respondents breach of the laws on human relations

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RTC

OF

FACTS: 

Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science and Technology (PCST).

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She comes from a very poor family and she was only able to go to school by means of financial support from her relatives.

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During her second semester of school year 20012002, she was enrolled in logic and statistics subjects under Repondents Rachelle A. Gamurot and Elissa Baladad (her teachers)

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It was in February 2002 that the college arranged a fund raising campaign called “Rave Party and Dance Revolution”. The proceeds of this dance will be used to construct the school’s tennis and volleyball courts.

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Everyone was required to buy at least two tickets priced at 100 pesos each. People who bought the tickets will be given additional points in their test scores but those who did not buy will not be allowed to take the final exams. Khristine, having no money and religious restrictions, refused to buy the tickets.

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The RTC dismissed the complaint for the lack of cause of action. It said that considering the case was between a school, two teachers and a student, CHED has jurisdiction over the case and not RTC. And it dismissed the case for the lack of cause of action without explaining their ground.

ISSUE/s: 1. W/N the doctrine of exhaustion of administrative remedies is applicable 2. W/N the Complaint stated sufficient cause(s) of action.

HELD: 1. Yes

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The Supreme Court ruled that the doctrine of exhaustion of administrative remedies has no bearing on the present case because the petitioner was not asking for the reversal of the policies of the PCST neither was she demanding that the school allow her to take the final examinations (considering that she was already enrolled in a different school). The acts of the respondent can no longer be reversed and even if it was reversed, it would not be adequate to redress her grievances The Supreme Court also held that the doctrine can only be applied when there is competence on the part of the administrative body to act upon the matter complained of. Thus in the case at bar, the CHED does not have the power to award damages to the petitioner. And lastly, the doctrine cannot be applied when the issue is purely legal and well within the jurisdiction of the trial court. The petitioner’s action for damages calls for the application of the Civil Code which falls within the jurisdiction of the courts. 2. Yes a. Breach of Action In the case of Alcuaz v. PSBA, the court characterized the relationship between the school and the student as a contract, where the student, once admitted by the school is considered enrolled for one semester. And in a succeeding case (Non v. Dames), the court ruled that it is not merely for one semester but an entire period that the student is expected to complete it. Thus it can be seen that when it comes to the court, the relationship between the school and the student is contractual in nature. Being that the relationship is reciprocal, where the school would be providing the education while the student will be abiding by the rules and regulations of the school. The terms of the contract are defined at the moment of its inception- upon enrollment of the student. Thus it is in practice that the student makes a down payment at the beginning of the semester and succeeding payments paid before every preliminary, midterm and final examination. Their failure to pay their financial obligation is regarded as a valid ground for the school to deny them the opportunity to take these examinations.

course. Considering that the fee was not part of the student-school contract entered into at the start of the year, it cannot be unilaterally imposed to the prejudice of the enrollees. It should be noted that the student-school contract is not an ordinary one and is imbued with public interest considering that it is protected by the constitution and by a legislative act called the Education Act of 1982. b. Liability for Tort In her complaint, Khristine wrote that she was inhumanly punished by reason only of their poverty, religious practive or lowly station I life which inculcated feelings of guilt, disgrace and unworthiness and as a result she was unable to finish her subjects for the second semester and had to lag her studies for a full year. The acts caused her extreme humiliation and mental agony and she asks for compensation as the respondents violated Article 19, 21, and 26 of the Civil Code. The court held that generally, tort arises only between partieis not otherwise bound by a contract. But in the case of PSBA vs. CA an academic institution may be held liable for tort even if it has an existing contract with its students, since the act that violated the contract may also be a tort. The Respondent CANNOT use the right to academic freedom as a defense because According to present jurisprudence, academic freedom encompasses the independence of an academic institution to determine for itself (1) who may teach, (2) what may be taught, (3) how it shall teach, and (4) who may be admitted to study. DISPOSITIVE: WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders REVERSED. The trial court is DIRECTED to reinstate the Complaint and, with all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No costs.

In the present case, the PCST imposed a revenue raising measure in the middle of the semester. It made the financial contribution of the student as a condition for the students to take their final examinations which ultimately is translated to the recognition of their ability to finish the 6

TORTS DISTINGUISHED FROM LIABILITY ARISING FROM CRIME

CIVIL

PEOPLE VS LIGON Facts: Accused-appellant, Fernando Gabat was convicted of the crime of Robbery with homicide and was sentenced to reclusion perpetua. Gabat allegedly robbed Jose “Rosales” Ortiz, a 17 year old working student, who was a cigarette vendor. According to Prudencio Castillo, a taxi driver, who allegedly saw the incident that transpired on the night Ortiz died. According to Castillo, he was at a distance of about 3 meters travelling on the same lane and was behind the Kombi driven by Rogelio Ligon together with Gabat. Castillo, in his testimony, said that Gabat grabbed the box of cigarettes from Rosales. That while waiting for the traffic light to change from red to green, Castillo idly watched the Volkswagon Kombi and saw Gabat signal to Ortiz. While Ortiz was handling the cigarettes to Gabat, the traffic light changed to green and as the Kombi moved forward, Gabat grabbed the box from Ortiz. Ortiz ran beside the Jombi and was able to hold on to the windowsill with his right hand. Howeverm as the Kombi continued to speed towards the C.M. Rector underpass, Gabat forcibly remove the hand of Rosales from the said windowsill and as a result fell face down on the ground. On the other hand, according to Gabat, after Ortiz handed the two sticks cigarettes Gabat in turn paid him a 5 peso bill. In order to change the said bill, Ortiz placed his box between the arm of Gabat and the window frame. When the traffic light changed to green, Ligon moved the vehicle forward. That in spite of Gabat’s order to stop the vehicle, Ligon said that it could not be done due the the moving vehicular traffic. When Ortiz fell down, Gabat shouted at Ligon but the latter replied that they should go on to Las Pinas and report the incident to the parents of Gabat and that later they would come back to the scene of the incident. At this point, the Kombi was blocked by Castillo’s taxi and the jeep driven by the policeman.

Held: According to the Court of Appeals, although Castillo is a disinterested witness, his testimony even if not tainted with bias is not entirely free from doubt because his observation of the event could have been faulty. Castillo’s taxi was driving a car lower in height compared to the Kombi. The windshield of the Kombi (1978 model) is occupying approximately 1/3 of the rear end of the vehicle making it visually difficult for Castillo to observe what clearly transpired. Also, Castillo’s statement given to the police on the evening of the incident did not mention that he saw Gabat forcibly prying off the hand of Rosales from the windowsill though such appeared in the police report. Given the circumstances, the Court is not convinced with moral certainty that the guilt of Gabat was established beyond reasonable doubt. As such he is acquitted. However, such does not necessarily exempt him from civil liability as such only requires a preponderance of evidence and such evidence is sufficient to establish Gabat’s liability. The Court finds Gabat’s act and omission with fault and negligence caused damage to Ortiz. That he failed to prevent the driver from moving forward while the purchase was completed; He failed to help Ortiz while the latter clung to the moving vehicle; e did not enforce his order to Ligon to stop; and that he acquiesced in the driver’s act of speeding away instead of stopping and picking up Ortiz. His acquittal in the criminal prosecution does not bar the heirs of Ortiz from recovering damages. The judgment of acquittal extinguishes the civil liability only when it includes a declaration that the facts from which the civil liability might arise did not exist. Wherefore, Gabat is sentenced to indemnify the heirs of Ortiz the amount of P15,000 for the latter’s death, P1,733 for hospital and medical expenses, 4,100 for funeral expenses, and the alleged loss of income amounting to P20,000.

The trial court gave full credence to Castillo’s testimony and dismissed Gabat’s testimony on the ground that it is of common knowledge that cigarette vendors do not let go of their cigarette. Gabat was convicted by the trial court; Hence, this appeal. Issue: Whether a person who is not criminally liable is also free from civil liability. 7

no negligence on his part at all, thatis, if he can prove due diligence in the selection and supervision of his driver).

RUFO MAURICIO CONST VS IAC FACTS: Illustre Cabiliza was charged before the RTC of Legaspi with homicide and damage to property through reckless imprudence because he had willfully, unlawfully and feloniously driven the Izusu dump truck owned by Rufo Mauricio Construction. The vehicle hit the Colt Gallant driven and owned by Judge Arsenio Solidum and directly caused his untimely death.Cabiliza filed a Notice of Appeal but his appeal did not pursue because he died. A notice of death was filed by his counsel and on the same notice, Atty. Beltran manifested Rufo Mauricio’s intention to proceed with the case on appeal pursuant to hisright as employer who is subsidiarily liable.The lower court ordered the heirs of Cabiliza to appear and to substitute him as appeallant for the civil aspect of the case. On motion of the heirs of the victim, the court ordered a writ of execution. However, the writ was returned unsatisfied because Cabiliza was found insolvent as manifested by the Certificate of Insolvency issued by the Register of Deeds of Cagayan.The victim’s widow filed a motion for the Issuance of a subsidiary writ of executiontobe enforced against the employer of Cabiliza, Rufo Mauricio and/or Rufo Mauricio Construction Co. This was granted by the lower court and which was affirmed by the Court of Appeals. Hence, Rufo filed an appeal to SC.

Inasmuch as the employer (petitioner herein) was not a party in the criminal case, and to grant him his day in court for the purpose of cross-examining the prosecution witnesses on their testimonies on the driver's alleged negligence and the amount of damages to which the heirs of the victim are entitled, as well as to introduce any evidence or witnesses he may care to present in his defense, the hearing on the motion to quash the subsidiary writ of execution must be reopened precisely for the purpose adverted to hereinabove.

DULAY VS CA FACTS: 

December 7, 1988: Due to a heated argument, Benigno Torzuela, the security guard on duty at Big Bang Sa Alabang carnival, shot and killed Atty. Napoleon Dulay

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Maria Benita A. Dulay, widow of the deceased Napoleon Dulay, in her own behalf and in behalf of her minor children filed an action for damages against Benigno Torzuela for wanton and reckless discharge of the firearm and Safeguard Investigation and Security Co., Inc., (Safeguard) and/or Superguard Security Corp. (Superguard) as employers for negligence having failed to exercise the diligence of a good father of a family in the supervision and control of its employee to avoid the injury

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Superguard:

ISSUE: W/N, the dismissal of criminal case against the accused wipes out not only the employee’s primarily civil liability but also the employer’s subsidiary liability; W/N, the petitioner can be condemned to pay the damages without the opportunity to examine the witness;

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RULING: No. The death of the accused during the pendency of his appeal or before the judgment of conviction (which became final and executory) extinguished his criminal liability to serve the imprisonment imposed and his pecuniary liability for fines ,but not his civil liability should the liability or obligation arise (not from a crime, for here, no crime was committed, the accused not having been convicted by final judgment, and therefore still regarded as innocent) but from a quasi-delict(See Arts. 2176 and 2177,Civil Code), as in this case .The liability of the employer here would not be subsidiary but solidary with his driver(unless said employer can prove there was

Torzuela's act of shooting Dulay was beyond the scope of his duties, and was committed with deliberate intent (dolo), the civil liability therefor is governed by Article 100 of the Revised Penal Code, which states:

Art. 100. Civil liability of a person guilty of a felony. — Every person criminally liable for a felony is also civilly liable. 

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civil liability under Article 2176 applies only to quasi-offenses under Article 365 of the Revised Penal Code CA Affirmed RTC: dismising the case of Dulay

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as a crime is not extinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused

ISSUE: W/N Superguard and Safeguard commited an actionable breach and can be civilly liable even if Benigno Torzuela is already being prosecuted for homicide 

HELD: YES. Petition for Review is Granted. remanded to RTC for trial on the merits 

Rule 111 of the Rules on Criminal Procedure provides:

Sec. 1. Institution of criminal and civil actions. When a criminal action is instituted, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action , reserves his right to institute it separately or institutes the civil action prior to the criminal action Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused 

Contrary to the theory of private respondents, there is no justification for limiting the scope of Article 2176 of the Civil Code to acts or omissions resulting from negligence. Wellentrenched is the doctrine that article 2176 covers not only acts committed with negligence, but also acts which are voluntary and intentional.

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Article 2176, where it refers to "fault or negligence," covers not only acts "not punishable by law" but also acts criminal in character; whether intentional and voluntary or negligent. Consequently, a separate civil action against the offender in a criminal act, whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming the awards made in the two cases vary

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extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as quasi-delict only and not

It is enough that the complaint alleged that Benigno Torzuela shot Napoleon Dulay resulting in the latter's death; that the shooting occurred while Torzuela was on duty; and that either SUPERGUARD and/or SAFEGUARD was Torzuela's employer and responsible for his acts.

