TIU VS PLATINUM PLANS

DAISY B. TIU, Petitioner vs. PLATINUM PLANS PHIL., INC., Respondent. DECISION QUISUMBING, J.: For review on certiorari are the Decision1 dated January 20, 2004 of the Court of Appeals in CA-G.R. CV No. 74972, and its Resolution2 dated May 4, 2004 denying reconsideration. The Court of Appeals had affirmed the decision3 dated February 28, 2002 of the Regional Trial Court (RTC) of Pasig City, Branch 261, in an action for damages, ordering petitioner to pay respondent P100,000 as liquidated damages. The relevant facts are as follows: Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing Director. On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President and Territorial Operations Head in charge of its Hongkong and Asean operations. The parties executed a contract of employment valid for five years.4 On September 16, 1995, petitioner stopped reporting for work. In November 1995, she became the VicePresident for Sales of Professional Pension Plans, Inc., a corporation engaged also in the pre-need industry. Consequently, respondent sued petitioner for damages before the RTC of Pasig City, Branch 261. Respondent alleged, among others, that petitioners employment with Professional Pension Plans, Inc. violated the noninvolvement clause in her contract of employment, to wit: 8. NON INVOLVEMENT PROVISION The EMPLOYEE further undertakes that during his/her engagement with EMPLOYER and in case of separation from the Company, whether voluntary or for cause, he/she shall not, for the next TWO (2) years thereafter, engage in or be involved with any corporation, association or entity, whether directly or indirectly, engaged in the same business or belonging to the same pre-need industry as the EMPLOYER. Any breach of the foregoing provision shall render the EMPLOYEE liable to the EMPLOYER in the amount of One Hundred Thousand Pesos (P100,000.00) for and as liquidated damages. 5 Respondent thus prayed for P100,000 as compensatory damages; P200,000 as moral damages; P100,000 as exemplary damages; and 25% of the total amount due plus P1,000 per counsels court appearance, as attorneys fees. Petitioner countered that the non-involvement clause was unenforceable for being against public order or public policy: First, the restraint imposed was much greater than what was necessary to afford respondent a fair and reasonable protection. Petitioner contended that the transfer to a rival company was an accepted practice in the pre-need industry. Since the products sold by the companies were more or less the same, there was nothing peculiar or unique to protect. Second, respondent did not invest in petitioners training or improvement. At the time petitioner was recruited, she already possessed the knowledge and expertise required in the pre-need industry and respondent benefited tremendously from it. Third, a strict application of the non-involvement clause would amount to a deprivation of petitioners right to engage in the only work she knew. In upholding the validity of the non-involvement clause, the trial court ruled that a contract in restraint of trade is valid provided that there is a limitation upon either time or place. In the case of the pre-need industry, the trial court found the two-year restriction to be valid and reasonable. The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to pay the following: 1. the amount of One Hundred Thousand Pesos (P100,000.00) for and as damages, for the breach of the non-involvement provision (Item No. 8) of the contract of employment; 2. costs of suit. There being no sufficient evidence presented to sustain the grant of attorneys fees, the Court deems it proper not to award any. SO ORDERED.6 On appeal, the Court of Appeals affirmed the trial courts ruling. It reasoned that petitioner entered into the contract on her own will and volition. Thus, she bound herself to fulfill not only what was expressly stipulated in the contract, but also all its consequences that were not against good faith, usage, and law. The appellate court also ruled that the stipulation prohibiting non-employment for two years was valid and enforceable considering the nature of respondents business. Petitioner moved for reconsideration but was denied. Hence, this appeal by certiorari where petitioner alleges that the Court of Appeals erred when: A. [IT SUSTAINED] THE VALIDITY OF THE NON-INVOLVEMENT CLAUSE IN PETITIONERS CONTRACT CONSIDERING THAT THE PERIOD FIXED THEREIN IS VOID FOR BEING OFFENSIVE TO PUBLIC POLICY B. [IT SUSTAINED] THE AWARD OF LIQUIDATED DAMAGES CONSIDERING THAT IT BEING IN THE NATURE OF A PENALTY THE SAME IS EXCESSIVE, INIQUITOUS OR UNCONSCIONABLE 7 Plainly stated, the core issue is whether the non-involvement clause is valid. Petitioner avers that the non-involvement clause is offensive to public policy since the restraint imposed is much greater than what is necessary to afford respondent a fair and reasonable protection. She adds that since the products sold in the pre-need industry are more or less the same, the transfer to a rival company is acceptable. Petitioner also points out that respondent did not invest in her training or improvement. At the time she joined respondent, she already had the knowledge and expertise required in the pre-need industry. Finally, petitioner argues that a strict application of the non-involvement clause would deprive her of the right to engage in the only work she knows. Respondent counters that the validity of a non-involvement clause has been sustained by the Supreme Court in a long line of cases. It contends that the inclusion of the two-year non-involvement clause in petitioners contract of employment was reasonable and needed since her job gave her access to the companys confidential marketing strategies. Respondent adds that the non-involvement clause merely enjoined her from engaging in pre-need business akin to respondents within two years from petitioners separation from respondent. She had not been prohibited from marketing other service plans. As early as 1916, we already had the occasion to discuss the validity of a non-involvement clause. In Ferrazzini v. Gsell,8 we said that such clause was unreasonable restraint of trade and therefore against public policy. InFerrazzini, the employee was prohibited from engaging in any business or occupation in the Philippines for a period of five years after the termination of his employment contract and must first get the written permission of his employer if he were to do so. The Court ruled that while the stipulation was indeed limited as to time and space, it was not limited as to trade. Such prohibition, in effect, forces an employee to leave the Philippines to work should his employer refuse to give a written permission.

In G. Martini, Ltd. v. Glaiserman,9 we also declared a similar stipulation as void for being an unreasonable restraint of trade. There, the employee was prohibited from engaging in any business similar to that of his employer for a period of one year. Since the employee was employed only in connection with the purchase and export of abaca, among the many businesses of the employer, the Court considered the restraint too broad since it effectively prevented the employee from working in any other business similar to his employer even if his employment was limited only to one of its multifarious business activities. However, in Del Castillo v. Richmond,10 we upheld a similar stipulation as legal, reasonable, and not contrary to public policy. In the said case, the employee was restricted from opening, owning or having any connection with any other drugstore within a radius of four miles from the employers place of business during the time the employer was operating his drugstore. We said that a contract in restraint of trade is valid provided there is a limitation upon either time or place and the restraint upon one party is not greater than the protection the other party requires. Finally, in Consulta v. Court of Appeals,11 we considered a non-involvement clause in accordance with Article 130612 of the Civil Code. While the complainant in that case was an independent agent and not an employee, she was prohibited for one year from engaging directly or indirectly in activities of other companies that compete with the business of her principal. We noted therein that the restriction did not prohibit the agent from engaging in any other business, or from being connected with any other company, for as long as the business or company did not compete with the principals business. Further, the prohibition applied only for one year after the termination of the agents contract and was therefore a reasonable restriction designed to prevent acts prejudicial to the employer. Conformably then with the aforementioned pronouncements, a non-involvement clause is not necessarily void for being in restraint of trade as long as there are reasonable limitations as to time, trade, and place. In this case, the non-involvement clause has a time limit: two years from the time petitioners employment with respondent ends. It is also limited as to trade, since it only prohibits petitioner from engaging in any pre-need business akin to respondents.
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More significantly, since petitioner was the Senior Assistant Vice-President and Territorial Operations Head in charge of respondents Hongkong and Asean operations, she had been privy to confidential and highly sensitive marketing strategies of respondents business. To allow her to engage in a rival business soon after she leaves would make respondents trade secrets vulnerable especially in a highly competitive marketing environment. In sum, we find the non-involvement clause not contrary to public welfare and not greater than is necessary to afford a fair and reasonable protection to respondent. 13 In any event, Article 1306 of the Civil Code provides that parties to a contract may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Article 115914 of the same Code also provides that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Courts cannot stipulate for the parties nor amend their agreement where the same does not contravene law, morals, good customs, public order or public policy, for to do so would be to alter the real intent of the parties, and would run contrary to the function of the courts to give force and effect thereto.15 Not being contrary to public policy, the non-involvement clause, which petitioner and respondent freely agreed upon, has the force of law between them, and thus, should be complied with in good faith.16 Thus, as held by the trial court and the Court of Appeals, petitioner is bound to pay respondent P100,000 as liquidated damages. While we have equitably reduced liquidated damages in certain cases, 17 we cannot do so in this case, since it appears that even from the start, petitioner had not shown the least intention to fulfill the noninvolvement clause in good faith.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated January 20, 2004, and the Resolution dated May 4, 2004, of the Court of Appeals in CA-G.R. CV No. 74972, are AFFIRMED. Costs against petitioner.

