G.R. No.
174156 June 20, 2012 required of a good father of a family in leasing or assigning
FILCAR TRANSPORT SERVICES, Petitioner,
vs.
JOSE A. ESPINAS, Respondent.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 filed
by petitioner Filcar Transport Services (Filcar), challenging the
decision2 and the resolution3 of the Court of Appeals (CA) in
CA-G.R. SP No. 86603.
The facts of the case, gathered from the records, are briefly
summarized below.
On November 22, 1998, at around 6:30 p.m., respondent
Jose A. Espinas was driving his car along Leon Guinto Street
in Manila. Upon reaching the intersection of Leon Guinto and
President Quirino Streets, Espinas stopped his car. When the
signal light turned green, he proceeded to cross the
intersection. He was already in the middle of the intersection
when another car, traversing President Quirino Street and
going to Roxas Boulevard, suddenly hit and bumped his car.
As a result of the impact, Espinas’ car turned clockwise. The
other car escaped from the scene of the incident, but Espinas
was able to get its plate number.
After verifying with the Land Transportation Office, Espinas
learned that the owner of the other car, with plate number
UCF-545, is Filcar.
Espinas sent several letters to Filcar and to its President and
General Manager Carmen Flor, demanding payment for the
damages sustained by his car. On May 31, 2001, Espinas filed
a complaint for damages against Filcar and Carmen Flor
before the Metropolitan Trial Court (MeTC) of Manila, and the
case was raffled to Branch 13. In the complaint, Espinas
demanded that Filcar and Carmen Flor pay the amount of
₱97,910.00, representing actual damages sustained by his
car.
Filcar argued that while it is the registered owner of the car
that hit and bumped Espinas’ car, the car was assigned to its
Corporate Secretary Atty. Candido Flor, the husband of
Carmen Flor. Filcar further stated that when the incident
happened, the car was being driven by Atty. Flor’s personal
driver, Timoteo Floresca.
Atty. Flor, for his part, alleged that when the incident
occurred, he was attending a birthday celebration at a nearby
hotel, and it was only later that night when he noticed a small
dent on and the cracked signal light of the car. On seeing the
dent and the crack, Atty. Flor allegedly asked Floresca what
happened, and the driver replied that it was a result of a "hit
and run" while the car was parked in front of Bogota on Pedro
Gil Avenue, Manila.
Filcar denied any liability to Espinas and claimed that the
incident was not due to its fault or negligence since Floresca
was not its employee but that of Atty. Flor. Filcar and Carmen
Flor both said that they always exercised the due diligence
their vehicles to third parties.
The MeTC Decision
The MeTC, in its decision dated January 20, 2004,4 ruled in
favor of Espinas, and ordered Filcar and Carmen Flor, jointly
and severally, to pay Espinas ₱97,910.00 as actual damages,
representing the cost of repair, with interest at 6% per
annum from the date the complaint was filed; ₱50,000.00 as
moral damages; ₱20,000.00 as exemplary damages; and
₱20,000.00 as attorney’s fees. The MeTC ruled that Filcar, as
the registered owner of the vehicle, is primarily responsible
for damages resulting from the vehicle’s operation.
The RTC Decision
The Regional Trial Court (RTC) of Manila, Branch 20, in the
exercise of its appellate jurisdiction, affirmed the MeTC
decision.5 The RTC ruled that Filcar failed to prove that
Floresca was not its employee as no proof was adduced that
Floresca was personally hired by Atty. Flor. The RTC agreed
with the MeTC that the registered owner of a vehicle is
directly and primarily liable for the damages sustained by
third persons as a consequence of the negligent or careless
operation of a vehicle registered in its name. The RTC added
that the victim of recklessness on the public highways is
without means to discover or identify the person actually
causing the injury or damage. Thus, the only recourse is to
determine the owner, through the vehicle’s registration, and
to hold him responsible for the damages.
The CA Decision
On appeal, the CA partly granted the petition in CA-G.R. SP
No. 86603; it modified the RTC decision by ruling that
Carmen Flor, President and General Manager of Filcar, is not
personally liable to Espinas. The appellate court pointed out
that, subject to recognized exceptions, the liability of a
corporation is not the liability of its corporate officers because
a corporate entity – subject to well-recognized exceptions –
has a separate and distinct personality from its officers and
shareholders. Since the circumstances in the case at bar do
not fall under the exceptions recognized by law, the CA
concluded that the liability for damages cannot attach to
Carmen Flor.
The CA, however, affirmed the liability of Filcar to pay Espinas
damages. According to the CA, even assuming that there had
been no employer-employee relationship between Filcar and
the driver of the vehicle, Floresca, the former can be held
liable under the registered owner rule.
The CA relied on the rule that the registered owner of a
vehicle is directly and primarily responsible to the public and
to third persons while the vehicle is being operated. Citing
Erezo, et al. v. Jepte,6 the CA said that the rationale behind
the rule is to avoid circumstances where vehicles running on
public highways cause accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. In Erezo,
the Court said that the main aim of motor vehicle registration
is to identify the owner, so that if a vehicle causes damage or
injury to pedestrians or other vehicles, responsibility can be
traced to a definite individual and that individual is the
registered owner of the vehicle.7
The CA did not accept Filcar’s argument that it cannot be held
liable for damages because the driver of the vehicle was not
its employee. In so ruling, the CA cited the case of Villanueva
v. Domingo8 where the Court said that the question of
whether the driver was authorized by the actual owner is
irrelevant in determining the primary and direct responsibility
of the registered owner of a vehicle for accidents, injuries and
deaths caused by the operation of his vehicle.
Filcar filed a motion for reconsideration which the CA denied
in its Resolution dated July 6, 2006.
Hence, the present petition.
The Issue
Simply stated, the issue for the consideration of this Court is:
whether Filcar, as registered owner of the motor vehicle
which figured in an accident, may be held liable for the
damages caused to Espinas.
Our Ruling
The petition is without merit.
Filcar, as registered owner, is deemed the employer of the
driver, Floresca, and is thus vicariously liable under Article
2176 in relation with Article 2180 of the Civil Code
It is undisputed that Filcar is the registered owner of the
motor vehicle which hit and caused damage to Espinas’ car;
and it is on the basis of this fact that we hold Filcar primarily
and directly liable to Espinas for damages.
As a general rule, one is only responsible for his own act or
omission.9 Thus, a person will generally be held liable only for
the torts committed by himself and not by another. This
general rule is laid down in Article 2176 of the Civil Code,
which provides to wit:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
Based on the above-cited article, the obligation to indemnify
another for damage caused by one’s act or omission is
imposed upon the tortfeasor himself, i.e., the person who
committed the negligent act or omission. The law, however,
provides for exceptions when it makes certain persons liable
for the act or omission of another.
One exception is an employer who is made vicariously liable
for the tort committed by his employee. Article 2180 of the
Civil Code states:
Article 2180. The obligation imposed by Article 2176 is
demandable not only for one’s own acts or omissions, but also
for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of
their assigned tasks, even though the former are not engaged
in any business or industry.
xxxx
The responsibility treated of in this article shall cease when
the persons herein mentioned prove that they observed all
the diligence of a good father of a family to prevent damage.
Under Article 2176, in relation with Article 2180, of the Civil
Code, an action predicated on an employee’s act or omission
may be instituted against the employer who is held liable for
the negligent act or omission committed by his employee.