CHUA VS CA Facts: On 28 February 1996, Lydia Hao, treasurer of Siena Realty Corporation, filed a complaint-affidavit with the City Prosecutor of Manila charging Francis Chua and his wife, Elsa Chua, of four counts of falsification of public documents pursuant to Article 172[3] in relation to Article 171[4] of the Revised Penal Code. The charge reads: "That on or about May 13, 1994, in the City of Manila, Philippines, the said accused, being then a private individual, did then and there willfully, unlawfully and feloniously commit acts of falsification upon a public document, to wit: the said accused prepared, certified, and falsified the Minutes of the Annual Stockholders meeting of the Board of Directors of the Siena Realty Corporation, duly notarized before a Notary Public, Atty. Juanito G. Garcia and entered in his Notarial Registry as Doc No. 109, Page 22, Book No. IV and Series of 1994, and therefore, a public document, by making or causing it to appear in said Minutes of the Annual Stockholders Meeting that one LYDIA HAO CHUA was present and has participated in said proceedings, when in truth and in fact, as the said accused fully well knew that said Lydia C. Hao was never present during the Annual Stockholders Meeting held on April 30, 1994 and neither has participated in the proceedings thereof to the prejudice of public interest and in violation of public faith and destruction of truth as therein proclaimed. Contrary to Law." Thereafter, the City Prosecutor filed the Information (Criminal Case 285721) for falsification of public document, before the Metropolitan Trial Court (MeTC) of Manila, Branch 22, against Francis Chua but dismissed the accusation against Elsa Chua. Francis Chua, was arraigned and trial ensued thereafter. During the trial in the MeTC, Atty. Evelyn Sua-Kho and Atty. Ariel Bruno Rivera appeared as private prosecutors and presented Hao 9

as their first witness. After Hao’s testimony, Chua moved to exclude Hao’s counsels as private prosecutors in the case on the ground that Hao failed to allege and prove any civil liability in the case. In an Order, dated 26 April 1999, the MeTC granted Chua’s motion and ordered the complainant’s counsels to be excluded from actively prosecuting Criminal Case 285721. Hao moved for reconsideration but it was denied. Hao filed a petition for certiorari (SCA 99-94846), before the Regional Trial Court (RTC) of Manila, Branch 19. The RTC gave due course to the petition and on 5 October 1999, the RTC in an order reversed the MeTC Order. Chua moved for reconsideration which was denied. Dissatisfied, Chua filed before the Court of Appeals a petition for certiorari. On 14 June 2001, the appellate court promulgated its Decision denying the petition. The Court of Appeals held that the action was indeed a derivative suit, for it alleged that petitioner falsified documents pertaining to projects of the corporation and made it appear that Chua was a stockholder and a director of the corporation. According to the appellate court, the corporation was a necessary party to the petition filed with the RTC and even if Hao filed the criminal case, her act should not divest the Corporation of its right to be a party and present its own claim for damages. Chua moved for reconsideration but it was denied in a Resolution dated 20 November 2001. Hence, the petition by Chua. Issue: Whether the criminal complaint was in the nature of a derivative suit. Held: Under Section 36 of the Corporation Code, read in relation to Section 23, where a corporation is an injured party, its power to sue is lodged with its board of directors or trustees. An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stocks in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party, with the corporation as the real party in interest. A derivative action is a suit by a shareholder to enforce a corporate cause of action. The corporation is a necessary party to the suit. And the relief which is granted is a judgment against a third person in favor of the corporation. Similarly, if a corporation has a defense to an action against it and is not asserting it, a stockholder may intervene and defend on behalf of the corporation. Under the Revised Penal Code, every person criminally liable for a felony is also civilly liable. When a criminal action is instituted, the civil action for the

recovery of civil liability arising from the offense charged shall be deemed instituted with the criminal action, unless the offended party waives the civil action, reserves the right to institute it separately or institutes the civil action prior to the criminal action. Not every suit filed in behalf of the corporation is a derivative suit. For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of the corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the suit. It is a condition sine qua non that the corporation be impleaded as a party because not only is the corporation an indispensable party, but it is also the present rule that it must be served with process. The judgment must be made binding upon the corporation in order that the corporation may get the benefit of the suit and may not bring subsequent suit against the same defendants for the same cause of action. In other words, the corporation must be joined as party because it is its cause of action that is being litigated and because judgment must be a res adjudicata against it. Herein, the complaint was instituted by Hao against Chua for falsifying corporate documents whose subject concerns corporate projects of Siena Realty Corporation. Clearly, Siena Realty Corporation is an offended party. Hence, Siena Realty Corporation has a cause of action. And the civil case for the corporate cause of action is deemed instituted in the criminal action. However, the board of directors of the corporation in this case did not institute the action against Chua. Hao was the one who instituted the action. Nowhere is it stated that she is filing the same in behalf and for the benefit of the corporation. Thus, the criminal complaint including the civil aspect thereof could not be deemed in the nature of a derivative suit. Additional: Under the Revised Penal Code, every person criminally liable for a felony is also civilly liable. When a criminal action is instituted, the civil action for the recovery of civil liability arising from the offense charged shall be deemed instituted with the criminal action, unless the offended party waives the civil action, reserves the right to institute it separately or institutes the civil action prior to the criminal action. The basis of civil liability arising from crime is the fundamental postulate that every man criminally liable is also civilly liable. When a person commits a crime he offends two entities namely (1) the society in which he lives in or the political entity called the State whose law 10

he has violated; and (2) the individual member of the society whose person, right, honor, chastity or property has been actually or directly injured or damaged by the same punishable act or omission. An act or omission is felonious because it is punishable by law, it gives rise to civil liability not so much because it is a crime but because it caused damage to another. Additionally, what gives rise to the civil liability is really the obligation and the moral duty of everyone to repair or make whole the damage caused to another by reason of his own act or omission, whether done intentionally or negligently. The indemnity which a person is sentenced to pay forms an integral part of the penalty imposed by law for the commission of the crime. The civil action involves the civil liability arising from the offense charged which includes restitution, reparation of the damage caused, and indemnification for consequential damages. Under the Rules, where the civil action for recovery of civil liability is instituted in the criminal action pursuant to Rule 111, the offended party may intervene by counsel in the prosecution of the offense. Private respondent did not waive the civil action, nor did she reserve the right to institute it separately, nor institute the civil action for damages arising from the offense charged. Thus, we find that the private prosecutors can intervene in the trial of the criminal action.

LUMANTAS VS CALAPIZ FACTS: In 1995, Spouses Hilario Calapiz, Jr. and Herlita Calapiz brought their 8-year-old son, Hanz Calapiz (Hanz), to the Misamis Occidental Provincial Hospital, Oroquieta City, for an emergency appendectomy. Hanz was attended to by the petitioner, who suggested to the parents that Hanz also undergo circumcision at no added cost to spare him the pain. With the parents’ consent, the petitioner performed the coronal type of circumcision on Hanz after his appendectomy. On the following day, Hanz complained of pain in his penis, which exhibited blisters. His testicles were swollen. The parents noticed that the child urinated abnormally after the petitioner forcibly removed the catheter, but the petitioner dismissed the abnormality as normal. Hanz was discharged from the hospital over his parents’ protestations, and was directed to continue taking antibiotics. After a few days, Hanz was confined in a hospital because of the abscess formation between the base and the shaft of his penis. Presuming

that the ulceration was brought about by Hanz’s appendicitis, the petitioner referred him to Dr. Henry Go, an urologist, who diagnosed the boy to have a damaged urethra. Thus, Hanz underwent cystostomy, and thereafter was operated on three times to repair his damaged urethra. When his damaged urethra could not be fully repaired and reconstructed, Hanz’s parents brought a criminal charge against the petitioner for reckless imprudence resulting to serious physical injuries. In his defense, the petitioner denied the charge. He contended that at the time of his examination of Hanz, he had found an accumulation of pus at the vicinity of the appendix two to three inches from the penis that had required immediate surgical operation; that after performing the appendectomy, he had circumcised Hanz with his parents’ consent by using a congo instrument, thereby debunking the parents’ claim that their child had been cauterized; that he had then cleared Hanz once his fever had subsided; that he had found no complications when Hanz returned for his follow up check-up; and that the abscess formation between the base and the shaft of the penis had been brought about by Hanz’s burst appendicitis. The RTC acquitted the petitioner of the crime charged for insufficiency of the evidence. It held that the Prosecution’s evidence did not show the required standard of care to be observed by other members of the medical profession under similar circumstances. Nonetheless, the RTC ruled that the petitioner was liable for moral damages because there was a preponderance of evidence showing that Hanz had received the injurious trauma from his circumcision by the petitioner. The Petitioner appealed his case to the CA contending that he could not be held civilly liable because there was no proof of his negligence. The CA affirmed the RTC, sustaining the award of moral damages. ISSUE: Whether the CA erred in affirming the petitioner’s civil liability despite his acquittal of the crime of reckless imprudence resulting in serious physical injuries. HELD: NO. It is axiomatic that every person criminally liable for a felony is also civilly liable. xxx Our law recognizes two kinds of acquittal, with different effects on the civil liability of the accused. First is an acquittal on the ground that the accused is not the author of the act or omission 11

complained of. This instance closes the door to civil liability, for a person who has been found to be not the perpetrator of any act or omission cannot and can never be held liable for such act or omission. There being no delict, civil liability ex delicto is out of the question, and the civil action, if any, which may be instituted must be based on grounds other than the delict complained of. This is the situation contemplated in Rule 111 of the Rules of Court. The second instance is an acquittal based on reasonable doubt on the guilt of the accused. In this case, even if the guilt of the accused has not been satisfactorily established, he is not exempt from civil liability which may be proved by preponderance of evidence only.

award as a sincere means of adjusting the value of the award to a level that is not only reasonable but just and commensurate. Unless we make the adjustment in the permissible manner by prescribing legal interest on the award, his sufferings would be unduly compounded. For that purpose, the reckoning of interest should be from the filing of the criminal information on April 17, 1997, the making of the judicial demand for the liability of the petitioner.

The petitioner’s contention that he could not be held civilly liable because there was no proof of his negligence deserves scant consideration. The failure of the Prosecution to prove his criminal negligence with moral certainty did not forbid a finding against him that there was preponderant evidence of his negligence to hold him civilly liable. With the RTC and the CA both finding that Hanz had sustained the injurious trauma from the hands of the petitioner on the occasion of or incidental to the circumcision, and that the trauma could have been avoided, the Court must concur with their uniform findings. In that regard, the Court need not analyze and weigh again the evidence considered in the proceedings a quo. The Court, by virtue of its not being a trier of facts, should now accord the highest respect to the factual findings of the trial court as affirmed by the CA in the absence of a clear showing by the petitioner that such findings were tainted with arbitrariness, capriciousness or palpable error. Every person is entitled to the physical integrity of his body. Although we have long advocated the view that any physical injury, like the loss or diminution of the use of any part of one’s body, is not equatable to a pecuniary loss, and is not susceptible of exact monetary estimation, civil damages should be assessed once that integrity has been violated. The assessment is but an imperfect estimation of the true value of one’s body. The usual practice is to award moral damages for the physical injuries sustained. In Hanz’s case, the undesirable outcome of the circumcision performed by the petitioner forced the young child to endure several other procedures on his penis in order to repair his damaged urethra. Surely, his physical and moral sufferings properly warranted the amount of P50,000.00 awarded as moral damages. Many years have gone by since Hanz suffered the injury. Interest of 6% per annum should then be imposed on the 12

INDEPENDENT CIVIL ACTION, RATIONALE AND PREJUDICIAL QUESTION

from crime especially as the latter action had been expressly reserved.

SANTOS VS PIZARRO

We held that the dismissal of the action based on culpa aquiliana is not a bar to the enforcement of the subsidiary liability of the employer. Once there is a conviction for a felony, final in character, the employer becomes subsidiarily liable if the commission of the crime was in discharge of the duties of the employees. This is so because Article 103 of the RPC operates the controlling force to obviate the possibility of the aggrieved party being deprived of indemnity even after the rendition of a final judgment convicting the employee.

Facts: In April 1994, Viron Transit driver Sibayan was charged with reckless imprudence resulting to multiple homicide and multiple physical injuries for which Sibayan was eventually convicted in December 1998. As there was a reservation to file a separate civil action, no pronouncement of civil liability was made by the MCTC. In October 2000 Santos filed a complaint for damages against Sibayan and Rondaris, the president and chairman of Viron Transit. Viron Transit moved for the dismissal of the complaint citing, among others, prescription alleging that actions based on quasi delict prescribe in 4 years from the accrual of the cause of action. Issue: Held: Petitioners expressly made a reservation of their right to file a separate civil action as a result of the crime committed by Sibayan. On account of this reservation the MCTC did not make any pronouncement as to the latter’s civil liability. Although there were allegations of negligence on the part of Sibayan and Viron Transit, such does not necessarily mean that petitioners were pursuing a cause of action based on quasi delict, considering that at the time of the filing of the complaint, the cause of action ex quasi delicto had already prescribed. Besides, in cases of negligence, the offended party has the choice between an action to enforce liability arising from crime under the Revised Penal Code and an action for quasi delict under the Civil Code. An act or omission causing damage to another may give rise to 2 separate civil liabilities on the part of the offender, i.e. (1) civil liability ex delicto, under Article 100 of the RPC; and (2) independent civil liabilities (a) not arising from an act or omission complained of as a felony, e.g., culpa contractual or obligations arising from law under Article 31 of the Civil Code, intentional torts under Articles 32 and 34, and culpa aquiliana under Article 2176 of the Civil Code; or (b) where the injured party is granted a right to file an action independent and distinct from the criminal proceedings. While the cause of action ex quasi delicto had already prescribed, petitioners can still pursue the remaining avenue opened for them by their reservation, i.e., the surviving cause of action ex delicto. This is so because the prescription of the action ex quasi delicto does not operate as a bar to an action to enforce the civil liability arising

L.G FOODS AGRAVIADOR

CORP

VS

PAGAPONG-

FACTS: Review on certiorari of a decision of the CA on 25 April 2003 affirming an order of Bacolod RTC, which in turn denied the petitioners’ motion to dismiss an action for damages arising from a vehicular accident instituted by the Vallejera spouses. On February 26, 1996, Charles Vallereja, a 7-year old son of the Vallejera spouses, was hit by a Ford Fiera van owned by LG Foods Corporation (LG Foods) and driven by their employee, Vincent Norman Yeneza y Ferrer. Charles died as a result of the accident. An information for reckless imprudence resulting to homicide was filed against the driver before the Bacolod MTCC. Before the trial could be concluded, however, the accused driver committed suicide. The case was then dismissed. On June 23, 1999, the spouses Vallejera filed a complaint for damages against LG Foods alleging that as employers, they failed to exercise due diligence in the selection and supervision of their employees In their defense, LG Foods denied liability by claiming to have exercised such diligence and prayed for dismissal for lack of cause of action. Also in their motion to dismiss, they argued that the complaint was a claim for subsidiary liability against an employer under A1035, RPC and, as such, there must first be a judgment of conviction against their driver to hold them liable. Since such condition was not fulfilled due to the latter’s death, they argued, the spouses had no cause of action. 13

The trial court denied the motion for lack of merit. Also, it denied the motion for reconsideration of the matter. LG Foods then went on certiorari to the CA alleging grave abuse of discretion of the part of the trial judge.

by which a party violates the right of another." Such act or omission gives rise to an obligation which may come from law, contracts, quasi contracts, delicts or quasidelicts.