CASTILLO VS CA
G.R. No. 48541 August 21, 1989 BERNABE CASTILLO (In his own behalf, and in behalf of SERAPION CASTILLO, who has since then become deceased, and EULOGIO CASTILLO, his minor child) and GENEROSA GALANG CASTILLO,petitioners-appellants, vs. THE HONORABLE COURT OF APPEALS, JUANITO ROSARIO and CRESENCIA ROSARIO, respondentsappellees. Lino R. Eugenio for petitioners. Eduardo G. Rosario for private respondents.

FERNAN, C.J.: In this petition for review on certiorari, petitioners seek the reversal of the February 13, 1978 decision of the Court of Appeals in CA-G.R. No. 52567-R, entitled "Bernabe Castillo, et al. v. Juanita Rosario, et al," affirming the dismissal by the Court of First Instance of Manila of the complaint for damages filed by petitioners against private respondents. Said dismissal was decreed on the basis of the evidence before the trial court as well as the decision of the Court of Appeals in CA-G.R. No. 07684-CR, entitled "People v. Juanito Rosario." Petitioners and private respondents figured in a vehicular accident on May 2, 1965 at Bagac, Villasis, Pangasinan, which caused injuries to their persons and damage to their respective vehicles. The parties have conflicting versions as to what actually transpired on that fateful day; each party pointing to the negligence of the other as the proximate cause of the accident. Thus, as expected in cases like this, the main issue is: Who was at fault? According to the petitioners, the accident happened as follows: 1 On May 2, 1985, at about 2:00 o'clock in the afternoon, petitioner Bernabe Castillo was driving his jeep with Plate No. J-4649 '64 Manila on the right lane of the McArthur Highway with Generosa Castillo, his wife, father Serapion Castillo, seated in front and Eulogio Castillo, then a minor child, as passengers, bound and northward for Binmaley, Pangasinan at the rate of 25 kilometers per hour. Just past San Nicolas bridge, Villasis, he noticed, from a distance of 120 meters more or less, a speeding oncoming car with Plate No. L-27045 '64 Cavite, along the same lane (facing north) he was driving, overtaking a cargo truck ahead of it. He switched on his headlights to signal the car to return to its own right lane as the way was not clear for it to overtake the truck. The car turned out to be driven by the private respondent, Juanito Rosario, with his wife, Cresencia Rosario. The signal was disregarded, as the car proceeded on its direction southward on the right lane (facing north). In order to evade the impending collision, petitioner Bernabe Castillo swerved his jeep to the right towards the shoulder and applied on the brakes, and leaving his feet on it, even, immediately after the impact. The car rested on the shoulder of the right lane. The jeep's rear left wheel was on the road, leaving short tiremarks behind it; while the car left long tire-marks, specially its left rear wheel. The jeep suffered a shattered windshield, pushed-in radiator. The left mid-portion of its bumper badly dented. The car had a flat tire on its right front wheel; its right fender badly dented as the headlamp on top of it. The bumber stooped downward, because it went thru under the bumper of the jeep.
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The driver of the jeep, including his passengers suffered physical injuries. Bernabe Castillo, with the patella of his right knee, fractured, suffered serious physical injuries, in other parts of his

body. Serapion Castillo whose head crushed through the windshield, was nearly beheaded, while the other two passengers suffered multiple slight and less serious injuries. Private respondents, on the other hand, have their own version of the accident and thus asseverate as follows: Sometime in the early afternoon of May 2, 1965, the private respondents, together with their small daughter, were on their way from San Carlos City (Pangasinan) to Olongapo City where they resided at the time and where Juanito Rosario, a member of the US Navy, had been temporarily stationed. They rode in the family car. (TSN, C. Rosario, p. 35; J. Rosario, pp. 2, 12 Annex "D", "Request for Admission") At or about 2:30 p.m. of the same date, as Juanito Rosario who was driving the car, and his two passengers, were along MacArthur Highway in Barrio Bacag, Villasis, Pangasinan, going towards the south, they saw ahead of them a big heavily loaded cargo truck. (TSN, B. Castillo, p. 532, Annex "B", "Request for Admission") The truck was moving very slowly because of its heavy load so that Juanito Rosario decided to overtake it. But before doing so, he first saw to it that the road was clear and as additional precautionary measure, he blew his horn several times at the time he was overtaking the truck. (TSN, Juanito Rosario, pp. 4, 11; C. Rosario, pp. 31-41, Annex "B", "Request for Admission") Then as the car was about to overtake the slow moving cargo truck, the car's front left tire suddenly burst due to pressure causing the car to swerve to the left and naturally making steering and control difficult. Because of the tendency of the car to veer towards the left due to the blown out tire, the driver steered the car towards the direction where he could find a safe place to park and fix the tire. He finally brought the car to a halt at the left shoulder of the road (facing south). (TSN, C. Rosario, p. 31; J. Rosario, pp. 4, 17, Annex "D", "Request for Admission") But barely had the said defendant parked his car on the left shoulder of the road and just as he was about to get off to fix the flat tire, the car was suddenly bumped by the jeep driven by Bernabe Castillo which came from the opposite direction. (TSN, C. Rosario, p. 32; J. Rosario, p. 6, "Request for Admission") Both vehicles were damaged, the car suffering the heavier damage. (Please see Annex "C", "Request for Admission") Passengers of the jeep sustained injuries while those of the car were badly shaken. On June 30, 1965, a civil case for the recovery of damages for the injuries sustained by petitioners and for the damage to their vehicle as a result of the collision, was instituted by the petitioners in the Court of First Instance of Manila. While this case was pending, the Provincial Fiscal of Pangasinan filed an information dated September 29, 1965 against Juanito Rosario, private respondent herein, for double physical injuries; double less serious physical injuries; and damage to property thru reckless imprudence, in the Court of First Instance of Urdaneta. Respondent Juanito Rosario was prosecuted and convicted by the trial court in the criminal case. He appealed to the Court of Appeals, which rendered a decision 3 acquitting him from the crime charged on the ground that his guilt has not been proved beyond reasonable doubt. In the meantime, private respondents thru counsel, filed a "Request for Admission" 4 on April 3, 1972 in the civil case, requesting petitioners to admit the truthfulness of the facts set forth therein as well as the correctness and genuineness of the documents attached thereto. On May 5,1972, petitioners filled a "Manifestation", 5 admitting the allegations in the "Request for Admission" with some qualifications. Later, both parties submitted their respective memoranda. On the basis of the testimonies and evidence submitted by the petitioners, as well as the records of the criminal case attached in the "Request for Admission" of the private respondents, the Court of First Instance of Manila rendered a decision 6 on December 28, 1972, dismissing the complaint of the petitioners against private respondents as well as the counterclaim of private respondents against the petitioners. On January 24, 1973, petitioners appealed to the Court of Appeals. On February 13, 1978, the Court of Appeals affirmed the decision 7of the Court of First Instance of Manila.
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Hence, the present petition for review on certiorari. 8 The petitioners-appellants raise in issue before Us the following questions, to wit: 1) Is the decision of the Court of Appeals, where its dispositive part, or "fallo", states that the guilt of the (appellant) accused was not proved beyond reasonable doubt final and conclusive, on an action for damages based on quasi-delict?; 2) Are the testimonies given in a criminal case, without strict compliance with Section 41 Rule 130 and without opportunity to cross examine the witnesses who made these testimonies, admissible evidence in a subsequent case and can be the basis of a valid decision?;
3) Is an action for damages based on quasi-delict barred by a decision of the appellate court acquitting the accused, the body of which lays the blame on the plaintiff but in its dispositive part, declares the guilt of the accused not proved beyond reasonable doubt ? 9