Although the employer is not the actual tortfeasor, the law
makes him vicariously liable on the basis of the civil law
principle of pater familias for failure to exercise due care and
vigilance over the acts of one’s subordinates to prevent
damage to another.10 In the last paragraph of Article 2180 of
the Civil Code, the employer may invoke the defense that he
observed all the diligence of a good father of a family to
prevent damage.
As its core defense, Filcar contends that Article 2176, in
relation with Article 2180, of the Civil Code is inapplicable
because it presupposes the existence of an employer-
employee relationship. According to Filcar, it cannot be held
liable under the subject provisions because the driver of its
vehicle at the time of the accident, Floresca, is not its
employee but that of its Corporate Secretary, Atty. Flor.
We cannot agree. It is well settled that in case of motor
vehicle mishaps, the registered owner of the motor vehicle is
considered as the employer of the tortfeasor-driver, and is
made primarily liable for the tort committed by the latter
under Article 2176, in relation with Article 2180, of the Civil
Code.
In Equitable Leasing Corporation v. Suyom,11 we ruled that
in so far as third persons are concerned, the registered owner
of the motor vehicle is the employer of the negligent driver,
and the actual employer is considered merely as an agent of
such owner.
In that case, a tractor registered in the name of Equitable
Leasing Corporation (Equitable) figured in an accident, killing
and seriously injuring several persons. As part of its defense,
Equitable claimed that the tractor was initially leased to Mr.
Edwin Lim under a Lease Agreement, which agreement has
been overtaken by a Deed of Sale entered into by Equitable
and Ecatine Corporation (Ecatine). Equitable argued that it
cannot be held liable for damages because the tractor had
already been sold to Ecatine at the time of the accident and
the negligent driver was not its employee but of Ecatine.
In upholding the liability of Equitable, as registered owner of
the tractor, this Court said that "regardless of sales made of a
motor vehicle, the registered owner is the lawful operator
insofar as the public and third persons are concerned;
consequently, it is directly and primarily responsible for the
consequences of its operation."12 The Court further stated
that "[i]n contemplation of law, the owner/operator of record
is the employer of the driver, the actual operator and
employer being considered as merely its agent."13 Thus,
Equitable, as the registered owner of the tractor, was
considered under the law on quasi delict to be the employer
of the driver, Raul Tutor; Ecatine, Tutor’s actual employer,
was deemed merely as an agent of Equitable.
Thus, it is clear that for the purpose of holding the registered
owner of the motor vehicle primarily and directly liable for
damages under Article 2176, in relation with Article 2180, of
the Civil Code, the existence of an employer-employee
relationship, as it is understood in labor relations law, is not
required. It is sufficient to establish that Filcar is the
registered owner of the motor vehicle causing damage in
order that it may be held vicariously liable under Article 2180
of the Civil Code.
Rationale for holding the registered owner vicariously liable
The rationale for the rule that a registered owner is
vicariously liable for damages caused by the operation of his
motor vehicle is explained by the principle behind motor
vehicle registration, which has been discussed by this Court in
Erezo, and cited by the CA in its decision:
The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or
injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual,
the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of
identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries
caused on public highways. [emphasis ours]
Thus, whether there is an employer-employee relationship
between the registered owner and the driver is irrelevant in
determining the liability of the registered owner who the law
holds primarily and directly responsible for any accident,
injury or death caused by the operation of the vehicle in the
streets and highways.
As explained by this Court in Erezo, the general public policy
involved in motor vehicle registration is the protection of
innocent third persons who may have no means of identifying
public road malefactors and, therefore, would find it difficult –
if not impossible – to seek redress for damages they may
sustain in accidents resulting in deaths, injuries and other
damages; by fixing the person held primarily and directly
liable for the damages sustained by victims of road mishaps,
the law ensures that relief will always be available to them.
To identify the person primarily and directly responsible for
the damages would also prevent a situation where a
registered owner of a motor vehicle can easily escape liability
by passing on the blame to another who may have no means
to answer for the damages caused, thereby defeating the
claims of victims of road accidents. We take note that some
motor vehicles running on our roads are driven not by their
registered owners, but by employed drivers who, in most
instances, do not have the financial means to pay for the
damages caused in case of accidents.
These same principles apply by analogy to the case at bar.
Filcar should not be permitted to evade its liability for
damages by conveniently passing on the blame to another
party; in this case, its Corporate Secretary, Atty. Flor and his
alleged driver, Floresca. Following our reasoning in Equitable,
the agreement between Filcar and Atty. Flor to assign the
motor vehicle to the latter does not bind Espinas who was not
a party to and has no knowledge of the agreement, and
whose only recourse is to the motor vehicle registration.
Neither can Filcar use the defenses available under Article
2180 of the Civil Code - that the employee acts beyond the
scope of his assigned task or that it exercised the due
diligence of a good father of a family to prevent damage -
because the motor vehicle registration law, to a certain
extent, modified Article 2180 of the Civil Code by making
these defenses unavailable to the registered owner of the
motor vehicle.1awp++i1 Thus, for as long as Filcar is the
registered owner of the car involved in the vehicular accident,
it could not escape primary liability for the damages caused to
Espinas.
The public interest involved in this case must not be
underestimated. Road safety is one of the most common
problems that must be addressed in this country. We are not
unaware of news of road accidents involving reckless drivers
victimizing our citizens. Just recently, such pervasive
recklessness among most drivers took the life of a professor
of our state university.14 What is most disturbing is that our
existing laws do not seem to deter these road malefactors
from committing acts of recklessness.
We understand that the solution to the problem does not stop
with legislation. An effective administration and enforcement
of the laws must be ensured to reinforce discipline among
drivers and to remind owners of motor vehicles to exercise
due diligence and vigilance over the acts of their drivers to
prevent damage to others.
Thus, whether the driver of the motor vehicle, Floresca, is an
employee of Filcar is irrelevant in arriving at the conclusion
that Filcar is primarily and directly liable for the damages
sustained by Espinas. While Republic Act No. 4136 or the
Land Transportation and Traffic Code does not contain any
provision on the liability of registered owners in case of motor
vehicle mishaps, Article 2176, in relation with Article 2180, of
the Civil Code imposes an obligation upon Filcar, as registered
owner, to answer for the damages caused to Espinas’ car.
This interpretation is consistent with the strong public policy
of maintaining road safety, thereby reinforcing the aim of the
State to promote the responsible operation of motor vehicles
by its citizens.
This does not mean, however, that Filcar is left without any
recourse against the actual employer of the driver and the
driver himself. Under the civil law principle of unjust
enrichment, the registered owner of the motor vehicle has a
right to be indemnified by the actual employer of the driver of
the amount that he may be required to pay as damages for
the injury caused to another.
The set-up may be inconvenient for the registered owner of
the motor vehicle, but the inconvenience cannot outweigh the
more important public policy being advanced by the law in
this case which is the protection of innocent persons who may
be victims of reckless drivers and irresponsible motor vehicle
owners.
WHEREFORE, the petition is DENIED. The decision dated
February 16, 2006 and the resolution dated July 6, 2006 of
the Court of Appeals are AFFIRMED. Costs against petitioner
Filcar Transport Services.
SO ORDERED.
G.R. No. 110295 October 18, 1993
COCA-COLA BOTTLERS PHILIPPINES, INC.,
vs.