The CA, however, affirmed the RTC decision ruling that the complaint by the spouses does not purport to be based on subsidiary liability since the basic elements of such liability, such as conviction and insolvency of the accused employee, were not even alleged in said complaint. It then said that the complaint purports to exact responsibility for fault or negligence under A2176, CC, which is entirely separate and distinct from civil liability arising from negligence under the A103, RPC. Liability under A2180, CC is direct and immediate, and not conditioned upon prior recourse against the negligent employee or showing of insolvency.

Corollarily, an act or omission causing damage to another may give rise to two separate civil liabilities on the part of the offender, i.e., 1) civil liability ex delicto, and 2) independent civil liabilities, such as those (a) not arising from an act or omission complained of as felony (e.g., culpa contractual or obligations arising from law; the intentional torts;14 and culpa aquiliana15); or (b) where the injured party is granted a right to file an action independent and distinct from the criminal action. Either of these two possible liabilities may be enforced against the offender.

Issue: Whether the cause of action of the Vallejera spouses is founded on CC or RPC. Ruling The case is a negligence suit brought under A2176, CC to recover damages primarily from LG Foods as employers responsible for their negligent driver pursuant to A2180, CC. The obligation imposed by A2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. Thus, the employer is liable for damages caused by his employees. First. Nothing in the allegations in the complaint suggests that the LG Foods are being made to account for their subsidiary liability under Article 103 of the Revised Penal Code. Plus, the complaint did not even aver the basic elements for the subsidiary liability of an employer under said provision. Second. While not explicitly stated that the suit was for damages based on quasi-delict, it alleged gross fault and negligence on the part of the driver and the failure of LG Foods, as employers, to exercise due diligence in the selection and supervision of their employees. It was further alleged that LG Foods is civilly liable for the negligence/imprudence of their driver since they failed to exercise the necessary diligence required of a good father of the family in the selection and supervision of their employees, which diligence, if exercised, could have prevented the vehicular accident that resulted to the death of their 7-year old son.

Stated otherwise, victims of negligence or their heirs have a choice between an action to enforce the civil liability arising from culpa criminal under Article 100 of the Revised Penal Code, and an action for quasi-delict (culpa aquiliana) under Articles 2176 to 2194 of the Civil Code. This is illustrated in A1161, CC providing that civil obligation arising from criminal offenses shall be governed by penal laws subject to the provision of A2177 and of the pertinent provision of Chapter 2, Preliminary Title on Human Relation, and of Title XVIII of this Book, regulating damages. This means that A2177 provides an alternative remedy for the plaintiff. The choice is with the plaintiff. Fourth. Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate, not conditioned upon prior recourse against the negligent employee and a prior showing of insolvency. This was the recourse of the spouses since there was no conviction in the criminal case against the driver. Fifth. LG Foods has been alleging that "they had exercised due diligence in the selection and supervision of [their] employees." This defense is an admission that indeed the petitioners acknowledged the private respondents' cause of action as one for quasi-delict under A2180, CC. Sixth. Since it is as if there was no criminal case to speak of due to its premature termination, the fact that there was no prior reservation made to institute a separate civil action is of no moment.

Third. Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as the "act or omission 14

CONSING JR VS PEOPLE Doctrine: An independent civil action based on fraud initiated by the defrauded party does not raise a prejudicial question to stop the proceedings in a pending criminal prosecution of the defendant for estafa through falsification. This is because the result of the independent civil action is irrelevant to the issue of guilt or innocence of the accused. Facts: Petitioner negotiated with and obtained for himself and his mother, Cecilia de la Cruz (de la Cruz) various loans totaling P18,000,000.00 from Unicapital Inc. (Unicapital). The loans were secured by a real estate mortgage constituted on a parcel of land registered under the name of de la Cruz. In accordance with its option to purchase the mortgaged property, Unicapital agreed to purchase one-half of the property for a total consideration of P21,221,500.00. Payment was effected by off-setting the amounts due to Unicapital under the promissory notes of de la Cruz and Consing in the amount of P18,000,000.00 and paying an additional amount of P3,145,946.50. The other half of the property was purchased by Plus Builders, Inc. (Plus Builders), a joint venture partner of Unicapital. Before Unicapital and Plus Builders could develop the property, they learned that the title to the property was really TCT No. 114708 in the names of Po Willie Yu and Juanito Tan Teng, the parties from whom the property had been allegedly acquired by de la Cruz. TCT No. 687599 held by De la Cruz appeared to be spurious. On its part, Unicapital demanded the return of the total amount of P41,377,851.48 as of April 19, 1999 that had been paid to and received by de la Cruz and Consing, but the latter ignored the demands. Consing filed Civil Case No. 1759 in the Pasig City RTC for injunctive relief, thereby seeking to enjoin Unicapital from proceeding against him for the collection of theP41,377,851.48 on the ground that he had acted as a mere agent of his mother. On the same date, Unicapital initiated a criminal complaint for estafa through falsification of public document against Consing and de la Cruz in the Makati City Prosecutor’s Office. Unicapital sued Consing in the RTC in Makati City (Civil Case No. 99-1418) for the recovery of a sum of money and damages, with an application for a writ of preliminary attachment. The Office of the City Prosecutor of Makati City filed against Consing and De la Cruz an information for estafa

through falsification of public document in the RTC in Makati City. Consing moved to defer his arraignment in the Makati criminal case on the ground of existence of a prejudicial question due to the pendency of the Pasig and Makati civil cases. On September 25, 2001, Consing reiterated his motion for deferment of his arraignment, citing the additional ground of pendency of CA-G.R. SP No. 63712 in the CA. On November 19, 2001, the Prosecution opposed the motion. On November 26, 2001, the RTC issued an order suspending the proceedings in the Makati criminal case on the ground of the existence of a prejudicial question, and on March 18, 2001, the RTC denied the Prosecution’s motion for reconsideration. The State thus assailed in the CA the last two orders of the RTC in the Makati criminal case via petition for certiorari (C.A.-G.R. SP No. 71252). On May 20, 2003, the CA promulgated its decision in C.A.-G.R. SP No. 71252, dismissing the petition for certiorari and upholding the RTC’s questioned orders. On August 18, 2003, the CA amended its decision, reversing itself. Consing filed a motion for reconsideration, but the CA denied the motion through the second assailed resolution of December 11, 2003. Hence, this appeal by petition for review on certiorari. Issue: Whether or not there is an existence of a prejudicial question that warranted the suspension of the proceedings in the Makati criminal case Held: NO Ruling: Consing has hereby deliberately chosen to ignore the firm holding in the ruling in G.R. No. 148193 to the effect that the proceedings in Criminal Case No. 00-120 could not be suspended because the Makati civil case was an independent civil action, while the Pasig civil case raised no prejudicial question. That was wrong for him to do considering that the ruling fully applied to him due to the similarity between his case with Plus Builders and his case with Unicapital. A perusal of Unicapital’s complaint in the Makati civil case reveals that the action was predicated on fraud. This was apparent from the allegations of Unicapital in its complaint to the effect that Consing and de la Cruz had acted in a "wanton, fraudulent, oppressive, or malevolent 15

manner in offering as security and later object of sale, a property which they do not own, and foisting to the public a spurious title." As such, the action was one that could proceed independently of Criminal Case No. 00-120 pursuant to Article 33 of the Civil Code.

liable for conspiring to falsify public documents. Hence, the determination of the issue involved in Civil Case No. SCA 1759 for Injunctive Relief is irrelevant to the guilt or innocence of the respondent in the criminal case for estafa through falsification of public document.

It is well settled that a civil action based on defamation, fraud and physical injuries may be independently instituted pursuant to Article 33 of the Civil Code, and does not operate as a prejudicial question that will justify the suspension of a criminal case.

WHEREFORE, the Court AFFIRMS the amended decision promulgated on August 18, 2003; and ORDERS petitioner to pay the costs of suit.

In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the alleged fraud committed by respondent and his mother in selling the disputed lot to PBI is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will justify the suspension of the criminal case at bar. Contrary to Consing’s stance, it was not improper for the CA to apply the ruling in G.R. No. 148193 to his case with Unicapital, for, although the Manila and Makati civil cases involved different complainants (i.e., Plus Builders and Unicapital), the civil actions Plus Builders and Unicapital had separately instituted against him were undeniably of similar mold, i.e., they were both based on fraud, and were thus covered by Article 33 of the Civil Code. Clearly, the Makati criminal case could not be suspended pending the resolution of the Makati civil case that Unicapital had filed. As far as the Pasig civil case is concerned, the issue of Consing’s being a mere agent of his mother who should not be criminally liable for having so acted due to the property involved having belonged to his mother as principal has also been settled in G.R. No. 148193, to wit: In the case at bar, we find no prejudicial question that would justify the suspension of the proceedings in the criminal case (the Cavite criminal case). The issue in Civil Case No. SCA 1759 (the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing) merely acted as an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381 (the Manila civil case), for Damages and Attachment, the question is whether respondent and his mother are liable to pay damages and to return the amount paid by PBI for the purchase of the disputed lot. Even if respondent is declared merely an agent of his mother in the transaction involving the sale of the questioned lot, he cannot be adjudged free from criminal liability. An agent or any person may be held 16

ELEMENTS SEA COMMERCIAL CO INC VS CA FACTS: SEACOM is a corporation engaged in the business of selling and distributing agricultural machinery, products and equipment. On September 20, 1966, SEACOM and JII entered into a dealership agreement whereby SEACOM appointed JII as its exclusive dealer in the City and Province of Iloilo. Tirso Jamandre executed a suretyship agreement binding himself jointly and severally with JII to pay for all obligations of JII to SEACOM. The agreement was subsequently amended to include Capiz in the territorial coverage and to make the dealership agreement on a nonexclusive basis. In the course of the business relationship arising from the dealership agreement, JII allegedly incurred a balance of P18,843.85 for unpaid deliveries, and SEACOM brought action to recover said amount plus interest and attorney’s fees. • JII filed an Answer denying the obligation and interposing a counterclaim for damages representing unrealized profits when JII sold to the Farm System Development Corporation (FSDC) twenty one (21) units of Mitsubishi power tillers. In the counterclaim, JII alleged that as a dealer in Capiz, JII contracted to sell in 1977 twenty-four (24) units of Mitsubishi power tillers to a group of farmers to be financed by said corporation, which fact JII allegedly made known to petitioner, but the latter taking advantage of said information and in bad faith, went directly to FSDC and dealt with it and sold twenty one (21) units of said tractors, thereby depriving JII of unrealized profit of eighty-five thousand four hundred fifteen and 61/100 pesos (P85,415.61). ISSUES & ARGUMENTS W/N SEACOM acted in bad faith when it competed with its own dealer as regards the sale of farm machineries to FSDC HOLDING & RATIO DECIDENDI • "Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due and observe honesty and good faith.” • Article 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to provide specifically in statutory law. If mere fault or negligence in one’s acts can make him liable for damages for injury caused thereby, with more reason should abuse

or bad faith make him liable. The absence of good faith is essential to abuse of right. Good faith is an honest intention to abstain from taking any unconscientious advantage of another, even through the forms or technicalities of the law, together with an absence of all information or belief of fact which would render the transaction unconscientious. In business relations, it means good faith as understood by men of affairs. • While Article 19 may have been intended as a mere declaration of principle, the “cardinal law on human conduct” expressed in said article has given rise to certain rules, e.g. that where a person exercises his rights but does so arbitrarily or unjustly or performs his duties in a manner that is not in keeping with honesty and good faith, he opens himself to liability. The elements of an abuse of rights under Article 19 are: (1) there is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. • Clearly, the bad faith of SEACOM was established. By appointing as a dealer of its agricultural equipment, SEACOM recognized the role and undertaking of JII to promote and sell said equipment. Under the dealership agreement, JII was to act as a middleman to sell SEACOM’s products, in its area of operations, i.e. Iloilo and Capiz provinces, to the exclusion of other places, to send its men to Manila for training on repair, servicing and installation of the items to be handled by it, and to comply with other personnel and vehicle requirements intended for the benefit of the dealership After being informed of the demonstrations JII had conducted to promote the sales of SEACOM equipment, including the operations at JII’s expense conducted for five months, and the approval of its facilities (service and parts) by FSDC, SEACOM participated in the bidding for the said equipment at a lower price, placing itself in direct competition with its own dealer. The actuations of SEACOM are tainted by bad faith. • Even if the dealership agreement was amended to make it on a non-exclusive basis, SEACOM may not exercise its right unjustly or in a manner that is not in keeping with honesty or good faith; otherwise it opens itself to liability under the abuse of right rule embodied in Article 19 of the Civil Code above-quoted. This provision, together with the succeeding article on human relation, was intended to embody certain basic principles “that are to be observed for the rightful relationship between human beings and for the stability of the social order.” What is sought to be written into the law is the pervading principle of equity and justice above strict legalism 17