The main thrust of this petition for review which stems from a cause of action based on quasi-delict or culpa aquiliana (being a recovery for damages arising from the vehicular accident), is that petitioners were deprived of due process because their civil action was decided on the basis of private respondent Juanita Rosario's acquittal in the criminal case for reckless imprudence. There is no dispute that the subject action for damages, being civil in nature, is separate and distinct from the criminal aspect, necessitating only a preponderance of evidence. According to a number of cases, 10 a quasidelict or culpa aquiliana is a separate legal institution under the Civil Code, with a substantively all its own, and individuality that is entirely apart and independent from a delict or crime. A distinction exists between the civil liability arising from a crime and the responsibility for quasi-delicts or culpa extra-contractual. The same negligence causing damages may produce civil liability arising from a crime under the Penal Code, or create an action for quasidelictos or culpa extra-contractual under the Civil Code. Therefore, the acquittal or conviction in the criminal case is entirely irrelevant in the civil case. 11 In the case of Azucena v. Potenciano, L-14028, June 30, 1962, 5 SCRA 468, 470-471, this Court held: ... in the criminal case for reckless imprudence resulting in serious physical injuries ..., the judgment of acquittal does not operate to extinguish the civil liability of the defendant based on the same incident. The civil action is entirely independent of the criminal case according to Articles 33 and 2177 of the Civil Code. There can be no logical conclusion than this, for to subordinate the civil action contemplated in the said articles to the result of the criminal prosecution whether it be conviction or acquittal would render meaningless the independent character of the civil action and the clear injunction in Article 31, that his action may proceed independently of the criminal proceedings and regardless of the result of the latter. But this rule is not without exception. Thus, Section 2 (c) of Rule 111 of the Rules of Court provides: Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration from a final judgment that the fact from which the civil action might arise did not exist. In a previous case, CA-G.R. No. 07684-CR, People v. Rosario, the Court of Appeals after a painstaking analysis of. (a) the testimonial evidence; (b) the relative positions of the two vehicles as depicted in the sketches; (c) the distance of each of the two vehicles from the cemented edge of the road; (d) the point of impact; (e) the visible tire marks, and (f) the extent of the damage caused upon each of the two vehicles, ruled that it was the driver of the jeep and not the accused driver of the car who was negligent and accordingly acquitted the latter. 12 Negligence, being the source and foundation of actions of quasi-delict, is the basis for the recovery of damages. In the case at bar, the Court of Appeals found that no negligence was committed by Juanito Rosario to warrant an award of damages to the petitioners.

Respondent Appellate Court states:

In acquitting defendant-appellee Juanito Rosario in CA-G.R. No. 07684-CR on October 28, 1968, this Court held that the collision was not due to the negligence of Juanito Rosario but it was Castillo's own act of driving the jeep to the shoulder [of the road] where the car was that was actually the proximate cause of the collision.' (Ibid., p. 183) With this finding, this Court actually exonerated appellee Juanito Rosario from civil liability. Since plaintiffs-appellants' civil action is predicated upon Juanito Rosario's alleged negligence which does not exist, it follows that his acquittal in the criminal action, which is already final, carried with it the extinction of civil responsibility arising therefrom. (Corpus vs. Paje, 28 SCRA 1062, 1064, 1067; Faraon vs. Priela, 24 SCRA 582, 583; De Soriano vs. Albornoz, 98 Phil. 785, 787788; Tan vs. Standard Vacuum Oil Co., 91 Phil. 672, 675). 13

It was the Court of Appeals findings that the collision was not due to the negligence of Juanita Rosario but rather it was Castillo's own act of driving the jeep to the shoulder of the road where the car was, which was actually the proximate cause of the collision. With this findings, the Court of Appeals exonerated Juanito Rosario from civil liability on the ground that the alleged negligence did not exist. As earlier stated, the questioned decision of the Court of Appeals was an affirmation of the decision of the Court of First Instance of Manila. During the trial of the case before the Court of First Instance, the private respondents were not present, in view of the fact that they were out of the country at that time. Their counsel introduced as part of their evidence, the records in the criminal case, in accordance with Section 41, Rule 130 of the Rules of Court.14 These records were attached to their "Request for Admission" and were substantially admitted by petitioners. The said records were mostly composed of transcripts of the hearing in the criminal case. Petitioners raised, as one of their objections, the propriety and correctness of admitting and adopting these transcripts as part of the record in the civil case. According to them, this is a violation of Section 41, Rule 130 of the Rules of Court, on the ground that petitioners were not given the opportunity to cross-examine. We have to disagree. A careful reading of the transcripts would reveal that then counsel for petitioners, Atty. Nicodemo Ferrer, actively participated during the proceedings of the criminal case. He raised various objections, 15 in the course of the trial. Petitioners, therefore, thru counsel had the opportunity to cross-examine the witnesses. Thus, the admission of the said testimonies cannot be set aside. Finally, in a long line of decisions, this Court has held time and again that the findings of facts by the Court of Appeals are conclusive and not reviewable by the Supreme Court. 16 In Macadangdang v. Court of Appeals, 100 SCRA 73 and Tolentino v. De Jesus, 56 SCRA 167, it was held that: Findings of fact of the Court of Appeals are conclusive on the parties and on the Supreme Court, unless (1) the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; (5) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admission of both appellant and appellee; (6) the findings of facts of the Court of Appeals are contrary to those of the trial court; (7) said findings of facts are conclusions without citation of specific evidence on which they are based; (8) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; and (9) when the finding of facts of the Court of Appeals is premised on the absence of evidence and is contradicted by evidence on record. Finding that the questioned decision does not fall under any of the exceptions cited above, we find no cogent reason to disturb the findings and conclusions of the Court of Appeals. WHEREFORE, in view of the foregoing, the petition is hereby denied. No pronouncement as to costs. SO ORDERED.

VIRATA VS OCHOA
CANDIDA VIRATA, TOMAS VIRATA, MANOLITO VIRATA, EDERLINDA VIRATA, NAPOLEON VIRATA, ARACELY VIRATA, ZENAIDA VIRATA, LUZMINDA VIRATA, PACITA VIRATA, and EVANGELINA VIRATA, petitioners, vs. VICTORIO OCHOA, MAXIMO BORILLA and THE COURT OF FIRST INSTANCE OF CAVITE, 7th JUDICIAL DISTRICT, BRANCH V, stationed at BACOOR, CAVITE, respondents. Remulla, Estrella & Associates for petitioners Exequil C. Masangkay for respondents.