THE HONORABLE COURT OF APPEALS (Fifth Division)
and MS. LYDIA GERONIMO, respondents
DAVIDE, JR., J.:
This case concerns the proprietress of a school canteen which
had to close down as a consequence of the big drop in its
sales of soft drinks triggered by the discovery of foreign
substances in certain beverages sold by it. The interesting
issue posed is whether the subsequent action for damages by
the proprietress against the soft drinks manufacturer should
be treated as one for breach of implied warranty against
hidden defects or merchantability, as claimed by the
manufacturer, the petitioner herein which must therefore be
filed within six months from the delivery of the thing sold
pursuant to Article 1571 of the Civil Code, or one for quasi-
delict, as held by the public respondent, which can be filed
within four years pursuant to Article 1146 of the same Code.
On 7 May 1990, Lydia L. Geronimo, the herein private
respondent, filed a complaint for damages against petitioner
with the Regional Trial Court (RTC) of Dagupan City. 1 The
case was docketed as Civil Case No. D-9629. She alleges in
her complaint that she was the proprietress of Kindergarten
Wonderland Canteen docketed as located in Dagupan City, an
enterprise engaged in the sale of soft drinks (including Coke
and Sprite) and other goods to the students of Kindergarten
Wonderland and to the public; on or about 12 August 1989,
some parents of the students complained to her that the Coke
and Sprite soft drinks sold by her contained fiber-like matter
and other foreign substances or particles; he then went over
her stock of softdrinks and discovered the presence of some
fiber-like substances in the contents of some unopened Coke
bottles and a plastic matter in the contents of an unopened
Sprite bottle; she brought the said bottles to the Regional
Health Office of the Department of Health at San Fernando,
La Union, for examination; subsequently, she received a letter
from the Department of Health informing her that the
samples she submitted "are adulterated;" as a consequence
of the discovery of the foreign substances in the beverages,
her sales of soft drinks severely plummeted from the usual 10
cases per day to as low as 2 to 3 cases per day resulting in
losses of from P200.00 to P300.00 per day, and not long after
that she had to lose shop on 12 December 1989; she became
jobless and destitute; she demanded from the petitioner the
payment of damages but was rebuffed by it. She prayed for
judgment ordering the petitioner to pay her P5,000.00 as
actual damages, P72,000.00 as compensatory damages,
P500,000.00 as moral damages, P10,000.00 as exemplary
damages, the amount equal to 30% of the damages awarded
as attorney's fees, and the costs. 2
The petitioner moved to dismiss 3 the complaint on the
grounds of failure to exhaust administrative remedies and
prescription. Anent the latter ground, the petitioner argued
that since the complaint is for breach of warranty under
Article 1561 of the said Code. In her Comment 4 thereto,
private respondent alleged that the complaint is one for
damages which does not involve an administrative action and
that her cause of action is based on an injury to plaintiff's
right which can be brought within four years pursuant to
Article 1146 of the Civil Code; hence, the complaint was
seasonably filed. Subsequent related pleadings were
thereafter filed by the parties. 5
In its Order of 23 January 1991, 6 the trial court granted the
motion to dismiss. It ruled that the doctrine of exhaustion of
administrative remedies does not apply as the existing
administrative remedy is not adequate. It also stated that the
complaint is based on a contract, and not on quasi-delict, as
there exists pre-existing contractual relation between the
parties; thus, on the basis of Article 1571, in relation to
Article 1562, the complaint should have been filed within six
months from the delivery of the thing sold.
Her motion for the reconsideration of the order having been
denied by the trial court in its Order of 17 April 1991, 7 the
private respondent came to this Court via a petition for review
on certiorari which we referred to the public respondent "for
proper determination and disposition. 8 The public respondent
docketed the case as CA-G.R. SP No. 25391.
In a decision promulgated on 28 January 1992, 9 the public
respondent annulled the questioned orders of the RTC and
directed it to conduct further proceedings in Civil Case No. D-
9629. In holding for the private respondent, it ruled that:
Petitioner's complaint being one for quasi-
delict, and not for breach of warranty as
respondent contends, the applicable
prescriptive period is four years.
It should be stressed that the allegations in
the complaint plainly show that it is an
action or damages arising from
respondent's act of "recklessly and
negligently manufacturing adulterated food
items intended to be sold or public
consumption" (p. 25, rollo). It is truism in
legal procedure that what determines the
nature of an action are the facts alleged in
the complaint and those averred as a
defense in the defendant's answer (I Moran
126; Calo v. Roldan, 76 Phil. 445; Alger
Electric, Inc. v. CA, 135 SCRA 340).
Secondly, despite the literal wording of
Article 2176 of the Civil code, the existence
of contractual relations between the parties
does not absolutely preclude an action by
one against the other for quasi-delict arising
from negligence in the performance of a
contract.
In Singson v. Court of Appeals (23 SCRA 1117), the Supreme
Court ruled:
It has been repeatedly held: that the existence of a
contract between the parties does not bar the
commission of a tort by the one against the other
 and the consequent recovery of damages therefor
. . . . Thus in Air France vs. Carrascoso, . . . (it was
held that) although the relation between a passenger
and a carrier is "contractual both in origin and in
nature the act that breaks the contract may also be
a tort.
Significantly, in American jurisprudence, from which
Our law on Sales was taken, the authorities are one
in saying that he availability of an action or breach of
warranty does not bar an action for torts in a sale of
defective goods. 10
Its motion for the reconsideration of the decision having been
denied by the public respondent in its Resolution of 14 May
1993, 11 the petitioner took his recourse under Rule 45 of the
Revised Rules of Court. It alleges in its petition that:
I.
THE HONORABLE COURT OF APPEALS
COMMITTED A GRAVE AND REVERSIBLE
ERROR IN RULING THAT ARTICLE 2176,
THE GENERAL PROVISION ON QUASI-
DELICTS, IS APPLICABLE IN THIS CASE
WHEN THE ALLEGATIONS OF THE
COMPLAINT CLEARLY SHOW THAT PRIVATE
RESPONDENT'S CAUSE OF ACTION IS
BASEDON BREACH OF A SELLER'S IMPLIED
WARRANTIES UNDER OUR LAW ON SALES.
II.
CORROLARILY, THE HONORABLE COURT OF
APPEALS COMMITTED A GRAVE AND
REVERSIBLE ERROR IN OVERRULING
PETITIONER'S ARGUMENT THAT PRIVATE
RESPONDENT'S CAUSE OF ACTION HAD
PRESCRIBED UNDER ARTICLE 1571 OF THE
CIVIL CODE. 12
The petitioner insists that a cursory reading of the complaint
will reveal that the primary legal basis for private
respondent's cause of action is not Article 2176 of the Civil
Code on quasi-delict — for the complaint does not ascribe any
tortious or wrongful conduct on its part — but Articles 1561
and 1562 thereof on breach of a seller's implied warranties
under the law on sales. It contends the existence of a
contractual relation between the parties (arising from the
contract of sale) bars the application of the law on quasi-
delicts and that since private respondent's cause of action
arose from the breach of implied warranties, the complaint
should have been filed within six months room delivery of the
soft drinks pursuant to Article 171 of the Civil Code.