TEST WHEN PRINCIPLE MAY BE INVOLVED GLOBE MACKAY CABLE VS CA Facts: Restituto Tobias, a purchasing agent and administrative assistant to the engineering operations manager, discovered fictitious purchases and other fraudulent transactions, which caused Globe Mackay Cable and Radio Corp loss of several thousands of pesos. He reported it to his immediate superior Eduardo T. Ferraren and to the Executive Vice President and General Manager Herbert Hendry. A day after the report, Hendry told Tobias that he was number one suspect and ordered him one week forced leave. When Tobias returned to work after said leave, Hendry called him a “crook” and a “swindler”, ordered him to take a lie detector test, and to submit specimen of his handwriting, signature and initials for police investigation. Moreover, petitioners hired a private investigator. Private investigation was still incomplete; the lie detector tests yielded negative results; reports from Manila police investigators and from the Metro Manila Police Chief Document Examiner are in favor of Tobias. Petitioners filed with the Fiscal’s Office of Manila a total of six (6) criminal cases against private respondent Tobias, but were dismissed. Tobias received a notice of termination of his employment from petitioners in January 1973, effective December 1972. He sought employment with the Republic Telephone Company (RETELCO); but Hendry wrote a letter to RETELCO stating that Tobias was dismissed by Globe Mackay due to dishonesty. Tobias, then, filed a civil case for damages anchored on alleged unlawful, malicious, oppressive, and abusive acts of petitioners. The Regional Trial Court of Manila, Branch IX, through Judge Manuel T. Reyes rendered judgment in favor of private respondent, ordering petitioners to pay him eighty thousand pesos (P80,000.00) as actual damages, two hundred thousand pesos (P200,000.00) as moral damages, twenty thousand pesos (P20,000.00) as exemplary damages, thirty thousand pesos (P30,000.00) as attorney’s fees, and costs; hence, this petition for review on certiorari.

told Tobias to just confess or else the company would file a hundred more cases against him until he landed in jail; his (Hendry) scornful remarks about Filipinos (“You Filipinos cannot be trusted.”) as well as against Tobias (“crook”, and “swindler”); the writing of a letter to RETELCO stating that Tobias was dismissed by Globe Mackay due to dishonesty; and the filing of six criminal cases by petitioners against private respondent. All these reveal that petitioners are motivated by malicious and unlawful intent to harass, oppress, and cause damage to private respondent. The imputation of guilt without basis and the pattern of harassment during the investigations of Tobias transgress the standards of human conduct set forth in Article 19 of the Civil Code. The Court has already ruled that the right of the employer to dismiss an employee should not be confused with the manner in which the right is exercised and the effects flowing therefrom. If the dismissal is done abusively, then the employer is liable for damages to the employee. Under the circumstances of the instant case, the petitioners clearly failed to exercise in a legitimate manner their right to dismiss Tobias, giving the latter the right to recover damages under Article 19 in relation to Article 21 of the Civil Code. DISPOSITIVE: WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 09055 is AFFIRMED.

Issue: Whether petitioners are liable for damages to private respondent. Held: Yes. The Court, after examining the record and considering certain significant circumstances, finds that all petitioners have indeed abused the right that they invoke, causing damage to private respondent and for which the latter must now be indemnified: when Hendry 18

REQUISITES TO BE LIABLE FOR DAMAGES UNDER THE PRINCIPLE

performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

HEIRS OF PURISIMA NALA VS CABANSAG

The foregoing provision sets the standards which may be observed not only in the exercise of one's rights but also in the performance of one's duties. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But a right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality. A person should be protected only when he acts in the legitimate exercise of his right; that is, when he acts with prudence and in good faith, but not when he acts with negligence or abuse. There is an abuse of right when it is exercised only for the purpose of prejudicing or injuring another. The exercise of a right must be in accordance with the purpose for which it was established, and must not be excessive or unduly harsh; there must be no intention to injure another.

FACTS: Respondent Cabansag filed a Civil Case for damages in October 1991. According to respondent, he bought a 50square meter property from spouses Gomez on July 23, 1990. Said property is part of a 400-square meter lot registered in the name of the Gomez spouses. In October 1991, he received a demand letter from Atty. Del Prado, in behalf of Purisima Nala, asking for the payment of rentals from 1987 to 1991 until he leaves the premises, as said property is owned by Nala, failing which, criminal and civil actions will be filed against him. Another demand letter was sent on May 14, 1991. Because of such demands, respondent suffered damages and was constrained to file the case against Nala and Atty. Del Prado. Atty. Del Prado claimed that he sent the demand letters in good faith and that he was merely acting in behalf of his client, Nala, who disputed respondent's claim of ownership. Nala alleged that said property is part of an 800-square meter property owned by her late husband, Eulogio Duyan, which was subsequently divided into two parts. The 400-square meter property was conveyed to spouses Gomez in a fictitious deed of sale, with the agreement that it will be merely held by them in trust for the Duyan's children. Said property is covered by Transfer Certificate of Title in the name of spouses Gomez. Nala also claimed that respondent is only renting the property which he occupies. After trial, the RTC rendered its Decision in favor of respondent. Nala and Atty. Del Prado appealed to the CA. CA affirmed the RTC Decision with modification. Hence, herein petition by the heirs of Nala. ISSUE: WON the CA erred in awarding damages and attorney's fees without any basis. RULING: YES The Court notes that both the RTC and the CA failed to indicate the particular provision of law under which it held petitioners liable for damages. Nevertheless, based on the allegations in respondent's complaint, it may be gathered that the basis for his claim for damages is Article 19 of the Civil Code, which provides: Art. 19. Every person must, in the exercise of his rights and in the

In order to be liable for damages under the abuse of rights principle, the following requisites must concur: (a) the existence of a legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.11 It should be stressed that malice or bad faith is at the core of Article 19 of the Civil Code. Good faith is presumed, and he who alleges bad faith has the duty to prove the same. Bad faith, on the other hand, does not simply connote bad judgment to simple negligence, dishonest purpose or some moral obloquy and conscious doing of a wrong, or a breach of known duty due to some motives or interest or ill will that partakes of the nature of fraud. Malice connotes ill will or spite and speaks not in response to duty. It implies an intention to do ulterior and unjustifiable harm. In the present case, there is nothing on record which will prove that Nala and her counsel, Atty. Del Prado, acted in bad faith or malice in sending the demand letters to respondent. In the first place, there was ground for Nala's actions since she believed that the property was owned by her husband Eulogio Duyan and that respondent was illegally occupying the same. Respondent failed to show that Nala and Atty. Del Prado's acts were done with the sole intention of prejudicing and injuring him. It may be true that respondent suffered mental anguish, serious anxiety and sleepless nights when 19

he received the demand letters; however, there is a material distinction between damages and injury. Injury is the legal invasion of a legal right while damage is the hurt, loss or harm which results from the injury. Thus, there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. In such cases, the consequences must be borne by the injured person alone; the law affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong. These situations are often called damnum absque injuria. Nala was acting well within her rights when she instructed Atty. Del Prado to send the demand letters. She had to take all the necessary legal steps to enforce her legal/equitable rights over the property occupied by respondent. One who makes use of his own legal right does no injury. Thus, whatever damages are suffered by respondent should be borne solely by him. Nala's acts in protecting her rights over the property find further solid ground in the fact that the property has already been ordered reconveyed to her and her heirs.

Dr. Filart since the latter was talking over the phone and doesn’t want to interrupt her. She asked Mr. Reyes to leave because the celebrant specifically ordered that the party should be intimate consisting only of those who part of the list. She even asked politely with the plaintiff to finish his food then leave the party. During the plaintiff’s cross-examination, he was asked how close Ms. Lim was when she approached him at the buffet table. Mr. Reyes answered “very close because we nearly kissed each other”. Considering the close proximity, it was Ms. Lim’s intention to relay the request only be heard by him. It was Mr. Reyes who made a scene causing everybody to know what happened.

FACTS:

The trial court dismissed the complaint, giving more credence to the testimony of Ms. Lim that she was discreet in asking Mr. Reyes to leave the party. The trial court likewise ruled that Mr. Reyes assumed the risk of being thrown out of the party as he was uninvited. However, the Court of Appeals reversed the ruling of the trial court as it found more commanding of belief the testimony of Mr. Reyes that Ms. Lim ordered him to leave in a loud voice within hearing distance of several guests. CA held petitioner liable for damages to Roberto Reyes aka “AmangBisaya”, an entertainment artist. Hence, this petition.

There are two versions of the story:

ISSUE:

Mr. Reyes: On the eve of October 13, 1994, Mr. Reyes while having coffee at the lobby of Nikko Hotel was approached by Dr. Violet Filart, a friend several years back. According to Mr. Reyes, Dr. Filart invited him to join a birthday party at the penthouse for the hotel’s former General Manager, Mr. Tsuruoka. Plaintiff agreed as Dr. Filart agreed to vouch for him and carried a basket of fruits, the latter’s gift. He lined up at the buffet table as soon as it was ready but to his great shock, shame and embarrassment, Ruby Lim, Hotel’s Executive Secretary, asked him to leave in a loud voice enough to be heard by the people around them. He was asked to leave the party and a Makati policeman accompanied him to step-out the hotel. All these time, Dr.Filart ignored him adding to his shame and humiliation.

Whether or not petitioners acted abusively in asking Mr. Reyes to leave the party.

NIKKO HOTEL MANILA GARDEN VS REYES

Ms. Ruby Lim: She admitted asking Mr. Reyes to leave the party but not in the manner claimed by the plaintiff. Ms. Lim approached several people including Dr. Filart’s sister, Ms. ZenaidaFruto, if Dr. Filart did invite him as the captain waiter told Ms. Lim that Mr. Reyes was with Dr. Filart’s group. She wasn’t able to ask it personally with

RULING: No. Supreme Court held that petitioners did not act abusively in asking Mr. Reyes to leave the party. Plaintiff failed to establish any proof of ill-motive on the part of Ms. Lim who did all the necessary precautions to ensure that Mr. Reyes will not be humiliated in requesting him to leave the party. Art. 19. of the Civil Code states that: “Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith”. When a right is exercised in a manner which does not conform with the norms enshrined in Article and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be responsible. The object of this article, therefore, is to set certain standards which must be observed not only in the exercise of one’s rights but also in the performance of one’s duties. These standards are 20

the following: act with justice, give everyone his due and observe honesty and good faith. Its antithesis, necessarily, is any act evincing bad faith or intent to injure. Its elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. Art. 21. of the Civil Code also states that: “Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage”.Article 2165 refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2) but which is contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to injure. As applied to herein case Mr. Reyes has not shown that Ms. Lim was driven by animosity against him. The manner by which Ms. Lim asked Mr. Reyes to leave was likewise acceptable and humane under the circumstances. Ms. Lim having been in the hotel business for twenty years wherein being polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she acted to the contrary does not inspire belief and is indeed incredible. Thus, the lower court was correct. Considering the closeness of defendant Lim to plaintiff when the request for the latter to leave the party was made such that they nearly kissed each other, the request was meant to be heard by him only and there could have been no intention on her part to cause embarrassment to him. Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he was not invited, cannot be made liable to pay for damages under Articles 19 and 21 of the Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its liability springs from that of its employees.

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FACTORS TO BE CONSIDERED WHETHER A CASE IS A NUISANCE OR HARASSMENT SUIT ANG VS ANG Facts: Sunrise Marketing (Bacolod), Inc. (SMBI) is a duly registered corporation owned by the Ang family.4 Its current stockholders and their respective stockholdings are Juanito, Anecita, Jeannevieve, Roberto, and Rachel  Roberto was elected President of SMBI, while Juanito was elected as its Vice President. Rachel Lu-Ang (Rachel) and Anecita are SMBI’s Corporate Secretary and Treasurer, respectively.  On 31 July 1995, Nancy Ang (Nancy), the sister of Juanito and Roberto, and her husband, Theodore Ang (Theodore), agreed to extend a loan to settle the obligations of SMBI and other corporations owned by the Ang family, specifically Bayshore Aqua Culture Corporation, Oceanside Marine Resources and JR Aqua Venture.6  Nancy and Theodore issued a check in the amount of $1,000,000.00 payable to "Juanito Ang and/or Anecita Ang and/or Roberto Ang and/or Rachel Ang." Nancy was a former stockholder of SMBI, but she no longer appears in SMBI’s General Information Sheets as early as 1996.7  There was no written loan agreement, in view of the close relationship between the parties. Part of the loan was also used to purchase real properties for SMBI, for Juanito, and for Roberto.8  On 22 December 2005, SMBI increased its authorized capital stock to ₱10,000,000.00. The Certificate of Increase of Capital Stock was signed by Juanito, Anecita, Roberto, and Rachel as directors of SMBI.9  Juanito claimed, however, that the increase of SMBI’s capital stock was done in contravention of the Corporation Code.10 According to Juanito, when he and Anecita left for Canada:  Sps. Roberto and Rachel Ang took over the active management of [SMBI].  Through the employment of sugar coated words, they were able to successfully manipulate the stocks sharings between themselves at 50-50 under the condition that the procedures mandated by the Corporation Code on increase of capital stock be strictly observed (valid Board Meeting).