FERNANDEZ, J.: This is an appeal by certiorari, from the order of the Court of First Instance of Cavite, Branch V, in Civil Case No. B-134 granting the motion of the defendants to dismiss the complaint on the ground that there is another action pending between the same parties for the same cause. 1 The record shows that on September 24, 1975 one Arsenio Virata died as a result of having been bumped while walking along Taft Avenue, Pasay City by a passenger jeepney driven by Maximo Borilla and registered in the name Of Victoria Ochoa; that Borilla is the employer of Ochoa; that for the death of Arsenio Virata, a action for homicide through reckless imprudence was instituted on September 25, 1975 against Maximo Borilla in the Court of First Instance of Rizal at Pasay City, docketed as C Case No. 3162-P of said court; that at the hearing of the said criminal case on December 12, 1975, Atty. Julio Francisco, the private prosecutor, made a reservation to file a separate civil action for damages against the driver on his criminal liability; that on February 19, 1976 Atty. Julio Francisco filed a motion in said c case to withdraw the reservation to file a separate civil action; that thereafter, the private prosecutor actively participated in the trial and presented evidence on the damages; that on June 29, 1976 the heirs of Arsenio Virata again reserved their right to institute a separate civil action; that on July 19, 1977 the heirs of Arsenio Virata, petitioners herein, commenced Civil No. B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, for damages based on quasi-delict against the driver Maximo Borilla and the registered owner of the jeepney, Victorio Ochoa; that on August 13, 1976 the defendants, private respondents filed a motion to dismiss on the ground that there is another action, Criminal Case No. 3162-P, pending between the same parties for the same cause; that on September 8, 1976 the Court of First Instance of Rizal at Pasay City a decision in Criminal Case No. 3612-P acquitting the accused Maximo Borilla on the ground that he caused an injury by name accident; and that on January 31, 1977, the Court of First Instance of Cavite at Bacoor granted the motion to Civil Case No. B-134 for damages. 2 The principal issue is weather or not the of the Arsenio Virata, can prosecute an action for the damages based on quasi-delict against Maximo Borilla and Victoria Ochoa, driver and owner, respectively on the passenger jeepney that bumped Arsenio Virata. It is settled that in negligence cases the aggrieved parties may choose between an action under the Revised Penal Code or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What is prohibited by Article 2177 of the Civil Code of the Philippines is to recover twice for the same negligent act. The Supreme Court has held that: According to the Code Commission: 'The foregoing provision (Article 2177) though at first sight startling, is not so novel or extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation of the criminal law, while the latter is a 'culpa aquiliana' or quasi-delict, of ancient origin, having always had its own foundation and individuality, separate

from criminal negligence. Such distinction between criminal negligence and 'culpa extracontractual' or quasi-delito has been sustained by decision of the Supreme Court of Spain and maintained as clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist. Therefore, under the proposed Article 2177, acquittal from an accusation of criminal negligence, whether on reasonable doubt or not, shall not be a bar to a subsequent civil action, not for civil liability arising from criminal negligence, but for damages due to a quasi-delict or 'culpa aquiliana'. But said article forestalls a double recovery. (Report of the Code Commission, p. 162.)
Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same argument of Justice Bocobo about construction that upholds 'the spirit that given life' rather than that which is literal that killeth the intent of the lawmaker should be observed in applying the same. And considering that the preliminary chapter on human relations of the new Civil Code definitely establishes the separability and independence of liability in a civil action for acts criminal in character (under Articles 29 to 32) from the civil responsibility arising from crime fixed by Article 100 of the Penal Code, and, in a sense, the Rules of Court, under Sections 2 and 3(c), Rule 111, contemplate also the same separability, it is 'more congruent' with the spirit of law, equity and justice, and more in harmony with modern progress', to borrow the felicitous language in Rakes vs. Atlantic Gulf and Pacific Co., 7 Phil. to 359, to hod as We do hold, that Article 2176, where it refers to 'fault covers not only acts 'not punishable by law' but also criminal in character, whether intentional and voluntary or consequently, a separate civil action lies against the in a criminal act, whether or not he is criminally prosecuted and found guilty and 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. In other words the extinction of civil liability refereed to in Par. (c) of Section 13, 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 a quasi-delict only and not 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. Brief stated, We hold, in reitration of Garcia, that culpa aquilina includes voluntary and negligent acts which may be punishable by law.3

The petitioners are not seeking to recover twice for the same negligent act. Before Criminal Case No. 3162-P was decided, they manifested in said criminal case that they were filing a separate civil action for damages against the owner and driver of the passenger jeepney based on quasi-delict. The acquittal of the driver, Maximo Borilla, of the crime charged in Criminal Case No. 3162-P is not a bar to the prosecution of Civil Case No. B-134 for damages based on quasi-delict The source of the obligation sought to be enforced in Civil Case No. B-134 isquasi-delict, not an act or omission punishable by law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and an act or omission punishable by law are two different sources of obligation. Moreover, for the petitioners to prevail in the action for damages, Civil Case No. B-134, they have only to establish their cause of action by preponderance of the evidence. WHEREFORE, the order of dismissal appealed from is hereby set aside and Civil Case No. B-134 is reinstated and remanded to the lower court for further proceedings, with costs against the private respondents. SO ORDERED.

ABS-CBN VS OFFICE OF THE OMBUDSMAN

ABS-CBN BROADCASTING CORPORATION, EUGENIO LOPEZ, JR., AUGUSTO ALMEDA-LOPEZ, and OSCAR M. LOPEZ, Petitioners, vs. OFFICE OF THE OMBUDSMAN, ROBERTO S. BENEDICTO, EXEQUIEL B. GARCIA, MIGUEL V. GONZALES, and SALVADOR (BUDDY) TAN, Respondents. RESOLUTION NACHURA, J.: Before us is a Motion for Reconsideration filed by petitioners Eugenio, Jr., Oscar and Augusto Almeda, all surnamed Lopez, in their capacity as officers and on behalf of petitioner ABS-CBN Broadcasting Corporation (ABS-CBN), of our Decision in G.R. No. 133347, dismissing their petition for certiorari because of the absence of grave abuse of discretion in the Ombudsman Resolution which, in turn, found no probable cause to indict respondents for the following violations of the Revised Penal Code (RPC): (1) Article 298 Execution of Deeds by Means of Violence or Intimidation; (2) Article 315, paragraphs 1[b], 2[a], and 3[a] Estafa; (3) Article 308 Theft; (4) Article 302 Robbery; (5) Article 312 Occupation of Real Property or Usurpation of Real Rights in Property; and (6) Article 318 Other Deceits. The assailed Decision disposed of the case on two (2) points: (1) the dropping of respondents Roberto S. Benedicto and Salvador (Buddy) Tan as respondents in this case due to their death, consistent with our rulings in People v. Bayotas1 and Benedicto v. Court of Appeals;2 and (2) our finding that the Ombudsman did not commit grave abuse of discretion in dismissing petitioners criminal complaint against respondents. Undaunted, petitioners ask for a reconsideration of our Decision on the following grounds: I. WITH DUE RESPECT, THE EXECUTION AND VALIDITY OF THE LETTER-AGREEMENT DATED 8 JUNE 1973 ARE PLAINLY IRRELEVANT TO ASCERTAINING THE CRIMINAL LIABILITY OF THE RESPONDENTS AND, THEREFORE, THE ISSUE AS TO WHETHER SAID AGREEMENT WAS RATIFIED OR NOT IS IMMATERIAL IN THE PRESENT CASE. II. WITH DUE RESPECT, RESPONDENTS BENEDICTO AND TAN SHOULD NOT BE DROPPED AS RESPONDENTS SIMPLY BECAUSE THEY MET THEIR UNTIMELY DEMISE DURING THE PENDENCY OF THE CASE.3 Before anything else, we note that petitioners filed a Motion to Refer the Case to the Court en banc. 4 Petitioners aver that the arguments contained in their Motion for Reconsideration, such as: (1) the irrelevance of the civil law concept of ratification in determining whether a crime was committed; and (2) the continuation of the criminal complaints against respondents Benedicto and Tan who have both died, to prosecute their possible civil liability therefor, present novel questions of law warranting resolution by the Court en banc. In the main, petitioners argue that the Decision is contrary to law because: (1) the ratification of the June 8, 1973 letter-agreement is immaterial to the determination of respondents criminal liability for the aforestated felonies in the RPC; and (2) the very case cited in our Decision, i.e. People v. Bayotas, 5 allows for the continuation of a criminal case to prosecute civil liability based on law and is independent of the civil liability arising from the crime. We disagree with petitioners. The grounds relied upon by petitioners in both motions, being intertwined, shall be discussed jointly. Before we do so, parenthetically, the counsel for respondent Miguel V. Gonzales belatedly