In her Comment the private respondent argues that in case of
breach of the seller's implied warranties, the vendee may,
under Article 1567 of the Civil Code, elect between
withdrawing from the contract or demanding a proportionate
reduction of the price, with damages in either case. She
asserts that Civil Case No. D-9629 is neither an action for
rescission nor for proportionate reduction of the price, but for
damages arising from a quasi-delict and that the public
respondent was correct in ruling that the existence of a
contract did not preclude the action for quasi-delict. As to the
issue of prescription, the private respondent insists that since
her cause of action is based on quasi-delict, the prescriptive
period therefore is four (4) years in accordance with Article
1144 of the Civil Code and thus the filing of the complaint was
well within the said period.
We find no merit in the petition. The public respondent's
conclusion that the cause of action in Civil Case No. D-9629 is
found on quasi-delict and that, therefore, pursuant to Article
1146 of the Civil Code, it prescribes in four (4) years is
supported by the allegations in the complaint, more
particularly paragraph 12 thereof, which makes reference to
the reckless and negligent manufacture of "adulterated food
items intended to be sold for public consumption."
The vendee's remedies against a vendor with respect to the
warranties against hidden defects of or encumbrances upon
the thing sold are not limited to those prescribed in Article
1567 of the Civil Code which provides:
Art. 1567. In the case of Articles 1561, 1562, 1564,
1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a
proportionate reduction of the price, with damages
either
case. 13
The vendee may also ask for the annulment of the contract
upon proof of error or fraud, in which case the ordinary rule
on obligations shall be applicable. 14 Under the law on
obligations, responsibility arising from fraud is demandable in
all obligations and any waiver of an action for future fraud is
void. Responsibility arising from negligence is also
demandable in any obligation, but such liability may be
regulated by the courts, according to the circumstances. 15
Those guilty of fraud, negligence, or delay in the performance
of their obligations and those who in any manner contravene
the tenor thereof are liable for damages. 16
The vendor could likewise be liable for quasi-delict under
Article 2176 of the Civil Code, and an action based thereon
may be brought by the vendee. While it may be true that the
pre-existing contract between the parties may, as a general
rule, bar the applicability of the law on quasi-delict, the
liability may itself be deemed to arise from quasi-delict, i.e.,
the acts which breaks the contract may also be a quasi-delict.
Thus, in Singson vs. Bank of the Philippine Islands, 17 this
Court stated:
We have repeatedly held, however, that the
existence of a contract between the parties does not
bar the commission of a tort by the one against the
other and the consequent recovery of damages
therefor. 18 Indeed, this view has been, in effect,
reiterated in a comparatively recent case. Thus, in
Air France vs. Carrascoso, 19 involving an airplane
passenger who, despite hi first-class ticket, had been
illegally ousted from his first-class accommodation
and compelled to take a seat in the tourist
compartment, was held entitled to recover damages
from the air-carrier, upon the ground of tort on the
latter's part, for, although the relation between the
passenger and a carrier is "contractual both in origin
and nature . . . the act that breaks the contract may
also be a tort.
Otherwise put, liability for quasi-delict may still exist
despite the presence of contractual relations. 20
 Under American law, the liabilities of a manufacturer
or seller of injury-causing products may be based on
negligence, 21 breach of warranty, 22 tort, 23 or other
grounds such as fraud, deceit, or misrepresentation.
24
Quasi-delict, as defined in Article 2176 of the Civil
Code, (which is known in Spanish legal treaties as
culpa aquiliana, culpa extra-contractual or cuasi-
delitos) 25 is homologous but not identical to tort
under the common law, 26 which includes not only
negligence, but also intentional criminal acts, such as
assault and battery, false imprisonment and deceit.
27
It must be made clear that our affirmance of the decision of
the public respondent should by no means be understood as
suggesting that the private respondent's claims for moral
damages have sufficient factual and legal basis.
IN VIEW OF ALL THE FOREGOING, the instant petition is
hereby DENIED for lack of merit, with costs against the
petitioner.
SO ORDERED.
G.R. No. L-24837 June 27, 1968
JULIAN C. SINGSON and RAMONA DEL
CASTILLO, plaintiffs,
vs.
BANK OF THE PHILIPPINE ISLANDS and SANTIAGO
FREIXAS, in his capacity as President of the said
Bank, defendants.
Gil B. Galang for plaintiffs.
Aviado and Aranda for defendants.
CONCEPCION, C.J.:
Appeal by plaintiffs, Julian Singson and his wife, Ramona del
Castillo, from a decision of the Court of First Instance of
Manila dismissing their complaint against defendants herein,
the Bank of the Philippine Islands and Santiago Freixas.
It appears that Singson, was one of the defendants in civil
case No. 23906 of the Court of First Instance, Manila, in
which judgment had been rendered sentencing him and his
co-defendants therein, namely, Celso Lobregat and Villa-
Abrille & Co., to pay the sum of P105,539.56 to the plaintiff
therein, Philippine Milling Co. Singson and Lobregat had
seasonably appealed from said judgment, but not Villa-Abrille
& Co., as against which said judgment, accordingly, became
final and executory. In due course, a writ of garnishment was
subsequently served upon the Bank of the Philippine Islands
— in which the Singsons had a current account — insofar as
Villa-Abrille's credits against the Bank were concerned. What
happened thereafter is set forth in the decision appealed
from, from which we quote:
Upon receipt of the said Writ of Garnishment, a clerk
of the bank in charge of all matters of execution and
garnishment, upon reading the name of the plaintiff
herein in the title of the Writ of Garnishment as a
party defendants, without further reading the body
of the said garnishment and informing himself that
said garnishment was merely intended for the
deposits of defendant Villa-Abrille & Co., Valentin
Teus, Fernando F. de Villa-Abrille and Joaquin Bona,
prepared a letter for the signature of the President of
the Bank informing the plaintiff Julian C. Singson of
the garnishment of his deposits by the plaintiff in
that case. Another letter was also prepared and
signed by the said President of the Bank for the
Special Sheriff dated April 17, 1963.
Subsequently, two checks issued by the plaintiff
Julian C. Singson, one for the amount of P383 in
favor of B. M. Glass Service dated April 16, 1963 and
bearing No. C-424852, and check No. C-394996 for
the amount of P100 in favor of the Lega Corporation,
and drawn against the said Bank, were deposited by
the said drawers with the said bank. Believing that
the plaintiff Singson, the drawer of the check, had no
more control over the balance of his deposits in the
said bank, the checks were dishonored and were
refused payment by the said bank. After the first
check was returned by the bank to the B. M. Glass
Service, the latter wrote plaintiff Julian C. Singson a
letter, dated April 19, 1963, advising him that his
check for P383.00 bearing No. C-424852 was not
honored by the bank for the reason that his account
therein had already been garnished. The said B. M.
Glass Service further stated in the said letter that
they were constrained to close his credit account
with them. In view thereof, plaintiff Julian C. Singson
wrote the defendant bank a letter on April 19, 1963,
claiming that his name was not included in the Writ
of Execution and Notice of Garnishment, which was
served upon the bank. The defendant President
Santiago Freixas of the said bank took steps to verify
this information and after having confirmed the
same, apologized to the plaintiff Julian C. Singson
and wrote him a letter dated April 22, 1963,
requesting him to disregard their letter of April 17,
1963, and that the action of garnishment from his
account had already been removed. A similar letter
was written by the said official of the bank on April
22, 1963 to the Special Sheriff informing him that his
letter dated April 17, 1963 to the said Special Sheriff
was considered cancelled and that they had already
removed the Notice of Garnishment from plaintiff
Singson's account. Thus, the defendants lost no time
to rectify the mistake that had been inadvertently
committed, resulting in the temporary freezing of the
account of the plaintiff with the said bank for a short
time.
xxx xxx xxx
On May 8, 1963, the Singsong commenced the present action
against the Bank and its president, Santiago Freixas, for
damages1 in consequence of said illegal freezing of plaintiffs'
account.1äwphï1.ñët
After appropriate proceedings, the Court of First Instance of
Manila rendered judgment dismissing the complaint upon the
ground that plaintiffs cannot recover from the defendants
upon the basis of a quasi-delict, because the relation between
the parties is contractual in nature; because this case does
not fall under Article 2219 of our Civil Code, upon which
plaintiffs rely; and because plaintiffs have not established the
amount of damages allegedly sustained by them.