 No such meeting of the Board to increase capital stock materialized. It was more of an accommodation to buy peace  Juanito claimed that payments to Nancy and Theodore (their creditors) ceased sometime after 2006.  On 24 November 2008, Nancy and Theodore, through their counsel here in the Philippines, sent a demand letter to "Spouses Juanito L. Ang/Anecita L. Ang and Spouses Roberto L. Ang/Rachel L. Ang" for payment of the principal amounting to $1,000,000.00 plus interest at ten percent (10%) per annum, for a total of $2,585,577.37 within ten days from receipt of the letter. 12  Roberto and Rachel then sent a letter to Nancy and Theodore’s counsel on 5 January 2009, saying that they are not complying with the demand letter because they have not personally contracted a loan from Nancy and Theodore.  On 8 January 2009, Juanito and Anecita executed a Deed of Acknowledgment and Settlement Agreement (Settlement Agreement) and an Extra-Judicial Real Estate Mortgage (Mortgage). Under the foregoing instruments, Juanito and Anecita admitted that they, together with Roberto and Rachel, obtained a loan from Nancy and Theodore for $1,000,000.00 on 31 July 1995  Robert and Rachel regused to pay their share of the loan  Thereafter, Juanito filed a "Stockholder Derivative Suit with prayer for an ex-parte Writ of Attachment/Receivership" (Complaint) before the RTC Bacolod on 29 January 2009. He alleged that "the intentional and malicious refusal of defendant Sps. Roberto and Rachel Ang to settle their 50% share x x x of the total obligation x x x will definitely affect the financial viability of plaintiff SMBI."14  Juanito also claimed that he has been "illegally excluded from the management and participation in the business of [SMBI through] force, violence and intimidation" and that Rachel and Roberto have seized and carted away SMBI’s records from its office.  Rachel also argued that the Complaint failed to allege that Juanito "exerted all reasonable efforts to exhaust all intra-corporate remedies available under the articles of incorporation, by-laws, laws or rules governing the 22

corporation to obtain the relief he desires," as required by the Interim Rules.  During cross-examination, Juanito admitted that there was no prior demand for accounting or liquidation nor any written objection to SMBI’s increase of capital stock. ISSUES: Whether based on the allegations of the complaint, the nature of the case is one of a derivative suit or not. RULING: Complaint is not a derivative suit.  A derivative suit is an action brought by a stockholder on behalf of the corporation to enforce corporate rights against the corporation’s directors, officers or other insiders.29 Under Sections 2330 and 3631 of the Corporation Code, the directors or officers, as provided under the bylaws,32 have the right to decide whether or not a corporation should sue. Since these directors or officers will never be willing to sue themselves, or impugn their wrongful or fraudulent decisions, stockholders are permitted by law to bring an action in the name of the corporation to hold these directors and officers accountable.33 In derivative suits, the real party ininterest is the corporation, while the stockholder is a mere nominal party  However, it cannot prosper without first complying with the legal requisites for its institution. Section 1, Rule 8 of the Interim Rules imposes the following requirements for derivative suits: 1. The person filing the suit must be a stockholder or member at the time the acts or transactions subject of the action occurred and the time the action was filed; 2. He must have exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires; 3. No appraisal rights are available for the act or acts complained of; and 4. The suit is not a nuisance or harassment suit.  Applying the foregoing, we find that the Complaint is not a derivative suit. The Complaint failed to show how the acts of Rachel and Roberto resulted in any detriment to SMBI.  The CA-Cebu correctly concluded that the loan was not a corporate obligation, but a personal debt of the Ang brothers and their spouses.

 The check was issued to "Juanito Ang and/or Anecita Ang and/or Roberto Ang and/or Rachel Ang" and not SMBI. The proceeds of the loan were used for payment of the obligations of the other corporations owned by the Angs as well as the purchase of real properties for the Ang brothers.  SMBI was never a party to the Settlement Agreement or the Mortgage. It was never named as a co-debtor or guarantor of the loan. Both instruments were executed by Juanito and Anecita in their personal capacity, and not in their capacity as directors or officers of SMBI. Thus, SMBI is under no legal obligation to satisfy the obligation.  Since damage to the corporation was not sufficiently proven by Juanito, the Complaint cannot be considered a bona fide derivative suit. A derivative suit is one that seeks redress for injury to the corporation, and not the stockholder. No such injury was proven in this case.  The Complaint also failed to allege that all available corporate remedies under the articles of incorporation, bylaws, laws or rules governing the corporation were exhausted, as required under the Interim Rules. o x x x No written demand was ever made for the board of directors to address private respondent Juanito Ang’s concerns.1âwphi1  The fact that [SMBI] is a family corporation does not exempt private respondent Juanito Ang from complying with the Interim Rules. In the x x x Yu case, the Supreme Court held that a family corporation is not exempt from complying with the clear requirements and formalities of the rules for filing a derivative suit. There is nothing in the pertinent laws or rules which state that there is a distinction between x x x family corporations x x x and other types of corporations in the institution by a stockholder of a derivative suit.38  The CA-Cebu correctly ruled that the Complaint should be dismissed since it is a nuisance or harassment suit under Section 1(b) of the Interim Rules. Section 1(b) thereof provides: b) Prohibition against nuisance and harassment suits. - Nuisance and harassment suits are prohibited. In determining whether a suit is a nuisance or harassment suit, the court shall consider, among others, the following: (1) The extent of the shareholding or interest of the initiating stockholder or member; 23

(2) Subject matter of the suit; (3) Legal and factual basis of the complaint; (4) Availability of appraisal rights for the act or acts complained of; and (5) Prejudice or damage to the corporation, partnership, or association in relation to the relief sought.  In case of nuisance or harassment suits, the court may, motu proprio or upon motion, forthwith dismiss the case.

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OTHER ILLUSTRATIVE CASES ROQUE JR VS TORRES (full) Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Decision1 of the Court of Appeals in CA-G.R. CV No. 55895, dated 21 March 2003, which reversed and set aside the Judgment2 of the Regional Trial Court (RTC) of Quezon City, Branch 104, in Civil Case No. Q-93-14408, dated 8 April 1997, ordering respondent to pay petitioner damages in the total amount of P1,600,000.00 and attorney’s fees. The instant case sprang from an action for damages filed by the original petitioner, the late Jose Roque, Jr., against respondent, the recently deceased Jaime Torres, for injuries sustained by petitioner on 27 August 1989, allegedly inflicted by the security guards employed by respondent. In this petition, the deceased petitioner Jose Roque, Jr. is substituted by his wife Norma Roque while respondent Jaime T. Torres, per agreement of all his heirs, is herein represented by his son James Kenley M. Torres. Petitioner was the administrator of certain parcels of land in Upper Boso-Boso, Antipolo, Rizal, particularly Lots No. 13259 and 13260 covered by Original Certificates of Titles (OCTs) No. NP-419 and NP-422, both registered in the name of his son Rafael Roque. Sometime before the incident, respondent, claiming to be the owner of said property, hired security guards from Anchor Security and Detective Agency, namely Cesar Aquino, Alfredo Negro, and Mariano Cabos, who allegedly barred petitioner from entering the property and threatened him with physical harm should he attempt to tend the said land. As a result, petitioner filed a case for grave threats against said security guards before the Municipal Trial Court (MTC) of Rizal. Prior to the incident, or on 9 September 1988, respondent instituted an Action3 for cancellation of OCTs No. NP-419 and NP-422 in the name of petitioner’s son Rafael Roque before the RTC of Antipolo which was dismissed by the trial court in an Order4 dated 26 June 1989. According to the court a quo, therein petitioner Torres’ action was premature for failure to exhaust administrative remedies in the Bureau of Lands, consistent with the established doctrine that where a party seeks for the cancellation of a Free Patent, he must pursue his action in the proper agency and a review by the court will not be permitted unless administrative remedies have been exhausted. The trial court also declared that the said action was in effect an action for reversion under Section 101 of the Public Land Act, thus, the action should be in the name of the government and not the private complainants. Respondent appealed the dismissal before the Court of Appeals, which later affirmed the decision of the lower court in a Decision5 dated 11 June 1990. Respondent’s appeal to this Court was also dismissed in a Resolution dated 11 February 1991.

Petitioner maintained that at around four o’clock in the afternoon of 27 August 1989, he, together with his housemaid Leilyn Saplot Kandt, Magno Imperial, Jose Imperial, and Eliseo Pesito, visited the said property and was surprised to see seven security guards, including the above-mentioned security guards, guarding the property upon orders of respondent. Aquino, Negro, and Cabos approached petitioner and asked: "Bakit wala ka noong arraignment sa Antipolo noong August 16, 1989?"6 to which he replied that his presence was not necessary since he was not the accused. Thereafter, the said security guards asked him to leave the property and uttered: "Bakit mo kami kinakalaban? Utos ni Torres na ito’y bantayan pagkat ito’y kanyang property raw!." Petitioner showed his son’s titles to the property but the security guards merely answered: "Fake ‘yan at hindi kayo maaaring pumasok dito. Kayo ay dapat paalisin." A security guard then cocked his shotgun and warned petitioner to leave the place. Petitioner offered to settle the dispute in the office of Anchor Security Agency, through its manager, Mrs. Nassam, but the security guards merely replied: "Wala kaming pakialam kay Nassam. Lahat ginagawa dito, lahat ay utos ni Torres. At ‘yan ay sinusunod naming dahil si Torres ang bumubuhay sa amin." When petitioner refused to leave the premises, Cabos threatened petitioner that should he stay inside, Cabos would shoot him, so petitioner immediately left the place. However, Cabos still fired at him but missed. Petitioner ran fast to his makeshift hut where Cabos followed him. Petitioner ran to the back of his makeshift hut and was shot again by Cabos, hitting petitioner on the back. When petitioner fell, he turned and saw Cabos and Negro shooting at him. At the same time, Aquino was also firing at the makeshift hut. After a while, the other security guards, namely Sulla, Betasulo, and Romy Mendoza, came, and together with Cabos and Negro, mauled and kicked petitioner all over his body until he lost consciousness. As a result of the incident, petitioner was hospitalized and placed under continuous treatment and medication. Due to the multiple gunshot wounds, hematoma, and contusions sustained by petitioner, his left eye became 90 to 95% blind and his body was paralyzed from the bustline down. Consequently, petitioner filed a criminal case7 for frustrated murder before the RTC of Antipolo against the security guards. Eventually, after suffering for more than nine years, petitioner died. On his part, respondent admits the existence of the titles in the name of Rafael Roque but denies the latter’s ownership over the property. He further admits the dismissal of his case for cancellation of Roque’s titles based on a technical ground. Respondent likewise admits to the posting of the security guards on the property to guard the same from any intruder but denies that they were his personal security guards, and moreover claimed that they were security guards of the Antipolo Landowners and Farmers Association, Inc. (ALFAI), of which he was president. Respondent further asserts that being the President of ALFAI, his instruction to the security

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guards was to prevent squatters or intruders from entering the property and to make use of reasonable force to repel aggression in the event of any untoward incident. After trial, the lower court, on 8 April 1997, rendered judgment in favor of petitioner. According to the court a quo: After a thorough examination of the evidence presented by both parties, the Court is faced with the issue of: "Whether or not defendant Torres can be held liable for damages to herein plaintiff as a result of the injuries inflicted by the security guards deployed in the property in question on August 28, 1989 [sic]. There is no question that the security guards involved in the shooting incident on August 28, 1989 [sic] were employed of [sic] Anchor Security and Detective Agency. There is also no question that the same security guards were hired by defendant Torres to man and guard the property in question in Boso-Boso, Antipolo, Rizal. In this simple scenario and in the event that said security guards caused wrong to others while in their tour of duty, the law provides that the liability falls on the employer being the principal. On the contrary, for illegal or harmful acts committed by the security guards as [sic] per order of the client or the one who hired them, liability attaches to the latter. In the instant case, the unlawful act committed by the security guards against the plaintiff is within the strict compliance of the instruction of the defendant. This is because of the fact that defendant Torres exercised direct supervision of the said security guards. As a matter of fact, he provided the guards with his school bus to perform their duties effectively. Hence, defendant Torres is liable for the unlawful acts committed by the said security guards against herein plaintiff. Such unlawful acts would not have been accomplished had defendant Torres being their "employer" at that time, not instructed them so. What resulted to the shooting of the plaintiff by the security guards cannot be given justice except by indemnifying him. And considering that plaintiff suffered paralization of his body and blindness in his left eye, notwithstanding the fact of incurring the amount of P300,000.00 as hospitalization and medical expenses plus the continuous medication up to the present, the Court believes that the plaintiff should be compensated. (Emphasis ours.) WHEREFORE, judgment is hereby rendered in favor of the plaintiff as against defendant Torres and the latter is ordered to pay the plaintiff the following: a) the amount of P300,000.00 as actual damages;

aggressive acts until the commission thereof, and that said security guards acted upon their own judgment. Respondent claimed that petitioner was an intruder and squatter on the property who entered it without permission from members of the ALFAI, the real owners of the said property. Thus, respondent argued that petitioner forcibly entered the property and that the security guards merely repelled the unlawful aggression. Subsequently, the appellate court reversed the RTC judgment and rendered a Decision, the pertinent portions of which read: It is appellee’s contention that appellant as employer of the said security guards is liable for the injuries inflicted by the latter who acted under his instructions to guard the subject premises. Verily, the obligation imposed under Article 2176 of the Civil Code is demandable not only for one’s own acts or omissions but also for those persons for whom, one is responsible. The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in exercise of their duties and/or functions. Relevantly, Article 2180 of the Civil Code provides that: Art. 2180. The obligation imposed by article 2176 is not demandable not only for one’s own acts or omissions, but also for those persons for whom one is responsible. xxxx 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 occasion of their functions. Under the facts obtaining, the above provision of law does not apply. The court a quo succinctly declared: "There is no question that the security guards involved in the shooting incident on August 28, 1989 were employed (sic) of Anchor Security Detective Agency. There is also no question that the same security guards were hired by defendant Torres to man and guard the property in question in Boso-Boso, Antipolo, Rizal. xxxx There is no question therefore that the said security guards who inflicted the injuries sustained by the appellee were not employees of herein appellant. This being so, the ruling in the case of Soliman, Jr. vs. Tuazon applies, viz:

b) the amount of P1,000,000.00 as moral damages; c) the amount of P300,000.00 as exemplary damages; and d) the amount of P50,000.00 as attorney’s fee.8 Aggrieved by the above judgment, respondent lodged an appeal before the Court of Appeals. According to respondent, he did not know that the security guards would commit the alleged

It is settled that where the security agency, as here recruits, hires and assigns the work of its watchmen or security guards, the agency is the employer of such security guards or watchmen. Liability for illegal or harmful acts committed by the security guards attaches to the employer agency, and not to the clients or customers of such agency.