informed this Court of his clients demise on July 20, 2007. 6 Hence, as to Gonzales, the case must also be dismissed.
1avvphi1

Contrary to petitioners assertion, their motion for reconsideration does not contain a novel question of law as would merit the attention of this Court sitting en banc. We also find no cogent reason to reconsider our Decision. First and foremost, there is, as yet, no criminal case against respondents, whether against those who are living or those otherwise dead. The question posed by petitioners on this long-settled procedural issue does not constitute a novel question of law. Nowhere in People v. Bayotas7 does it state that a criminal complaint may continue and be prosecuted as an independent civil action. In fact, Bayotas, once and for all, harmonized the rules on the extinguished and on the subsisting liabilities of an accused who dies. We definitively ruled: From this lengthy disquisition, we summarize our ruling herein: 1. Death of an accused pending appeal of his conviction extinguishes his criminal liability as well as the civil liability based solely thereon. As opined by Justice Regalado, in this regard, "the death of the accused prior to final judgment terminates his criminal liability and only the civil liability directly arising from and based solely on the offense committed, i.e., civil liability ex delicto in senso strictiore." 2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the same may also be predicated on a source of obligation other than delict. Article 1157 of the Civil Code enumerates these other sources of obligation from which the civil liability may arise as a result of the same act or omission: a) Law b) Contracts c) Quasi-contracts d) xxx xxx xxx e) Quasi-delicts 3. Where the civil liability survives, as explained in Number 2 above, an action for recovery thereof may be pursued but only by filing a separate civil action and subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate civil action may be enforced either against the executor/administrator or the estate of the accused, depending on the source of obligation upon which the same is based as explained above. 4. Finally, the private offended party need not fear a forfeiture of his right to file this separate civil action by prescription, in cases where during the prosecution of the criminal action and prior to its extinction, the private offended party instituted together therewith the civil action. In such case, the statute of limitations on the civil liability is deemed interrupted during the pendency of the criminal case, conformably with provisions of Article 1155 of the Civil Code, that should thereby avoid any apprehension on a possible [de]privation of right by prescription. From the foregoing, it is quite apparent that Benedicto, Tan, and Gonzales, who all died during the pendency of this case, should be dropped as party respondents. If on this score alone, our ruling does not warrant reconsideration. We need not even delve into the explicit declaration in Benedicto v. Court of Appeals. 8 Second, and more importantly, we dismissed the petition for certiorari filed by petitioners because they failed to show grave abuse of discretion on the part of the Ombudsman when he dismissed petitioners criminal complaint

against respondents for lack of probable cause. We reiterate that our inquiry was limited to a determination of whether the Ombudsman committed grave abuse of discretion when he found no probable cause to indict respondents for various felonies under the RPC. The invocation of our certiorari jurisdiction over the act of a constitutional officer, such as the Ombudsman, must adhere to the strict requirements provided in the Rules of Court and in jurisprudence. The determination of whether there was grave abuse of discretion does not, in any way, constitute a novel question of law. We first pointed out in our Decision that the complaint-affidavits of petitioners, apart from a blanket charge that remaining respondents, Gonzales (who we thought was alive at that time) and Exequiel Garcia, are officers of KBS/RPN and/or alter egos of Benedicto, are bereft of sufficient ground to engender a well-founded belief that crimes have been committed and that respondents, namely, Gonzales and Garcia, are probably guilty thereof and should be held for trial. Certainly, no grave abuse of discretion can be imputed to the Ombudsman that would warrant a reversal of his Resolution. The charges of individual petitioners Eugenio, Jr., Oscar and Augusto Almeda against respondents, Gonzales and Garcia, contained in their respective complaint-affidavits simply consisted of the following: 1. Complaint-affidavit of Eugenio, Jr. 32.1. I was briefed that Senator Estanislao Fernandez in representation of Benedicto, met with Senator Taada at the Club Filipino in June 1976. Discussions were had on how to arrive at the "reasonable rental" for the use of ABS-CBN stations and facilities. A second meeting at Club Filipino took place on July 7, 1976 between Senators Taada and Fernandez, who brought along Atty. Miguel Gonzales, a close associate and lawyer of Benedicto and an officer of KBS. xxxx 38.2. The illegal takeover of ABS-CBN stations, studios and facilities, and the loss and/or damages caused to our assets occurred while Benedicto, Exequiel Garcia, Miguel Gonzales, and Salvador Tan were in possession, control and management of our network. Roberto S. Benedicto was the Chairman of the Board of KBS-RPN and its Chief Executive Officer (CEO), to whom most of the KBS-RPN officers reported while he was in Metro Manila. Miguel Gonzales, the Vice-President of KBS, and Exequiel Garcia, the Treasurer, were the alter egos of Benedicto whenever the latter was out of the country; x x x.9 2. Complaint-affidavit of Oscar 25. All the illegal activities as complained of above, were done upon the orders, instructions and directives of Roberto S. Benedicto, the Chairman of the Board and Chief Executive Officer of the KBS/RPN group; Miguel Gonzales and Exequiel Garcia, close colleagues and business partners of Benedicto who were either directors/officers KBS/RPN and who acted as Benedictos alter egos whenever the latter was out of the country; x x x. xxxx 38. Senator Estanislao Fernandez, in representation of Benedicto, met with Senator Taada at the Club Filipino on June 1976. Discussions were had on how to arrive at the "reasonable rental" for the use of ABS stations and facilities. A second meeting at Club Filipino took place on July 7, 1976 between Senators Taada and Fernandez, who brought along Atty. Mike Gonzales, a close associate and friend of Benedicto and an officer of KBS.10 3. Complaint-affidavit of Augusto Almeda 21.1. Barely two weeks from their entry into the ABS Broadcast Center, KBS personnel started making unauthorized withdrawals from the ABS Stock Room. All these withdrawals of supplies and equipment were made under the orders of Benedicto, Miguel Gonzales, Exequiel Garcia, and Salvador Tan, the Chairman, the