The lower court held that plaintiffs' claim for damages cannot
be based upon a tort or quasi-delict, their relation with the
defendants being contractual in nature. We have repeatedly
held, however, that the existence of a contract between the
parties does not bar the commission of a tort by the one
against the order and the consequent recovery of damages
therefor.2 Indeed, this view has been, in effect, reiterated in a
comparatively recent case. Thus, in Air France vs.
Carrascoso,3 involving an airplane passenger who, despite his
first-class ticket, had been illegally ousted from his first-class
accommodation and compelled to take a seat in the tourist
compartment, was held entitled to recover damages from the
air-carrier, upon the ground of tort on the latter's part, for,
although the relation between a passenger and a carrier is
"contractual both in origin and nature ... the act that breaks
the contract may also be a tort".
In view, however, of the facts obtaining in the case at bar,
and considering, particularly, the circumstance, that the
wrong done to the plaintiff was remedied as soon as the
President of the bank realized the mistake he and his
subordinate employee had committed, the Court finds that an
award of nominal damages — the amount of which need not
be proven4 — in the sum of P1,000, in addition to attorney's
fees in the sum of P500, would suffice to vindicate plaintiff's
rights.5
WHEREFORE, the judgment appealed from is hereby
reversed, and another one shall be entered sentencing the
defendant Bank of the Philippine Islands to pay to the
plaintiffs said sums of P1,000, as nominal damages, and
P500, as attorney's fees, apart from the costs. It is so
ordered.
G.R. No. 188363 February 27, 2013
ALLIED BANKING CORPORATION, Petitioner,
vs.
BANK OF THE PHILIPPINE ISLANDS, Respondents.
DECISION
VILLARAMA, JR., J.:
A collecting bank is guilty of contributory negligence when it
accepted for deposit a post-dated check notwithstanding that
said check had been cleared by the drawee bank which failed
to return the check within the 24-hour reglementary period.
Petitioner Allied Banking Corporation appeals the
Decision1 dated March 19, 2009 of the Court of Appeals (CA)
in CA-G.R. SP No. 97604 which set aside the Decision2 dated
December 13, 2005 of the Regional Trial Court (RTC) of
Makati City, Branch 57 in Civil Case No. 05-418.
The factual antecedents:
On October 10, 2002, a check in the amount of
₱1,000,000.00 payable to "Mateo Mgt. Group International"
(MMGI) was presented for deposit and accepted at
petitioner's Kawit Branch. The check, post-dated "Oct. 9,
2003", was drawn against the account of Marciano Silva, Jr.
(Silva) with respondent Bank of the Philippine Islands (BPI)
Bel-Air Branch. Upon receipt, petitioner sent the check for
clearing to respondent through the Philippine Clearing House
Corporation (PCHC).3
The check was cleared by respondent and petitioner credited
the account of MMGI with ₱1,000,000.00. On October 22,
2002, MMGI’s account was closed and all the funds therein
were withdrawn. A month later, Silva discovered the debit of
₱1,000,000.00 from his account. In response to Silva’s
complaint, respondent credited his account with the aforesaid
sum.4
On March 21, 2003, respondent returned a photocopy of the
check to petitioner for the reason: "Postdated." Petitioner,
however, refused to accept and sent back to respondent a
photocopy of the check. Thereafter, the check, or more
accurately, the Charge Slip, was tossed several times from
petitioner to respondent, and back to petitioner, until on May
6, 2003, respondent requested the PCHC to take custody of
the check. Acting on the request, PCHC directed the
respondent to deliver the original check and informed it of
PCHC’s authority under Clearing House Operating Memo
(CHOM) No. 279 dated 06 September 1996 to split 50/50 the
amount of the check subject of a "Ping-Pong" controversy
which shall be implemented thru the issuance of Debit
Adjustment Tickets against the outward demands of the
banks involved. PCHC likewise encouraged respondent to
submit the controversy for resolution thru the PCHC
Arbitration Mechanism.5
However, it was petitioner who filed a complaint6 before the
Arbitration Committee, asserting that respondent should
solely bear the entire face value of the check due to its
negligence in failing to return the check to petitioner within
the 24-hour reglementary period as provided in Section
20.17 of the Clearing House Rules and Regulations8(CHRR)
2000. Petitioner prayed that respondent be ordered to
reimburse the sum of ₱500,000.00 with 12% interest per
annum, and to pay attorney’s fees and other arbitration
expenses.
In its Answer with Counterclaims,9 respondent charged
petitioner with gross negligence for accepting the post-dated
check in the first place. It contended that petitioner’s
admitted negligence was the sole and proximate cause of the
loss.
On December 8, 2004, the Arbitration Committee rendered its
Decision10 in favor of petitioner and against the respondent.
First, it ruled that the situation of the parties does not involve
a "Ping-Pong" controversy since the subject check was neither
returned within the reglementary time or through the PCHC
return window, nor coursed through the clearing facilities of
the PCHC.
As to respondent’s direct presentation of a photocopy of the
subject check, it was declared to be without legal basis
because Section 21.111 of the CHRR 2000 does not apply to
post-dated checks. The Arbitration Committee further noted
that respondent not only failed to return the check within the
24-hour reglementary period, it also failed to institute any
formal complaint within the contemplation of Section
20.312 and it appears that respondent was already contented
with the 50-50 split initially implemented by the PCHC.
Finding both parties negligent in the performance of their
duties, the Committee applied the doctrine of "Last Clear
Chance" and ruled that the loss should be shouldered by
respondent alone, thus:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff Allied Banking Corporation and
against defendant Bank of the Philippine Islands, ordering the
latter to pay the former the following:
(a) The sum of ₱500,000.00, plus interest thereon at
the rate of 12% per annum counted from the date of
filing of the complaint;
(b) Attorney’s fees in the amount of ₱25,000.00;
(c) The sum of ₱2,090.00 as and by way of
reimbursement of filing fees, plus the cost of suit.
SO ORDERED.13
Respondent filed a motion for reconsideration14 but it was
denied by the PCHC Board of Directors under Board
Resolution No. 10-200515 dated April 22, 2005. The Board
pointed out that what actually transpired was a "ping-pong"
"not of a check but of a Charge Slip (CS) enclosed in a carrier
envelope that went back and forth through the clearing
system in apparent reaction by [petitioner] to the wrongful
return via the PCHC clearing system." Respondent’s conduct
was held as a "gross and unmistakably deliberate violation" of
Section 20.2,16 in relation to Section 20.1(e) of the CHRR
2000.17
On May 13, 2005, respondent filed a petition for review 18 in
the RTC claiming that PCHC erred in constricting the return of
a post-dated check to Section 20.1, overlooking the fact that
Section 20.3 is also applicable which provision necessarily
contemplates defects that are referred to in Section 20.1 as
both sections are subsumed under the general provision
(Section 20) on the return of regular items. Respondent also
argued that assuming it to be liable, the PCHC erred in
holding it solely responsible and should bear entirely the
consequent loss considering that while respondent may have
the "last" opportunity in proximity, it was petitioner which had
the longest, fairest and clearest chance to discover the
mistake and avoid the happening of the loss. Lastly,
respondent assailed the award of attorney’s fees, arguing that
PCHC’s perception of "malice" against it and misuse of the
clearing machinery is clearly baseless and unfounded.