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At any rate, the appellant cannot be held liable under Art. 33 of the Civil Code as no evidence whatsoever, was adduced to show his participation in the commission of the acts complained of. Neither was appellee able to prove that appellant can be held liable in the alternative under Article 2176 in relation to Article 2180 of the Civil Code. xxxx WHEREFORE, the assailed decision is hereby REVERSED and SET ASIDE and the complaint as well as the counterclaim filed before the court a quo is DISMISSED.9 With the reversal of the trial court judgment, petitioner filed the instant appeal, raising the following issues: I. Whether or not the Court of Appeals committed grave and reversible error in ruling that petitioner failed to prove by mere preponderance of evidence that respondent Torres was involved in any malevolent designs on petitioner; II. Whether or not the Court of Appeals committed grave and reversible error in ruling that Article 2180 in relation to Article 2176 of the Civil Code is not applicable to the case at bar; and III. Whether or not the Court of Appeals committed grave and reversible error in applying the case of Soliman, Jr. v. Tuazon to the case at bar. We agree with the Court of Appeals’ finding that respondent cannot be held liable under Article 2180 of the Civil Code for the damages suffered by petitioner because respondent is not the employer of the security guards who inflicted the injuries upon the person of the petitioner. As reiterated in the recent case of Mercury Drug Corporation v. Libunao:[10] In Soliman, Jr. v. Tuazon, we held that where the security agency recruits, hires and assigns the works of its watchmen or security guards to a client, the employer of such guards or watchmen is such agency, and not the client, since the latter has no hand in selecting the security guards. Thus, the duty to observe the diligence of a good father of a family cannot be demanded from the said client: x x x [I]t is settled in our jurisdiction that where the security agency, as here, recruits, hires and assigns the work of its watchmen or security guards, the agency is the employer of such guards or watchmen. Liability for illegal or harmful acts committed by the security guards attaches to the employer agency, and not to the clients or customers of such agency. As a general rule, a client or customer of a security agency has no hand in selecting who among the pool of security guards or watchmen employed by the agency shall be assigned to it; the duty to observe the diligence of a good father of a family in the selection of the guards cannot, in the ordinary course of events, be demanded from the client whose premises or property are protected by the security guards.

x x x [T]he fact that a client company may give instructions or directions to the security guards assigned to it, does not, by itself, render the client responsible as an employer of the security guards concerned and liable for their wrongful acts or omissions.11 This conclusion, however, does not necessarily preclude this Court from holding respondent liable under the law for damages resulting from the injuries inflicted on petitioner by the unlawful acts of the security guards. As stressed by petitioner in his Memorandum: Assuming arguendo that the security guards are not respondent’s employees, the same does not constitute a valid defense at all. Article 2176 of the Civil Code provides that a person who, by act or omission, causes damage to another through fault or negligence may be held liable in damages. By making it appear that he owns the disputed properties, putting security guards thereat to inti[mi]date, harass or cause the rightful owner and his representatives and by providing the escape vehicle, more than sufficient evidence was established on the civil liability of private respondent under Article 2176 of the Civil Code of the Philippines. It must be emphasized that private respondent committed all these overt acts despite an earlier Decision by the Regional Trial Court of Antipolo, Branch 71, affirming Rafael Roque’s ownership of the properties and dismissing the case he (private respondent) filed for the cancellation of NP-419 and NP-422 in Rafael Roque’s name. Had he not misrepresented to the security guards that he owns the properties and had he not hired these security guards/common thugs to secure the premises which he does not own, then the untoward incident would not have happened. To allow private respondent to escape liability, despite his misdeeds, will not only result in grave injustice to Jose Roque, Jr. who eventually died after having been paralyzed for several years as a result of [the] incident but will likewise result in the implied tolerance by this Honorable Court of private respondent’s disobedience or disrespect of a lawful order/decision of the trial court (RTC Branch 71, Antipolo) which he failed or refused to honor.12 (Emphasis ours.) Article 2176 of the Civil Code states that "whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done." In the case at bar, respondent cannot feign ignorance of the fact that at the time of the shooting incident, the titles to the disputed property were already registered in the name of petitioner’s son, the cancellation for title case filed by respondent having been dismissed. In fact, during trial, the offer for stipulation of petitioner’s counsel that at the time of the shooting incident, there is a valid and existing title in the name of petitioner’s son which was never cancelled by the court, was accepted by the respondent. Therefore, by hiring the security guards to prevent entry, possibly even by the registered owner, to the subject property, titles to which he fully knew he did not possess,

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respondent blatantly acted in bad faith. Respondent’s unwarranted act of posting security guards within the property, which he clearly knew is registered in the name of another, unduly placed petitioner at harm and deprived him of his right to fully exercise his privileges and duties as administrator of said property. Respondent, by his grossly faulty acts, paved the way to the infliction of injuries by the security guards on petitioner. Furthermore, respondent’s palpable display of bad faith in claiming a superior right to the property over petitioner’s son entitles petitioner to damages resulting therefrom. In order that a plaintiff may maintain an action for the injuries which he sustained, he must establish that such injuries resulted from a breach of duty which the defendant owed to the plaintiff – a concurrence of injury to the plaintiff and legal responsibility by the person causing it.13 In other words, in order that the law will give redress for an act causing damage, the act must be not only hurtful, but wrongful.14 In the case at bar, it is clear that respondent violated the principle embodied in Article 19 of the Civil Code which mandates that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." When a right is exercised in a manner which discards these norms resulting in damage to another, a legal wrong is committed for which the actor can be held accountable.15 As we have stated in a previous case, if mere fault or negligence in one’s acts can make him liable for damages for injury caused thereby, with more reason should abuse or bad faith make him liable. 16 With respect to the award of damages, we sustain the ruling of the trial court. It is essential in the award of damages that the claimant must have satisfactorily proven during the trial the existence of the factual basis of the damages and its causal connection to defendant’s acts.17 During trial, petitioner, through his own testimony and that of his wife, was able to establish that they have incurred actual damages in the amount of P300,000.00 for the hospitalization of petitioner as a result of the shooting and the mauling incident, thus, the award of actual damages in said amount is proper. As regards the award of moral damages, we have ruled that there is no hard and fast rule in the determination of what would be a fair amount of moral damages, since each case must be governed by its own peculiar circumstances.18 As reflected in the records of the instant case, there is no gainsaying the fact that petitioner, together with his family, had suffered physical suffering, mental anguish, fright, serious anxiety and moral shock resulting from respondent’s acts which caused petitioner grave physical injuries eventually leading to his death. The several years of torment and agonizing on the part of the deceased petitioner and his family more than justifiy the award of moral damages. It must be emphasized that moral damages are not intended to enrich the complainant at the expense of a defendant.19 They are awarded only to enable the injured parties

to obtain means, diversions or amusements that will serve to alleviate the moral sufferings the injured parties have undergone by reason of defendant’s culpable action.20 In other words, the award of moral damages is aimed at a restoration within the limits of the possible, of the spiritual status quo ante; and therefore it must be proportionate to the suffering inflicted.21Therefore, in light of the sufferings sustained by petitioner and his family, we are inclined to sustain the award of P1,000,000.00 as moral damages. As to exemplary damages, Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. While exemplary damages cannot be recovered as a matter of right, they need not be proved, although plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded.22 In the case at bar, having determined that petitioner is entitled to the award of actual and moral damages as a result of the wanton act of respondent in stationing security guards in the property, the title of which is under the name of petitioner’s son, said act ultimately resulting in the paralysis and blindness of petitioner, we find the award of exemplary damages to be proper by way of correction for the public good of respondent’s flagrant display of bad faith. WHEREFORE, premises considered, the Petition for Review is hereby GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 55895 is hereby REVERSED and SET ASIDE. The Judgment of the Regional Trial Court of Quezon City, Branch 104, in Civil Case No. Q-93-14408 ordering respondent Torres to pay petitioner Roque the amount of P300,000.00 as actual damages; the amount of P1,000,000.00 as moral damages; the amount of P300,000.00 as exemplary damages; and the amount of P50,000.00 as attorney’s fee is hereby REINSTATED.

UNIVERSITY OF THE EAST VS JADER FACTS: Plaintiff was enrolled in the defendants’ College of Law from 1984 up to 1988. In the first semester of his last year (School year 1987-1988), he failed to take the regular final examination in Practice Court I for which he was given an incomplete grade . He enrolled for the second semester as fourth year law student and on February 1, 1988 he filed an application for the removal of the incomplete grade given him by Professor Carlos Ortega which was approved by Dean Celedonio Tiongson after payment of the required fee. He took the examination on 28

March 28, 1988. On May 30, 1988, Professor Carlos Ortega submitted his grade. It was a grade of five (5). The 35th Investitures & Commencement Ceremonies for the candidates of Bachelor of Laws was scheduled on the 16th of April 1988, and in the invitation for that occasion the name of the plaintiff appeared as one of the candidates. At the foot of the list of the names of the candidates there is an annotation stating that the same is a tentative list. The plaintiff attended the investiture ceremonies and he was thereafter handed by Dean Celedonio a rolled white sheet of paper symbolical of the Law Diploma. He tendered a blow-out that evening which was attended by neighbors, friends and relatives who wished him good luck in the forthcoming bar examination. He thereafter prepared himself for the bar examination. He took a leave of absencewithout pay from his job from April 20, 1988 to September 30, 1988 and enrolled at the pre-bar review class in Far Eastern University . Having learned of the deficiency he dropped his review class and was not able to take the bar examination. Consequently, respondent sued petitioner for damages alleging that he suffered moral shock, mental anguish, serious anxiety, besmirched reputation, wounded feelings and sleepless nights when he was not able to take the 1988 bar examinations arising from the latter’s negligence. He prayed for an award of moral and exemplary damages, unrealized income, attorney’s fees, and costs of suit. RTC’s Decision: WHEREFORE, in view of the foregoing judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter to pay plaintiff the sum of THIRTY FIVE THOUSAND FOUR HUNDRED SEVENTY PESOS (P35,470.00) with legal rate of interest from the filing of the complaint until fully paid, the amount of FIVE THOUSAND PESOS (P5,000.00) as attorney’s fees and the cost of suit. CA’s Decision: WHEREFORE, in the light of the foregoing, the lower Court’s Decision is hereby AFFIRMED with the MODIFICATION that defendant-appellee, in addition to the sum adjudged by the lower court in favor of plaintiffappellant, is also ORDERED to pay plaintiff-appellant the amount of FIFTY THOUSAND (P50,000.00) PESOS for moral damages. Costs against defendant-appellee.