Vice-President, Treasurer, and the General Manager of KBS, respectively. No payment was ever made by either Benedicto or KBS for all the supplies and equipment withdrawn from the ABS Broadcast Center. xxxx 31. Senator Estanislao Fernandez, in representation of Benedicto, met with Senator Taada at the Club Filipino on June 1976. Discussions were had on how to arrive at the "reasonable rental" for the use of ABS stations and facilities. A second meeting at Club Filipino took place on July 7, 1976 between Senators Taada and Fernandez, who brought along Atty. Mike Gonzales, a close associate and friend of Benedicto and an officer of KBS.11 From the foregoing, it is beyond cavil that there is no reason for us to depart from our policy of non-interference with the Ombudsmans finding of probable cause or lack thereof. On the strength of these allegations, we simply could not find any rational basis to impute grave abuse of discretion to the Ombudsmans dismissal of the criminal complaints. Third, we did not state in the Decision that ratification extinguishes criminal liability. We simply applied ratification in determining the conflicting claims of petitioners regarding the execution of the letter-agreement. Petitioners, desperate to attach criminal liability to respondents acts, specifically to respondent Benedicto, alleged in their complaint-affidavits that Benedicto forced, coerced and intimidated petitioners into signing the letter-agreement. In other words, petitioners disown this letter-agreement that they were supposedly forced into signing, such that this resulted in a violation of Article 298 of the RPC (Execution of Deeds by means of Violence or Intimidation). However, three elements must concur in order for an offender to be held liable under Article 298: (1) that the offender has intent to defraud another. (2) that the offender compels him to sign, execute, or deliver any public instrument or document. (3) that the compulsion is by means of violence or intimidation. 12 The element of intent to defraud is not present because, even if, initially, as claimed by petitioners, they were forced to sign the letter-agreement, petitioners made claims based thereon and invoked the provisions thereof. In fact, petitioners wanted respondents to honor the letter-agreement and to pay rentals for the use of the ABS-CBN facilities. By doing so, petitioners effectively, although they were careful not to articulate this fact, affirmed their signatures in this letter-agreement. True, ratification is primarily a principle in our civil law on contracts. Yet, their subsequent acts in negotiating for the rentals of the facilities which translate into ratification of the letter-agreement cannot be disregarded simply because ratification is a civil law concept. The claims of petitioners must be consistent and must, singularly, demonstrate respondents culpability for the crimes they are charged with. Sadly, petitioners failed in this regard because, to reiterate, they effectively ratified and advanced the validity of this letter-agreement in their claim against the estate of Benedicto. Finally, we take note of the conflicting claim of petitioners by filing a separate civil action to enforce a claim against the estate of respondent Benedicto. Petitioners do not even specifically deny this fact and simply sidestep this issue which was squarely raised in the Decision. The Rules of Court has separate provisions for different claims against the estate of a decedent under Section 5 of Rule 86 and Section 1 of Rule 87: RULE 86. SECTION 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except

that they may be set forth as counter claims in any action that the executor or administrator may bring against the claimants. Xxx Claims not yet due, or contingent, may be approved at their present value. RULE 87. SECTION 1. Actions which may and which may not be brought against executor or administrator. No action upon a claim for the recovery of money or debt or interest thereon shall be commenced against the executor or administrator; but actions to recover real or personal property, or an interest therein, from the estate, or to enforce a lien thereon, and actions to recover damages for an injury to person or property, real or personal, may be commenced against him. If, as insisted by petitioners, respondents committed felonies in forcing them to sign the letter-agreement, petitioners should have filed an action against the executor or administrator of Benedictos estate based on Section 1, Rule 87 of the Rules of Court. But they did not. Instead they filed a claim against the estate based on contract, the unambiguous letter-agreement, under Section 5, Rule 86 of the Rules of Court. The existence of this claim against the estate of Benedicto as opposed to the filing of an action against the executor or administrator of Benedictos estate forecloses all issues on the circumstances surrounding the execution of this letter- agreement. We are not oblivious of the fact that, in the milieu prevailing during the Marcos years, incidences involving intimidation of businessmen were not uncommon. Neither are we totally unaware of the reputed closeness of Benedicto to President Marcos. However, given the foregoing options open to them under the Rules of Court, petitioners choice of remedies by filing their claim under Section 5, Rule 86 after Marcos had already been ousted and full democratic space restored works against their contention, challenging the validity of the letteragreement. Now, petitioners must live with the consequences of their choice. WHEREFORE, in light of the foregoing, the Motion to Refer the Case to the Court en banc and the Motion for Reconsideration are DENIED. SO ORDERED.

VALENZUELA HARDWOOD VS CA
G.R. No. 102316 June 30, 1997 VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner, vs. COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.

PANGANIBAN, J.: Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo" 1 valid? This is the main question raised in this petition for review assailing the Decision of Respondent Court of Appeals 2 in CA-G.R. No. CV-20156 promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which reads: WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the lost logs with legal interest thereon from the date of demand on February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS (2,000,000.00) representing the value of lost logs plus legal interest from the date of demand on April 24, 1984 until full payment thereof; the reasonable attorney's fees in the amount equivalent to five (5) percent of the amount of the claim and the costs of the suit. Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of the stipulated freight charges. Defendant South Sea Surety and Insurance Company's counterclaim is hereby dismissed. In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far ( sic) as the liability of the Seven Brothers Shipping Corporation to the plaintiff is concerned which is hereby REVERSED and SET ASIDE. 3

The Facts The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows: It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila. On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date.

On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua. In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiff's insured logs. On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both defendants shipping corporation and the surety company appealed. Defendant-appellant Seven Brothers Shipping Corporation impute ( sic) to the court a quo the following assignment of errors, to wit: A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven Ambassadors, was not due to fortuitous event but to the negligence of the captain in stowing and securing the logs on board, causing the iron chains to snap and the logs to roll to the portside. B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to public policy invoking article 1745 of the New Civil Code. C. The lower court erred in holding defendant-appellant Seven Brothers Shipping Corporation liable in the alternative and ordering/directing it to pay plaintiff-appellee the amount of two million (2,000,000.00) pesos representing the value of the logs plus legal interest from date of demand until fully paid. D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping Corporation to pay appellee reasonable attorney's fees in the amount equivalent to 5% of the amount of the claim and the costs of the suit. E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its counter-claim for attorney's fees. F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping Corporation. Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors: A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant South Sea Surety and Insurance Company, Inc. and likewise erred in not holding that he was the representative of the insurance broker Columbia Insurance Brokers, Ltd. B. The trial court erred in holding that Victorio Chua received compensation/commission on the premiums paid on the policies issued by the defendant-appellant South Sea Surety and Insurance Company, Inc.

C. The trial court erred in not applying Section 77 of the Insurance Code. D. The trial court erred in disregarding the "receipt of payment clause" attached to and forming part of the Marine Cargo Insurance Policy No. 84/24229. E. The trial court in disregarding the statement of account or bill stating the amount of premium and documentary stamps to be paid on the policy by the plaintiff-appellee. F. The trial court erred in disregarding the endorsement of cancellation of the policy due to nonpayment of premium and documentary stamps. G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing value of the policy with legal interest from 2 February 1984 until the amount is fully paid, H. The trial court erred in not awarding to the defendant-appellant the attorney's fees alleged and proven in its counterclaim.
The primary issue to be resolved before us is whether defendants shipping corporation and the surety company are liable to the plaintiff for the latter's lost logs. 4

The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance Company ("South Sea"), but modified it by holding that Seven Brothers Shipping Corporation ("Seven Brothers") was not liable for the lost cargo. 5 In modifying the RTC judgment, the respondent appellate court ratiocinated thus: It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss. The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24).
The shipping corporation should not therefore be held liable for the loss of the logs.
6

South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. ("Valenzuela") filed separate petitions for review before this Court. In a Resolution dated June 2, 1995, this Court denied the petition of South Sea. 7 There the Court found no reason to reverse the factual findings of the trial court and the Court of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuela's premium payment for the marine cargo insurance policy which was thus binding on the insurer. 8 The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision which exempted Seven Brothers from any liability for the lost cargo. The Issue Petitioner Valenzuela's arguments resolve around a single issue: "whether or not respondent Court (of Appeals) committed a reversible error in upholding the validity of the stipulation in the charter party executed between the

petitioner and the private respondent exempting the latter from liability for the loss of petitioner's logs arising from the negligence of its (Seven Brothers') captain." 9 The Court's Ruling The petition is not meritorious. Validity of Stipulation is Lis Mota The charter party between the petitioner and private respondent stipulated that the "(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo." 10 The validity of this stipulation is the lis mota of this case. It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event." 11 Likewise undisputed is the status of Private Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition. 12 The trial court deemed the charter party stipulation void for being contrary to public policy, the Civil Code which provides:
13

citing Article 1745 of

Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of the Code of Commerce 14 and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil Code, 15 petitioner further contends that said stipulation "gives no duty or obligation to the private respondent to observe the diligence of a good father of a family in the custody and transportation of the cargo." The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in transporting petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be applied unless expressly stipulated by the parties in their charter party. 16

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers. The issue posed in this case and the arguments raised by petitioner are not novel; they were resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc. 18 In that case, the trial court similarly nullified a stipulation identical to that involved in the present case for being contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial court held the shipowner liable for damages resulting for the partial loss of the cargo. This Court reversed the trial court and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine: The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier . The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship totally chartered for the used of a single party. 19 (Emphasis supplied.)

Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle against onesided stipulations inserted in tickets, invoices or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not similarly situated. It can and in fact it usually does enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carrier's obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes a normal business risk. Petitioner contends that the rule in Home Insurance is not applicable to the present case because it "covers only a stipulation exempting a private carrier from liability for the negligence of his agent, but it does not apply to a stipulation exempting a private carrier like private respondent from the negligence of his employee or servant which is the situation in this case." 20 This contention of petitioner is bereft of merit, for it raises a distinction without any substantive difference. The case Home Insurance specifically dealt with "the liability of the shipowner for acts or negligence of its captain and crew" 21 and a charter party stipulation which "exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner on board, for whose acts the owner would ordinarily be liable except for said paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at bar. The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the rule in the Philippines 23 deserves scant consideration. The Court there categorically held that said rule was "reasonable"

and proceeded to apply it in the resolution of that case. Petitioner miserably failed to show such circumstances or arguments which would necessitate a departure from a well-settled rule. Consequently, our ruling in said case remains a binding judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code which provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines." In fine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a stipulation exempting the owner from liability even for the negligence of its agents is valid." 24 Other Arguments On the basis of the foregoing alone, the present petition may already be denied; the Court, however, will discuss the other arguments of petitioner for the benefit and satisfaction of all concerned. Articles 586 and 587, Code of Commerce Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of the Code of Commerce which confer on petitioner the right to recover damages from the shipowner and ship agent for the acts or conduct of the captain. 25 We are not persuaded. Whatever rights petitioner may have under the aforementioned statutory provisions were waived when it entered into the charter party. Article 6 of the Civil Code provides that "(r)ights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a person with a right recognized by law." As a general rule, patrimonial rights may be waived as opposed to rights to personality and family rights which may not be made the subject of waiver. 26 Being patently and undoubtedly patrimonial, petitioner's right conferred under said articles may be waived. This, the petitioner did by acceding to the contractual stipulation that it is solely responsible or any damage to the cargo, thereby exempting the private carrier from any responsibility for loss or damage thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and private respondent alone; it is not imbued with public policy considerations for the general public or third persons are not affected thereby. Articles 1170 and 1173, Civil Code Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170 and 1173 of the Civil Code 27 which read: Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, shall apply. If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to the present case. Moreover, the factual milieu of this case does not justify the application of the second paragraph of Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event the law or the contract is silent. In the instant case, Article 362 of the Code of Commerce 28 provides the standard of ordinary diligence for

the carriage of goods by a carrier. The standard of diligence under this statutory provision may, however, be modified in a contract of private carriage as the petitioner and private respondent had done in their charter party. Cases Cited by Petitioner Inapplicable Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and argues that the public policy considerations stated there vis-a-vis contractual stipulations limiting the carrier's liability be applied "with equal force" to this case. 31 It also cites Manila Railroad Co. vs.Compaia Transatlantica 32 and contends that stipulations exempting a party from liability for damages due to negligence "should not be countenanced" and should be "strictly construed" against the party claiming its benefit.33 We disagree. The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the application of such policy considerations and concomitantly stricter rules. As already discussed above, the public policy considerations behind the rigorous treatment of common carriers are absent in the case of private carriers. Hence, the stringent laws applicable to common carriers are not applied to private carries. The case of Manila Railroad is also inapplicable because the action for damages there does not involve a contract for transportation. Furthermore, the defendant therein made a "promise to use due care in the lifting operations" and, consequently, it was "bound by its undertaking"'; besides, the exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable occurrences" not caused by its "personal negligence." This promise was thus constructed to make sense together with the stipulation against liability for damages. 34 In the present case, we stress that the private respondent made no such promise. The agreement of the parties to exempt the shipowner from responsibility for any damage to the cargo and place responsibility over the same to petitioner is the lone stipulation considered now by this Court. Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo, 35 Walter A. Smith & Co. vs.Cadwallader Gibson Lumber Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta Development Co. vs.Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship Co. 39 in support of its contention that the shipowner be held liable for damages. 40 These however are not on all fours with the present case because they do not involve a similar factual milieu or an identical stipulation in the charter party expressly exempting the shipowner form responsibility for any damage to the cargo. Effect of the South Sea Resolution In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because this Court has earlier affirmed the liability of South Sea for the loss suffered by petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single loss. 41 In view of the above disquisition upholding the validity of the questioned charter party stipulation and holding that petitioner may not recover from private respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated June 2, 1995 42 affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private respondent. An aggrieved party may still recover the deficiency for the person causing the loss in the event the amount paid by the insurance company does not fully cover the loss. Article 2207 of the Civil Code provides: Art. 2207. If the plaintiff's property has been insured, and he has received indemnity for the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency form the person causing the loss or injury. WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED. SO ORDERED.