In its Decision dated December 13, 2005, the RTC affirmed
with modification the Arbitration Committee’s decision by
deleting the award of attorney’s fees. The RTC found no merit
in respondent’s stance that through inadvertence it failed to
discover that the check was post-dated and that confirmation
within 24 hours is often "elusive if not outright impossible"
because a drawee bank receives hundreds if not thousands of
checks in an ordinary clearing day. Thus:
Petitioner admitted par. 4 in its Answer with Counterclaim and
in its Memorandum, further adding that upon receipt of the
subject check "through inadvertence", it did not notice that
the check was postdated, hence, petitioner did not return the
same to respondent."
These contradict petitioner’s belated contention that it
discovered the defect only after the lapse of the reglementary
period. What the evidence on record discloses is that
petitioner received the check on October 10, 2002, that it was
promptly sent for clearing, that through inadvertence, it did
not notice that the check was postdated. Petitioner did not
even state when it discovered the defect in the subject check.
Likewise, petitioner’s contention that its discovery of the
defect was a non-issue in view of the admissions made in its
Answer is unavailing. The Court has noted the fact that the
PCHC Arbitration Committee conducted a clarificatory hearing
during which petitioner admitted that its standard operating
procedure as regards confirmation of checks was not
followed. No less than petitioner’s witness admitted that BPI
tried to call up the drawer of the check, as their procedure
dictates when it comes to checks in large amounts. However,
having initially failed to contact the drawer, no follow up calls
were made nor other actions taken. Despite these, petitioner
cleared the check. Having admitted making said calls, it
is simply impossible for petitioner to have missed the
fact that the check was postdated.19 (Emphasis supplied)
With the denial of its motion for partial reconsideration,
respondent elevated the case to the CA by filing a petition for
review under Rule 42 of the 1997 Rules of Civil Procedure, as
amended.
By Decision dated March 19, 2009, the CA set aside the RTC
judgment and ruled for a 60-40 sharing of the loss as it found
petitioner guilty of contributory negligence in accepting what
is clearly a post-dated check. The CA found that petitioner’s
failure to notice the irregularity on the face of the check was a
breach of its duty to the public and a telling sign of its lack of
due diligence in handling checks coursed through it. While the
CA conceded that the drawee bank has a bigger responsibility
in the clearing of checks, it declared that the presenting bank
cannot take lightly its obligation to make sure that only valid
checks are introduced into the clearing system. According to
the CA, considerations of public policy and substantial justice
will be served by allocating the damage on a 60-40 ratio, as it
thus decreed:
WHEREFORE, the decision of the Regional Trial Court of
Makati City (Branch 57) dated December 13, 2005 is
ANNULLED and SET ASIDE and judgment is rendered ordering
petitioner to pay respondent Allied Banking Corporation the
sum of ₱100,000.00 plus interest thereon at the rate of 6%
from July 10, 2003, which shall become 12% per annum from
finality hereof, until fully paid, aside from costs.
SO ORDERED.20
Its motion for reconsideration having been denied by the CA,
petitioner is now before the Court seeking a partial reversal of
the CA’s decision and affirmance of the December 13, 2005
Decision of the RTC.
Essentially, the two issues for resolution are: (1) whether the
doctrine of last clear chance applies in this case; and (2)
whether the 60-40 apportionment of loss ordered by the CA
was justified.
As well established by the records, both petitioner and
respondent were admittedly negligent in the encashment of a
check post-dated one year from its presentment.
Petitioner argues that the CA should have sustained PCHC’s
finding that despite the antecedent negligence of petitioner in
accepting the postdated check for deposit, respondent, by
exercising reasonable care and prudence, might have avoided
injurious consequences had it not negligently cleared the
check in question. It pointed out that in applying the doctrine
of last clear chance, the PCHC cited the case of Philippine
Bank of Commerce v. Court of Appeals21 which ruled that
assuming the bank’s depositor, private respondent, was
negligent in entrusting cash to a dishonest employee, thus
providing the latter with the opportunity to defraud the
company, it cannot be denied that petitioner bank had the
last clear opportunity to avert the injury incurred by its client,
simply by faithfully observing their self-imposed validation
procedure.
Petitioner underscores respondent’s failure to observe
clearing house rules and its own standard operating
procedure which, the PCHC said constitute further negligence
so much so that respondent should be solely liable for the
loss. Specifically, respondent failed to return the subject
check within the 24-hour reglementary period under Section
20.1 and to institute any formal complaint within the
contemplation of Section 20.3 of the CHRR 2000. The PCHC
likewise faulted respondent for not making follow-up calls or
taking any other action after it initially attempted, without
success, to contact by telephone the drawer of the check, and
clearing the check despite such lack of confirmation from its
depositor in violation of its own standard procedure for checks
involving large amounts.
The doctrine of last clear chance, stated broadly, is that the
negligence of the plaintiff does not preclude a recovery for the
negligence of the defendant where it appears that the
defendant, by exercising reasonable care and prudence,
might have avoided injurious consequences to the plaintiff
notwithstanding the plaintiff’s negligence.22The doctrine
necessarily assumes negligence on the part of the defendant
and contributory negligence on the part of the plaintiff, and
does not apply except upon that assumption.23 Stated
differently, the antecedent negligence of the plaintiff does not
preclude him from recovering damages caused by the
supervening negligence of the defendant, who had the last
fair chance to prevent the impending harm by the exercise of
due diligence.24Moreover, in situations where the doctrine has
been applied, it was defendant’s failure to exercise such
ordinary care, having the last clear chance to avoid loss or
injury, which was the proximate cause of the occurrence of
such loss or injury.25
In this case, the evidence clearly shows that the proximate
cause of the unwarranted encashment of the subject check
was the negligence of respondent who cleared a post-dated
check sent to it thru the PCHC clearing facility without
observing its own verification procedure. As correctly found
by the PCHC and upheld by the RTC, if only respondent
exercised ordinary care in the clearing process, it could have
easily noticed the glaring defect upon seeing the date written
on the face of the check "Oct. 9, 2003". Respondent could
have then promptly returned the check and with the check
thus dishonored, petitioner would have not credited the
amount thereof to the payee’s account. Thus, notwithstanding
the antecedent negligence of the petitioner in accepting the
post-dated check for deposit, it can seek reimbursement from
respondent the amount credited to the payee’s account
covering the check.