ISSUE: Whether or not UE has liability to Romeo Jader, considering that the proximate and immediate cause of the alleged damages incurred by the latter arose out of his own negligence in not verifying from the professor concerned the result of his removal exam. RULING: Petitioner, in belatedly informing respondent of the result of the removal examination, particularly at a time when he had already commenced preparing for the bar exams, cannot be said to have acted in good faith. Article 19 was intended to expand the concept of torts by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to provide specifically in statutory law. Schools and professors cannot just take students for granted and be indifferent to them, for without the latter, the former are useless. Petitioner’s liability arose from its failure to promptly inform respondent of the result of an examination and in misleading the latter into believing that he had satisfied all requirements for the course. “It is apparent from the testimony of Dean Tiongson that defendant-appellee University had been informed during the deliberation that the professor in Practice Court I gave plaintiff-appellant a failing grade. Yet, defendantappellee still did not inform plaintiff-appellant of his failure to complete the requirements for the degree nor did they remove his name from the tentative list of candidates for graduation. Worse, defendant-appellee university, despite the knowledge that plaintiff-appellant failed in Practice Court I, again included plaintiffappellant’s name in the “tentative” list of candidates for graduation which was prepared after the deliberation and which became the basis for the commencement rites program. Dean Tiongson reasons out that plaintiffappellant’s name was allowed to remain in the tentative list of candidates for graduation in the hope that the latter would still be able to remedy the situation in the remaining few days before graduation day. Dean Tiongson, however, did not explain how plaintiffappellant Jader could have done something to complete his deficiency if defendant-appellee university did not exert any effort to inform plaintiff-appellant of his failing grade in Practice Court I. However, while petitioner was guilty of negligence and thus liable to respondent for the latter’s actual damages, we hold that respondent should not have 29

been awardedmoral damages. We do not agree with the Court of Appeals’ findings that respondent suffered shock, trauma and pain when he was informed that he could not graduate and will not be allowed to take the bar examinations. At the very least, it behooved on respondent to verify for himself whether he has completed all necessary requirements to be eligible for the bar examinations. As a senior law student, respondent should have been responsible enough to ensure that all his affairs, specifically those pertaining to his academic achievement, are in order. Given these considerations, we fail to see how respondent could have suffered untold embarrassment in attending the graduation rites, enrolling in the bar review classes and not being able to take the bar exams. If respondent was indeed humiliated by his failure to take the bar, he brought this upon himself by not verifying if he has satisfied all the requirements including his school records, before preparing himself for the bar examination. Certainly, taking the bar examinations does not only entail a mental preparation on the subjects thereof; there are also prerequisites of documentation and submission of requirements which the prospective examinee must meet. WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner is ORDERED to PAY respondent the sum of Thirty-five Thousand Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per annum computed from the date of filing of the complaint until fully paid; the amount of Five Thousand Pesos (P5,000.00) as attorney’s fees; and the costs of the suit. The award of moral damages is DELETED.

ToR with the UST Registrars Office, paid the required fees, but was only given a Certificate of Graduation by the Registrar. Despite repeated attempts by the respondent to secure a copy of his ToR, and submission of his class cards as proof of his enrolment, UST refused to release his records, making it impossible for him to take the nursing board examinations, and depriving him of the opportunity to make a living. The respondent prayed that the RTC order UST to release his ToR and hold UST liable for actual, moral, and exemplary damages, attorneys fees, and the costs of suit. Petitioners filed a Motion to Dismiss where they claimed that they refused to release respondents ToR because he was not a registered student, since he had not been enrolled in the university for the last three semesters. They claimed that the respondents graduation, attendance in classes, and taking/passing of examinations were immaterial because he ceased to be a student when he failed to enroll during the second semester of school year 2000-2001. Petitioners then filed a Supplement to their Motion to Dismiss, alleging that respondent sought administrative recourse before the Commission on Higher Education (CHED) through a letter-complaint. Petitioners claimed that the CHED had primary jurisdiction to resolve matters pertaining to school controversies.

Issues: 1) The CHED exercises quasi-judicial power over controversies involving school matters and has primary jurisdiction over respondents demand for the release of his ToR. Thus, respondent failed to exhaust administrative remedies;

UNIVERSITY OF SANTO TOMAS VS SANCHEZ FACTS: A Complaint for Damages filed by respondent Danes B. Sanchez (respondent) against the University of Santo Tomas (UST) and its Board of Directors, the Dean and the Assistant Dean of the UST College of Nursing, and the University Registrar for their alleged unjustified refusal to release the respondents Transcript of Records (ToR). In his Complaint, respondent alleged that he graduated from UST on April 2, 2002 with a Bachelors Degree of Science in Nursing. He was included in the list of candidates for graduation and attended graduation ceremonies. Respondent sought to secure a copy of his

2) Since respondent sought recourse with both the CHED and the RTC, respondent violated the rule against forum-shopping; and 3) The Complaint failed to state a cause of action, since respondent admitted that he was not enrolled in UST in the last three semesters prior to graduation.

Held: 1. 1. The doctrine of exhaustion of administrative remedies requires that where a remedy before an administrative agency is provided, the administrative 30

agency concerned must be given the opportunity to decide a matter within its jurisdiction before an action is brought before the courts. Failure to exhaust administrative remedies is a ground for dismissal of the action. In this case, the doctrine does not apply because petitioners failed to demonstrate that recourse to the CHED is mandatory or even possible in an action such as that brought by the respondent, which is essentially one for mandamus and damages. The doctrine of exhaustion of administrative remedies admits of numerous exceptions, one of which is where the issues are purely legal and well within the jurisdiction of the trial court, as in the present case. Petitioners liability if any for damages will have to be decided by the courts, since any judgment inevitably calls for the application and the interpretation of the Civil Code. As such, exhaustion of administrative remedies may be dispensed with. The Supreme Court held in Regino v. Pangasinan Colleges of Science and Technology x x x exhaustion of administrative remedies is applicable when there is competence on the part of the administrative body to act upon the matter complained of .Administrative agencies are not courts; x x x neither [are they] part of the judicial system, [or] deemed judicial tribunals. Specifically, the CHED does not have the power to award damages. Hence, petitioner could not have commenced her case before the Commission. In addition, the rule on primary jurisdiction applies only where the administrative agency exercises quasi-judicial or adjudicatory functions. Thus, an essential requisite for this doctrine to apply is the actual existence of quasijudicial power. However, petitioners have not shown that the CHED possesses any such power to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions. Indeed, Section 8 of Republic Act No. 7722 otherwise known as the Higher Education Act of 1994, certainly does not contain any express grant to the CHED of judicial or quasi-judicial power. 2. 2. Forum shopping exists when, as a result of an ad verse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another, or when he institutes two or more actions or proceedings grounded on the same cause, on the gamble that one or the other court would make a favorable disposition. Here, there can be no forum shopping precisely because the CHED is without quasi-judicial power, and cannot make

any disposition of the case whether favorable or otherwise. 3.3. Under Rule 16, Section 1(g) of the Rules of Court, a motion to dismiss may be made on the ground that the pleading asserting the claim states no cause of action. To clarify the essential test required to sustain dismissal on this ground, we have explained that the test of the sufficiency of the facts found in a petition, to constitute a cause of action, is whether admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of the petition. Stated otherwise, a complaint is said to assert a sufficient cause of action if, admitting what appears solely on its face to be correct, the plaintiff would be entitled to the relief prayed for. The Complaint makes the following essential allegations: that petitioners unjustifiably refused to release respondents ToR despite his having obtained a degree from UST; that petitioners claim that respondent was not officially enrolled is untrue; that as a result of petitioners unlawful actions, respondent has not been able to take the nursing board exams since 2002; that petitioners actions violated Articles 19-21 of the Civil Code; and that petitioners should be ordered to release respondents ToR and held liable for P400,000.00 as moral damages,P50,000.00 as exemplary damages, P50,000.00 as attorneys fees and costs of suit, and P15,000.00 as actual damages. Clearly, assuming that the facts alleged in the Complaint are true, the RTC would be able to render a valid judgment in accordance with the prayer in the Complaint.

VILLANUEVA VS ROSQUETA FACTS: Respondent Emma M. Rosqueta (Rosqueta), formerly Deputy Commissioner of the Revenue Collection and Monitoring Group of the Bureau of Customs (the Bureau), tendered her courtesy resignation from that post on January 23, 2001, shortly after President Gloria Macapagal-Arroyo assumed office. But five months later on June 5, 2001, she withdrew her resignation, claiming that she enjoyed security of tenure and that she had resigned against her will on orders of her superior. Meantime, on July 13, 2001 President Arroyo appointed Gil Valera (Valera) to respondent Rosqueta’s position. Challenging such appointment, 31

Rosqueta filed a petition for prohibition, quo warranto, and injunction against petitioner Titus B. Villanueva (Villanueva), then Commissioner of Customs, the Secretary of Finance, and Valera with the Regional Trial Court (RTC) of Manila in Civil Case 01-101539. On August 27, 2001 the RTC issued a temporary restraining order (TRO), enjoining Villanueva and the Finance Secretary from implementing Valera’s appointment. On August 28, 2001 the trial court superseded the TRO with a writ of preliminary injunction. On November 22, 2001 while the preliminary injunction in the quo warranto case was again in force, petitioner Villanueva issued Customs Memorandum Order 40-2001, authorizing Valera to exercise the powers and functions of the Deputy Commissioner. During the Bureau’s celebration of its centennial anniversary in February 2002, its special Panorama magazine edition featured all the customs deputy commissioners, except respondent Rosqueta. The souvenir program, authorized by the Bureau’s Steering Committee headed by petitioner Villanueva to be issued on the occasion, had a space where Rosqueta’s picture was supposed to be but it instead stated that her position was “under litigation.” Meanwhile, the commemorative billboarddisplayed at the Bureau’s main gate included Valera’s picture but not Rosqueta’s. On February 28, 2002 respondent Rosqueta filed a complaint for damages before the RTC of Quezon City against petitioner Villanueva in Civil Case Q-02-46256, alleging that the latter maliciously excluded her from the centennial anniversary memorabilia. Further, she claimed that he prevented her from performing her duties as Deputy Commissioner, withheld her salaries, and refused to act on her leave applications. Thus, she asked the RTC to award her P1,000,000.00 in moral damages, P500,000.00 in exemplary damages, and P300,000.00 in attorney’s fees and costs of suit. RTC dismissed the case. CA reversed granting Villanueva to pay P500,000.00 in moral damages, P200,000.00 in exemplary damages and P100,000.00 in attorney’s fees and litigation expenses. ISSUE: Whether or not the CA erred in holding petitioner Villanueva liable in damages to respondent Rosqueta for ignoring the preliminary injunction order that the RTC issued in the quo warranto case, thus denying her of the

right to do her job as Deputy Commissioner of the Bureau and to be officially recognized as such public officer. RULING: Petitioner Villanueva cannot seek shelter in the alleged advice that the OSG gave him. Surely, a government official of his rank must know that a preliminary injunction order issued by a court of law had to be obeyed, especially since the question of Valera’s right to replace respondent Rosqueta had not yet been properly resolved. That petitioner Villanueva ignored the injunction shows bad faith and intent to spite Rosqueta who remained in the eyes of the law the Deputy Commissioner. His exclusion of her from the centennial anniversary memorabilia was not an honest mistake by any reckoning. Indeed, he withheld her salary and prevented her from assuming the duties of the position. The CA correctly awarded moral damages to respondent Rosqueta. Here, respondent Rosqueta’s colleagues and friends testified that she suffered severe anxiety on account of the speculation over her employment status. She had to endure being referred to as a “squatter” in her workplace. She had to face inquiries from family and friends about her exclusion from the Bureau’s centennialanniversary memorabilia. She did not have to endure all these affronts and the angstand depression they produced had Villanueva abided in good faith by the court’s order in her favor. Clearly, she is entitled to moral damages. The Court, however, finds the award of P500,000.00 excessive. As it held in Philippine Commercial International Bank v. Alejandro,[18] moral damages are not a bonanza. They are given to ease the defendant’s grief and suffering. Moral damages should reasonably approximate the extent of hurt caused and the gravity of the wrong done. Here, that would be P200,000.00. The Court affirms the grant of exemplary damages by way of example or correctionfor the public good but, in line with the same reasoning, reduces it to P50,000.00. Finally, the Court affirms the award of attorney’s fees and litigation expenses but reduces it to P50,000.00.

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MWSS VS ACT THEATER INC FACTS On September 28, 1988, four employees of ACT were apprehended by the Quezon City police for allegedly tamperng a water meter in violation of P.D. No 401, as amended by B.P. Blg 876, and were subsequently criminally charged before the Regional Trial Court of Quezon City, Branch 77. At mignight of the day following the said apprehension, the MWSS disconnected ACT's water supply on account of the meter tampering incident. ACT subsequently filed a civil case against MWSS before the same court on the ground that the water supply provider acted “arbitrarily, whimsically and capricuously” in cutting off the respondent's water service connection without prior notice, adversely affecting the health and sanitation of the theater company's patrons and in surrounding premises.

court, however, erroneously typed P500,000 as attorney's fees when the same should only be P5,000. Thus, MWSS elevated the case to the Supreme Court by filing a petition for review on certiorari seeking to reverse the CA decision affiriming the civil aspect of the RTC ruling. ISSUES: (1) Whether or not the Court of Appeals validly affirmed the RTC decision (2) Whether or not the Court of Appeals validly upheld the award of attorney's fees (3) Whether or not the Court of Appeals correctly applied the provision of Article 19 of the New Civil Court without considering the applicable provision of Article 429 of the same code

HELD The two cases were jointly tried in the same RTC. After due trial, the four employees were acquitted in the criminal case for failure of the prosecution to prove guilt of the accused beyond reasonable doubt. In the civil case, the RTC again ruled in favor of ACT, ordering MWSS to pay the theater company P25,000 for compensatory damages and to return P200,000 earlier deposited by ACT for the restoration of its water services following its disconnection. The RTC also ordered MWSS to pay costs of suit and to pay ACT P5,000 as attorney's fees. Aggrieved, MWSS appealed the civil aspect of the aforementioned decision to the Court of Appeals. In justifying its act of disconnecting the water supply, MWSS relied upon Article 429 of the Civil Code, which provides that “(t)he owner or lawful possessor of a thing has the right to exclude any person from the enjoyment and disposal thereof. For this purpose, he may use such force as may be reasonable to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property.” The appelate court, however, dismissed the appeal, justifying the award of damages, citing Article 19 of the Civil Code which states that “(e)very person must, in the exercise of his rights x x x act with justice, give everyone his due, and observe honesty and good faith.'' In quoting the decretal portion of the RTC decision, the appelate