SAGRADA VS NACOCO
SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS, plaintiff-appellee, vs. NATIONAL COCONUT CORPORATION, defendant-appellant. First Assistant Corporate Counsel Federico C. Alikpala and Assistant Attorney Augusto Kalaw for appellant. Ramirez and Ortigas for appellee. LABRADOR, J.: This is an action to recover the possession of a piece of real property (land and warehouses) situated in Pandacan Manila, and the rentals for its occupation and use. The land belongs to the plaintiff, in whose name the title was registered before the war. On January 4, 1943, during the Japanese military occupation, the land was acquired by a Japanese corporation by the name of Taiwan Tekkosho for the sum of P140,00, and thereupon title thereto issued in its name (transfer certificate of title No. 64330, Register of Deeds, Manila). After liberation, more specifically on April 4, 1946, the Alien Property Custodian of the United States of America took possession, control, and custody thereof under section 12 of the Trading with the Enemy Act, 40 Stat., 411, for the reason that it belonged to an enemy national. During the year 1946 the property was occupied by the Copra Export Management Company under a custodianship agreement with United States Alien Property Custodian (Exhibit G), and when it vacated the property it was occupied by the defendant herein. The Philippine Government made representations with the Office Alien Property Custodian for the use of property by the Government (see Exhibits 2, 2-A, 2-B, and 1). On March 31, 1947, the defendant was authorized to repair the warehouse on the land, and actually spent thereon the repairs the sum of P26,898.27. In 1948, defendant leased one-third of the warehouse to one Dioscoro Sarile at a monthly rental of P500, which was later raised to P1,000 a month. Sarile did not pay the rents, so action was brought against him. It is not shown, however, if the judgment was ever executed. Plaintiff made claim to the property before the Alien Property Custodian of the United States, but as this was denied, it brought an action in court (Court of First Instance of Manila, civil case No. 5007, entitled "La Sagrada Orden Predicadores de la Provinicia del Santisimo Rosario de Filipinas," vs. Philippine Alien Property Administrator, defendant, Republic of the Philippines, intervenor) to annul the sale of property of Taiwan Tekkosho, and recover its possession. The Republic of the Philippines was allowed to intervene in the action. The case did not come for trial because the parties presented a joint petition in which it is claimed by plaintiff that the sale in favor of the Taiwan Tekkosho was null and void because it was executed under threats, duress, and intimidation, and it was agreed that the title issued in the name of the Taiwan Tekkosho be cancelled and the original title of plaintiff re-issued; that the claims, rights, title, and interest of the Alien Property Custodian be cancelled and held for naught; that the occupant National Coconut Corporation has until February 28, 1949, to recover its equipment from the property and vacate the premises; that plaintiff, upon entry of judgment, pay to the Philippine Alien Property Administration the sum of P140,000; and that the Philippine Alien Property Administration be free from responsibility or liability for any act of the National Coconut Corporation, etc. Pursuant to the agreement the court rendered judgment releasing the defendant and the intervenor from liability, but reversing to the plaintiff the right to recover from the National Coconut Corporation reasonable rentals for the use and occupation of the premises. (Exhibit A-1.) The present action is to recover the reasonable rentals from August, 1946, the date when the defendant began to occupy the premises, to the date it vacated it. The defendant does not contest its liability for the rentals at the rate of P3,000 per month from February 28, 1949 (the date specified in the judgment in civil case No. 5007), but resists the claim therefor prior to this date. It interposes the defense that it occupied the property in good faith, under no obligation whatsoever to pay rentals for the use and occupation of the warehouse. Judgment was rendered for the plaintiff to recover from the defendant the sum of P3,000 a month, as reasonable rentals, from August, 1946, to the date the defendant vacates the premises. The judgment declares that plaintiff has always been the owner, as the sale of Japanese purchaser was void ab initio; that the Alien Property Administration never acquired any right to the property, but that it held the same in trust until the determination as to whether or not the owner is an enemy citizen. The trial court further declares that defendant can not claim any better rights than its predecessor, the Alien Property Administration, and that as defendant has used the property and had subleased portion thereof, it must pay reasonable rentals for its occupation.

Against this judgment this appeal has been interposed, the following assignment of error having been made on defendant-appellant's behalf: The trial court erred in holding the defendant liable for rentals or compensation for the use and occupation of the property from the middle of August, 1946, to December 14, 1948. 1. Want to "ownership rights" of the Philippine Alien Property Administration did not render illegal or invalidate its grant to the defendant of the free use of property. 2. the decision of the Court of First Instance of Manila declaring the sale by the plaintiff to the Japanese purchaser null and void ab initio and that the plaintiff was and has remained as the legal owner of the property, without legal interruption, is not conclusive. 3. Reservation to the plaintiff of the right to recover from the defendant corporation not binding on the later; 4. Use of the property for commercial purposes in itself alone does not justify payment of rentals. 5. Defendant's possession was in good faith. 6. Defendant's possession in the nature of usufruct. In reply, plaintiff-appellee's counsel contends that the Philippine Allien Property Administration (PAPA) was a mere administrator of the owner (who ultimately was decided to be plaintiff), and that as defendant has used it for commercial purposes and has leased portion of it, it should be responsible therefore to the owner, who had been deprived of the possession for so many years. (Appellee's brief, pp. 20, 23.) We can not understand how the trial court, from the mere fact that plaintiff-appellee was the owner of the property and the defendant-appellant the occupant, which used for its own benefit but by the express permission of the Alien Property Custodian of the United States, so easily jumped to the conclusion that the occupant is liable for the value of such use and occupation. If defendant-appellant is liable at all, its obligations, must arise from any of the four sources of obligations, namley, law, contract or quasi-contract, crime, or negligence. (Article 1089, Spanish Civil Code.) Defendant-appellant is not guilty of any offense at all, because it entered the premises and occupied it with the permission of the entity which had the legal control and administration thereof, the Allien Property Administration. Neither was there any negligence on its part. There was also no privity (of contract or obligation) between the Alien Property Custodian and the Taiwan Tekkosho, which had secured the possession of the property from the plaintiff-appellee by the use of duress, such that the Alien Property Custodian or its permittee (defendant-appellant) may be held responsible for the supposed illegality of the occupation of the property by the said Taiwan Tekkosho. The Allien Property Administration had the control and administration of the property not as successor to the interests of the enemy holder of the title, the Taiwan Tekkosho, but by express provision of law (Trading with the Enemy Act of the United States, 40 Stat., 411; 50 U.S.C.A., 189). Neither is it a trustee of the former owner, the plaintiff-appellee herein, but a trustee of then Government of the United States (32 Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own right, to the exclusion of, and against the claim or title of, the enemy owner. (Youghioheny & Ohio Coal Co. vs. Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From August, 1946, when defendant-appellant took possession, to the late of judgment on February 28, 1948, Allien Property Administration had the absolute control of the property as trustee of the Government of the United States, with power to dispose of it by sale or otherwise, as though it were the absolute owner. (U.S vs. Chemical Foundation [C.C.A. Del. 1925], 5 F. [2d], 191; 50 U.S.C.A., 283.) Therefore, even if defendant-appellant were liable to the Allien Property Administration for rentals, these would not accrue to the benefit of the plaintiff-appellee, the owner, but to the United States Government. But there is another ground why the claim or rentals can not be made against defendant-appellant. There was no agreement between the Alien Property Custodian and the defendant-appellant for the latter to pay rentals on the property. The existence of an implied agreement to that effect is contrary to the circumstances. The copra Export Management Company, which preceded the defendant-appellant, in the possession and use of the property, does not appear to have paid rentals therefor, as it occupied it by what the parties denominated a "custodianship

agreement," and there is no provision therein for the payment of rentals or of any compensation for its custody and or occupation and the use. The Trading with the Enemy Act, as originally enacted, was purely a measure of conversation, hence, it is very unlikely that rentals were demanded for the use of the property. When the National coconut Corporation succeeded the Copra Export Management Company in the possession and use of the property, it must have been also free from payment of rentals, especially as it was Government corporation, and steps where then being taken by the Philippine Government to secure the property for the National Coconut Corporation. So that the circumstances do not justify the finding that there was an implied agreement that the defendant-appellant was to pay for the use and occupation of the premises at all. The above considerations show that plaintiff-appellee's claim for rentals before it obtained the judgment annulling the sale of the Taiwan Tekkosho may not be predicated on any negligence or offense of the defendant-appellant, or any contract, express or implied, because the Allien Property Administration was neither a trustee of plaintiffappellee, nor a privy to the obligations of the Taiwan Tekkosho, its title being based by legal provision of the seizure of enemy property. We have also tried in vain to find a law or provision thereof, or any principle in quasi contracts or equity, upon which the claim can be supported. On the contrary, as defendant-appellant entered into possession without any expectation of liability for such use and occupation, it is only fair and just that it may not be held liable therefor. And as to the rents it collected from its lessee, the same should accrue to it as a possessor in good faith, as this Court has already expressly held. (Resolution, National Coconut Corporation vs. Geronimo, 83 Phil. 467.) Lastly, the reservation of this action may not be considered as vesting a new right; if no right to claim for rentals existed at the time of the reservation, no rights can arise or accrue from such reservation alone. Wherefore, the part of the judgment appealed from, which sentences defendant-appellant to pay rentals from August, 1946, to February 28, 1949, is hereby reversed. In all other respects the judgment is affirmed. Costs of this appeal shall be against the plaintiff-appellee.