What petitioner omitted to mention is that in the cited case
of Philippine Bank of Commerce v. Court of Appeals,26while
the Court found petitioner bank as the culpable party under
the doctrine of last clear chance since it had, thru its teller,
the last opportunity to avert the injury incurred by its client
simply by faithfully observing its own validation procedure, it
nevertheless ruled that the plaintiff depositor (private
respondent) must share in the loss on account of
its contributory negligence. Thus:
The foregoing notwithstanding, it cannot be denied that,
indeed, private respondent was likewise negligent in not
checking its monthly statements of account. Had it done so,
the company would have been alerted to the series of frauds
being committed against RMC by its secretary. The damage
would definitely not have ballooned to such an amount if only
RMC, particularly Romeo Lipana, had exercised even a little
vigilance in their financial affairs. This omission by RMC
amounts to contributory negligence which shall
mitigate the damages that may be awarded to the
private respondent under Article 2179 of the New Civil
Code, to wit:
"x x x. When the plaintiff’s own negligence was the immediate
and proximate cause of his injury, he cannot recover
damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the
defendant's lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be
awarded."
In view of this, we believe that the demands of substantial
justice are satisfied by allocating the damage on a 60-40
ratio. Thus, 40% of the damage awarded by the respondent
appellate court, except the award of ₱25,000.00 attorney’s
fees, shall be borne by private respondent RMC; only the
balance of 60% needs to be paid by the petitioners. The
award of attorney’s fees shall be borne exclusively by the
petitioners.27 (Italics in the original; emphasis supplied)
In another earlier case,28 the Court refused to hold petitioner
bank solely liable for the loss notwithstanding the finding that
the proximate cause of the loss was due to its negligence.
Since the employees of private respondent bank were likewise
found negligent, its claim for damages is subject to mitigation
by the courts. Thus:
Both banks were negligent in the selection and supervision of
their employees resulting in the encashment of the forged
checks by an impostor. Both banks were not able to
overcome the presumption of negligence in the selection and
supervision of their employees. It was the gross negligence of
the employees of both banks which resulted in the fraud and
the subsequent loss. While it is true that petitioner BPI’s
negligence may have been the proximate cause of the
loss, respondent CBC’s negligence contributed equally
to the success of the impostor in encashing the
proceeds of the forged checks. Under these
circumstances, we apply Article 2179 of the Civil Code to the
effect that while respondent CBC may recover its losses, such
losses are subject to mitigation by the courts. x x x
Considering the comparative negligence of the two (2) banks,
we rule that the demands of substantial justice are satisfied
by allocating the loss of ₱2,413,215.16 and the costs of the
arbitration proceedings in the amount of ₱7,250.00 and the
costs of litigation on a 60-40 ratio. Conformably with this
ruling, no interests and attorney’s fees can be awarded to
either of the parties.29 (Emphasis supplied)
Apportionment of damages between parties who are both
negligent was followed in subsequent cases involving banking
transactions notwithstanding the court’s finding that one of
them had the last clear opportunity to avoid the occurrence of
the loss.
In Bank of America NT & SA v. Philippine Racing Club,30 the
Court ruled:
In the case at bar, petitioner cannot evade responsibility for
the loss by attributing negligence on the part of respondent
because, even if we concur that the latter was indeed
negligent in pre-signing blank checks, the former had the last
clear chance to avoid the loss. To reiterate, petitioner’s own
operations manager admitted that they could have called up
the client for verification or confirmation before honoring the
dubious checks. Verily, petitioner had the final opportunity to
avert the injury that befell the respondent. x x x Petitioner’s
negligence has been undoubtedly established and, thus,
pursuant to Art. 1170 of the NCC, it must suffer the
consequence of said negligence.
In the interest of fairness, however, we believe it is
proper to consider respondent’s own negligence to
mitigate petitioner’s liability.1âwphi1 Article 2179 of
the Civil Code provides:
xxxx
Explaining this provision in Lambert v. Heirs of Ray Castillon,
the Court held:
"The underlying precept on contributory negligence is that a
plaintiff who is partly responsible for his own injury should not
be entitled to recover damages in full but must bear the
consequences of his own negligence. The defendant must
thus be held liable only for the damages actually caused by
his negligence. xxx xxx xxx"
xxxx
Following established jurisprudential precedents, we believe
the allocation of sixty percent (60%) of the actual damages
involved in this case (represented by the amount of the
checks with legal interest) to petitioner is proper under the
premises. Respondent should, in light of its contributory
negligence, bear forty percent (40%) of its own
loss.31 (Emphasis supplied)
In Philippine National Bank v. F.F. Cruz and Co., Inc.,32 the
Court made a similar disposition, thus:
Given the foregoing, we find no reversible error in the
findings of the appellate court that PNB was negligent in the
handling of FFCCI’s combo account, specifically, with respect
to PNB’s failure to detect the forgeries in the subject
applications for manager’s check which could have prevented
the loss. x x x PNB failed to meet the high standard of
diligence required by the circumstances to prevent the fraud.
In Philippine Bank of Commerce v. Court of Appeals and The
Consolidated Bank & Trust Corporation v. Court of
Appeals, where the bank’s negligence is the proximate cause
of the loss and the depositor is guilty of contributory
negligence, we allocated the damages between the bank and
the depositor on a 60-40 ratio. We apply the same ruling in
this case considering that, as shown above, PNB’s negligence
is the proximate cause of the loss while the issue as to
FFCCI’s contributory negligence has been settled with finality
in G.R. No. 173278. Thus, the appellate court properly
adjudged PNB to bear the greater part of the loss consistent
with these rulings.33
"Contributory negligence is conduct on the part of the injured
party, contributing as a legal cause to the harm he has
suffered, which falls below the standard to which he is
required to conform for his own protection."34 Admittedly,
petitioner’s acceptance of the subject check for deposit
despite the one year postdate written on its face was a clear
violation of established banking regulations and practices. In
such instances, payment should be refused by the drawee
bank and returned through the PCHC within the 24-hour
reglementary period. As aptly observed by the CA,
petitioner’s failure to comply with this basic policy regarding
post-dated checks was "a telling sign of its lack of due
diligence in handling checks coursed through it."35
It bears stressing that "the diligence required of banks is
more than that of a Roman paterfamilias or a good father of a
family. The highest degree of diligence is
expected,"36 considering the nature of the banking business
that is imbued with public interest. While it is true that
respondent's liability for its negligent clearing of the check is
greater, petitioner cannot take lightly its own violation of the
long-standing rule against encashment of post-dated checks
and the injurious consequences of allowing such checks into
the clearing system.
Petitioner repeatedly harps on respondent's transgression of
clearing house rules when the latter resorted to direct
presentment way beyond the reglementary period but glosses
over its own negligent act that clearly fell short of the conduct
expected of it as a collecting bank. Petitioner must bear the
consequences of its omission to exercise extraordinary
diligence in scrutinizing checks presented by its depositors.
Assessing the facts and in the light of the cited precedents,
the Court thus finds no error committed by the CA in
allocating the resulting loss from the wrongful encashment of
the subject check on a 60-40 ratio.
WHEREFORE, the petition for review on certiorari
is DENIED. The Decision dated March 19, 2009 of the Court
of Appeals in CA-G.R. SP No. 97604 is hereby AFFIRMED.
G.R. No. 163609 November 27, 2008
SPS. BUENAVENTURA JAYME AND ROSARIO
JAYME, petitioners,
vs.
RODRIGO APOSTOL, FIDEL LOZANO, ERNESTO
SIMBULAN, MAYOR FERNANDO Q. MIGUEL,
MUNICIPALITY OF KORONADAL (NOW CITY OF
KORONADAL), PROVINCE OF SOUTH COTABATO,
represented by the MUNICIPAL TREASURER and/or
MUNICIPAL MAYOR FERNANDO Q. MIGUEL, and THE
FIRST INTEGRATED BONDING AND INSURANCE
COMPANY, INC., respondents.