(1) There is no reason to deviate from the uniform findings of the RTC and the appellate court and that the petitioner's act of disconnecting the water supply was arbitrary, injurious and prejudicial to the respondent pursuant to Article 19 of the Civil Code (2) The amount of P500,000 as attorney's fees in the assailed CA decision was obviously a typographical error but it is nevertheless reasonable and warranted as attorney's fees may be awarded when a party is compelled to litigate or incur expenses to protect his interest by reason of an unjustified act of the other party (3) Concededly, MWSS, as the owner of the utility providing water supply to certain consumers, including the respondent, had the right to exclude any person from the enjoyment and disposal thereof. However, the exercise of rights is not without limitations. Article 19 sets the norms for the exercise of one's rights. When a right such as that provided in Article 429 is exercised in a manner which discards the norms mentioned in Article 19 resulting in damage to another, a legal wrong is committed. In this case, MWSS failed to act with justice and give the respondent what is due to it when the petitioner unceremoniously cut off the respondent's water supply connection. The petition is denied. 33

MANALOTO VS VELOSO III Facts: This case stems from an unlawful detainer case filed by Ermelinda Manaloto et al., who are the lessors to of residential house, which was leased to respondent Ismael Veloso III at the rate of Php17,000 per month. The action for unlawful detainer was instituted because of Veloso’s failure to pay the monthly rent from May 23, 1997 to December 22, 1998 despite the petitioner’s repeated demands. Veloso, however, denied the nonpayment of rentals, alleging that he made advance payments when he spent Php825,000 for the repairs done on the leased property. While the case was still on appeal, the petitioner lessors published the decision of the Metropolitan Trial Court, who ruled in favor of the lessors. Copies of the decision were distributed to the homeowners of Horseshoe Village, which caused Veloso to be the talk of the town and his good name to be greatly damaged. Issue: Were the petitioners correct in publishing the MeTC’s decision while the case was still on appeal? Ruling: No. The petitioners are obliged to respect the respondent’s good name even though they are opposing parties in a detainer case. Article 19 of the Civil Code provides that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. A violation of such principle constitutes an abuse of rights, a tortuous conduct. Petitioners are also expected to respect Veloso’s dignity, personality, privacy, and peace of mind under Article 26 of the Civil Code.

34

REQUISITES AND CONDITIONS H.L. CARLOS CONSTRUCTION INC VS MARINA PROPERTIES FACTS MARINA PROPERTIES CORPORATION (MPC for brevity) is engaged in the business of real estate development. It entered into a contract with H.I. CARLOS CONSTRUCTION, INC. (HLC) to construct Phase III of a condominium complex called MARINA BAYHOMES CONDOMINIUM PROJECT, consisting of townhouses and villas, totaling 31 housing units, for a total consideration of P38,580,609.00, within a period of 365 days from receipt of ‘Notice to Proceed’. The original completion date of the project was May 16, 1989, but it was extended to October 31, 1989 with a grace period until November 30, 1989.

Petitioner was in delay and in breach of contract. Clearly, the obligor is liable for damages that are the natural and probable consequences of its breach of obligation. In order to finish the project, the latter had to contract the services of a second construction firm for P11,750,000. Hence, MPC suffered actual damages in the amount of P4,604,579 for the completion of the project. Petitioner is also liable for liquidated damages as provided in the Contract. Liquidated damages are those that the parties agree to be paid in case of a breach. As worded, the amount agreed upon answers for damages suffered by the owner due to delays in the completion of the project. Under Philippine laws, these damages take the nature of penalties. A penal clause is an accessory undertaking to assume greater liability in case of a breach. It is attached to an obligation in order to ensure performance.

“The contract was signed by Jovencio F. Cinco, president of MPC, and Honorio L. Carlos, president of HLC. “On December 15, 1989, HLC instituted this case for sum of money against not only MPC but also against the latter’s alleged president, [Respondent] Jesus K. Typoco, Sr. (Typoco) and [Respondent] Tan Yu (Tan), seeking the payment of various sums with an aggregate amount of P14 million pesos, broken down as follows: a. P7,065,885.03 for costs of labor escalation, change orders and material price escalation;

CHUA VS UNITED COCONUT PLANTERS BANK -see full text

ISSUES & ARGUMENTS W/N H.L. is liable for actual and liquidated damages for failing to finish the construction it undertook to complete ( Which party was in delay) HOLDING & RATIO DECIDENDI Yes. petitioner did not fulfill its contractual obligations. It could not totally pass the blame to MPC for hiring a second contractor, because the latter was allowed to terminate the services of the contractor. Either party shall have the right to terminate this Contract for reason of violation or non-compliance by the other party of the terms and conditions herein agreed upon.” As of November 1989, petitioner accomplished only approximately 80 percent of the project. In other words, it was already in delay at the time. In addition, Engineer Miranda testified that it would lose money even if it finished the project; thus, respondents already suspected that it had no intention of finishing the project at all. 35

MANIFESTATION OF UNJUST ENRICHMENT

ISSUE:

ALMARIO VS PHIL AIRLINES o

Unjust enrichment: Article 22, CC recognizes the principle that one may not enrich himself at the expense of another.

o

Form of "enrichment:" Enrichment of the defendant consists in every patrimonial, physical, or moral advantage, so long as it is appreciable in money

FACTS: This is a complaint for reimbursement of training costs filed by PAL against its pilot, Almario. Almario was initially hired as a Boeing 747 Systems Engineer. Later on, he successfully bid for the higher position of Airbus 300 First Officer, for which he was given additional training at PAL’s expense. After completing the course, Almario served as A-300 First Officer of PAL but after eight months of service, he tendered his resignation for “personal reasons.” PAL then wrote him a letter, stating that they invested heavily on his professional training on the basis that he continue to serve the Company for a definite period of time which is approximately 3 yrs. In short, PAL wanted Almario to reconsider his resignation, otherwise they would be compelled to ask reimbursement for the training costs from him. Despite this, Almario pushed through with his resignation. Hence, a reimbursement case was filed. In the lower court, PAL invoked the existence of an innominate contract of do ut facias (I give that you may do) with Almario in that by spending for his training, he would render service to it until the costs of training were recovered in at least 3 yrs. They based the period of “3 yrs” to a decision of the Secretary of Labor concerning PAL’s CBA with its employee-union. For his part, Almario denied the existence of any agreement with PAL that he would render service to it for three years after his training, failing which he would reimburse the training costs. The lower court ruled in favor of Almario. On appeal, CA found Almario liable under the CBA and under Article 22 of the Civil Code. Hence this appeal.

o

Whether or not Almario is obliged to reimburse the costs incurred by PAL for his training

HELD: The petition fails. The rationale of the three-year period is the prohibitive training costs. At an earlier time, when the CBA between PAL and its employees were still negotiated, the Secretary of Labor basically ruled that PAL should be allowed a return on investment for their pilots’ training expenses. Thus, the provisions that pilots 57 years of age shall be frozen and pilots less than 57, provided they have previously qualified in any company’s turbo-jet aircraft, shall be permitted to occupy any position in the company’s turbo-jet fleet, were incorporated in later incarnations of the CBA. When Almario took the training course, he was about 39 yrs old, 21 yrs away from the retirement age of 60. Hence, with the maturity, expertise and experience he gained from the training course, he was expected to serve PAL for at least three yrs to offset “the prohibitive costs” thereof. Article

22

of

the

Civil

Code

applies.

This provision on unjust enrichment recognizes the principle that one may not enrich himself at the expense of another. Enrichment of the defendant consists in every patrimonial, physical, or moral advantage, so long as it is appreciable in money. It may consist of some positive pecuniary value incorporated into the patrimony of the defendant, such as: (1) the enjoyment of a thing belonging to the plaintiff; (2) the benefits from service rendered by the plaintiff to the defendant; (3) the acquisition of a right, whether real or personal; (4) the increase of value of property of the defendant; (5) the improvement of a right of the defendant, such as the acquisition of a right of preference; (6) the recognition of the existence of a right in the defendant; and (7) the improvement of the conditions of life of the defendant. The enrichment of the defendant must have a correlative prejudice, disadvantage, or injury to the plaintiff. This 36

prejudice may consist, not only of the loss of property or the deprivation of its enjoyment, but also of non-payment of compensation for a prestation or service rendered to the defendant without intent to donate on the part of the plaintiff, or the failure to acquire something which the latter would have obtained. The injury to the plaintiff, however, need not be the cause of the enrichment of the defendant. It is enough that there be some relation between them, that the enrichment of the defendant would not have been produced had it not been for the fact from which the injury to the plaintiff is derived. In the present case, PAL invested for the training of Almario on the expectation that they may recover by availing of Almario’s services for at least three years. This expectation was not fully realized, however, due to Almario’s resignation after only eight months of service following the completion of his training course. He cannot, therefore, refuse to reimburse the costs of training without violating the principle of unjust enrichment.

37

WHERE IS THERE NO UNJUST ENRICHMENT BENGUET CORPORATION VS DENR MINES ADJUDICATION BOARD FACTS: On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was acknowledged as the owner of four mining claims respectively named as Bonito-I, Bonito-II, Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares, situated in Barangay Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte. Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N. Tachuling, issued a letter informing J.G. Realty of its intention to develop the mining claims. However, on February 9, 1999, J.G. Realty, through its President, Johnny L. Tan, then sent a letter to the President of Benguet informing the latter that it was terminating the RAWOP on the following grounds: a. The fact that your company has failed to perform the obligations set forth in the RAWOP, i.e., to undertake development works within 2 years from the execution of the Agreement; b. Violation of the Contract by allowing high graders to operate on our claim. c. No stipulation was provided with respect to the term limit of the RAWOP. d. Non-payment of the royalties thereon as provided in the RAWOP.

On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP with the Legaspi City POA, Region V, docketed as DENR Case No. 2000-01 and entitled J.G. Realty v. Benguet. DECISION OF LOWER COURTS: *POA: declared the RAWOP cancelled. *MAB: affirmed POA.

ISSUES: (1) Should the controversy have first been submitted to arbitration before the POA took cognizance of the case?; (2) Was the cancellation of the RAWOP supported by evidence?; and

(3) Did the cancellation of the RAWOP amount to unjust enrichment of J.G. Realty at the expense of Benguet?

HELD: On correctness of appeal: Petitioner having failed to properly appeal to the CA under Rule 43, the decision of the MAB has become final and executory. On this ground alone, the instant petition must be denied. (1) YES, the case should have first been brought to voluntary arbitration before the POA. Secs. 11.01 and 11.02 of the RAWOP pertinently provide: 11.01 Arbitration Any disputes, differences or disagreements between BENGUET and the OWNER with reference to anything whatsoever pertaining to this Agreement that cannot be amicably settled by them shall not be cause of any action of any kind whatsoever in any court or administrative agency but shall, upon notice of one party to the other, be referred to a Board of Arbitrators consisting of three (3) members, one to be selected by BENGUET, another to be selected by the OWNER and the third to be selected by the aforementioned two arbitrators so appointed. xxxx 11.02 Court Action No action shall be instituted in court as to any matter in dispute as hereinabove stated, except to enforce the decision of the majority of the Arbitrators A contractual stipulation that requires prior resort to voluntary arbitration before the parties can go directly to court is not illegal and is in fact promoted by the State. To reiterate, availment of voluntary arbitration before resort is made to the courts or quasi-judicial agencies of the government is a valid contractual stipulation that must be adhered to by the parties. In other words, in the event a case that should properly be the subject of voluntary arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion of the defendant, the court or quasi-judicial agency shall determine whether such contractual provision for arbitration is sufficient and effective. If in affirmative, the court or quasi-judicial agency shall then order the enforcement of said provision. 38

In sum, on the issue of whether POA should have referred the case to voluntary arbitration, we find that, indeed, POA has no jurisdiction over the dispute which is governed by RA 876, the arbitration law. HOWEVER, ESTOPPEL APPLIES. the Court rules that the jurisdiction of POA and that of MAB can no longer be questioned by Benguet at this late hour. What Benguet should have done was to immediately challenge the POA's jurisdiction by a special civil action for certiorari when POA ruled that it has jurisdiction over the dispute. To redo the proceedings fully participated in by the parties after the lapse of seven years from date of institution of the original action with the POA would be anathema to the speedy and efficient administration of justice.

governmental unit or labor department's personnel, said arbitrator renders arbitration services provided for under labor laws. There is a clear distinction between compulsory and voluntary arbitration. The arbitration provided by the POA is compulsory, while the nature of the arbitration provision in the RAWOP is voluntary, not involving any government agency.

LAWS AND CASES (2) The cancellation of the RAWOP was supported by evidence.

ADVANCED FOUNDATION SYSTEMS CORP VS NEW WORLD PROPERTIES AND VENTURES INC See full text

(3) There is no unjust enrichment in the instant case. There is no unjust enrichment when the person who will benefit has a valid claim to such benefit. The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at another's expense or damage. Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP, which left Benguet without any legal right to participate in further developing the mining claims, was brought about by its violation of the RAWOP. Hence, Benguet has no one to blame but itself for its predicament.

OBITER DICTA: (1) Difference between compulsory & voluntary arbitration -In Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory arbitration has been defined both as “the process of settlement of labor disputes by a government agency which has the authority to investigate and to make an award which is binding on all the parties, and as a mode of arbitration where the parties are compelled to accept the resolution of their dispute through arbitration by a third party.” While a voluntary arbitrator is not part of the 39