DECISION
REYES, R.T., J.:
MAY a municipal mayor be held solidarily liable for the WHEREFORE, in view of the foregoing, the defendant
negligent acts of the driver assigned to him, which resulted in Municipality of Koronadal cannot be held liable for
the death of a minor pedestrian? the damages incurred by other defendant (sic) being
an agency of the State performing a (sic)
governmental functions. The same with defendant
Challenged in this petition for review on certiorari is the
Hermogenes Simbulan, not being the owner of the
Decision1 of the Court of Appeals (CA) which reversed and set
subject vehicle, he is absolved of any liability. The
aside the decision of the Regional Trial Court (RTC),
complaint against defendant First Integrated Bonding
Polomolok, Cotabato City, Branch 39, insofar as defendant
Insurance Company, Inc. is hereby ordered
Mayor Fernando Q. Miguel is concerned. The CA absolved
dismissed there being no cause of action against said
Mayor Miguel from any liability since it was not he, but the
insurance company.
Municipality of Koronadal, that was the employer of the
negligent driver.
However, defendants Fidel Lozano, Rodrigo Apostol,
and Mayor Fernando Miguel of Koronadal, South
The Facts
Cotabato, are hereby ordered jointly and severally to
pay the plaintiff (sic) the following sums:
On February 5, 1989, Mayor Miguel of Koronadal, South
Cotabato was on board the Isuzu pick-up truck driven by Fidel
1. One Hundred Seventy Three Thousand
Lozano, an employee of the Municipality of Koronadal.2 The
One Hundred One and Forty Centavos
pick-up truck was registered under the name of Rodrigo
(P173,101.40) Pesos as actual damages
Apostol, but it was then in the possession of Ernesto
with legal interest of 12% per annum
Simbulan.3 Lozano borrowed the pick-up truck from Simbulan
computed from February 11, 1989 until fully
to bring Miguel to Buayan Airport at General Santos City to
paid;
catch his Manila flight.4

2. Fifty Thousand (P50,000.00) Pesos as

The pick-up truck accidentally hit Marvin C. Jayme, a minor,
moral damages;
who was then crossing the National Highway in Poblacion,
Polomolok, South Cotabato.5 The intensity of the collision sent
Marvin some fifty (50) meters away from the point of impact, 3. Twenty Thousand (P20,000.00) Pesos as
a clear indication that Lozano was driving at a very high exemplary damages;
speed at the time of the accident.6
4. Twenty Thousand (P20,000.00) Pesos as
Marvin sustained severe head injuries with subdural Attorney's fees;
hematoma and diffused cerebral contusion.7 He was initially
treated at the Howard Hubbard Memorial Hospital.8 Due to
5. Fifty Thousand (P50,000.00) Pesos for
the seriousness of his injuries, he was airlifted to the Ricardo
the death of Marvin Jayme;
Limso Medical Center in Davao City for more intensive
treatment.9Despite medical attention, Marvin expired six (6)
days after the accident.10 6. Three Thousand (P3,000.00) as litigation
expenses; and
Petitioners spouses Buenaventura and Rosario Jayme, the
parents of Marvin, filed a complaint for damages with the RTC 7. To pay the cost of this suit.
against respondents.11 In their complaint, they prayed that all
respondents be held solidarily liable for their loss. They SO ORDERED.12
pointed out that that proximate cause of Marvin's death was
Lozano's negligent and reckless operation of the vehicle. They
prayed for actual, moral, and exemplary damages, attorney's Dissatisfied with the RTC ruling, Mayor Miguel interposed an
fees, and litigation expenses. appeal to the CA.

In their respective Answers, all respondents denied liability CA Disposition

for Marvin's death. Apostol and Simbulan averred that Lozano
took the pick-up truck without their consent. Likewise, Miguel
and Lozano pointed out that Marvin's sudden sprint across the
highway made it impossible to avoid the accident. Yet, Miguel
denied being on board the vehicle when it hit Marvin. The
Municipality of Koronadal adopted the answer of Lozano and
Miguel. As for First Integrated Bonding and Insurance
Company, Inc., the vehicle insurer, it insisted that its liability
is contributory and is only conditioned on the right of the
insured. Since the insured did not file a claim within the
prescribed period, any cause of action against it had
prescribed.
In his appeal, Mayor Miguel contended that the RTC erred in
ruling that he was Lozano's employer and, hence, solidarily
liable for the latter's negligent act. Records showed that the
Municipality of Koronadal was the driver's true and lawful
employer. Mayor Miguel also denied that he did not exercise
due care and diligence in the supervision of Lozano. The
incident, although unfortunate, was unexpected and cannot
be attributed to him.
On October 22, 2003, the CA granted the appeal, disposing as
follows:

RTC Disposition
On January 25, 1999, the RTC rendered judgment in favor of
spouses Jayme, the dispositive portion of which reads:
WHEREFORE, the Decision appealed from is
REVERSED and SET ASIDE, insofar as defendant-
appellant Mayor Fernando Q. Miguel is concerned,
and the complaint against him is DISMISSED.
 IT IS SO ORDERED.13
The CA held that Mayor Miguel should not be held liable for
damages for the death of Marvin Jayme. Said the appellate
court:
Moreover, plaintiffs-appellees admitted that Mayor
Miguel was not the employer of Lozano. Thus,
paragraph 9 of the complaint alleged that
the Municipality of Koronadal was the employer
of both Mayor Miguel and Lozano. Not being the
employer of Lozano, Mayor Miguel could not thus be
held liable for the damages caused by the
former. Mayor Miguel was a mere passenger in
the Isuzu pick-up at the time of the
accident.14 (Emphasis supplied)
The CA also reiterated the settled rule that it is the registered
owner of a vehicle who is jointly and severally liable with the
driver for damages incurred by passengers or third persons as
a consequence of injuries or death sustained in the operation
of the vehicle.
Issues
The spouses Jayme have resorted to the present recourse and
assign to the CA the following errors:
I.
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT MAYOR FERNANDO MIGUEL CANNOT
BE HELD LIABLE FOR THE DEATH OF MARVIN JAYME
WHICH CONCLUSION IS CONTRARY TO LAW AND
THE SETTLED PRONOUNCEMENTS OF THIS
HONORABLE TRIBUNAL;
II.
THE FINDINGS OF FACTS OF THE HONORABLE
COURT OF APPEALS ARE CONTRARY TO THE
FINDINGS OF THE TRIAL COURT AND ARE
CONTRADICTED BY THE EVIDENCE ON RECORD;
MOREOVER, THE CONCLUSIONS DRAWN BY THE
HONORABLE COURT OF APPEALS ARE ALL BASED ON
CONJECTURES AND SURMISES AND AGAINST
ACCEPTED COURSE OF JUDICIAL PROCEEDINGS
WHICH URGENTLY CALL FOR AN EXERCISE OF THIS
HONORABLE COURT'S SUPERVISION.15
Our Ruling
The doctrine of vicarious liability or imputed liability
finds no application in the present case.
Spouses Jayme contend, inter alia, that vicarious liability
attaches to Mayor Miguel. He was not a mere passenger, but
instead one who had direct control and supervision over
Lozano during the time of the accident. According to
petitioners, the element of direct control is not negated by the
fact that Lozano's employer was the Municipality of
Koronadal. Mayor Miguel, being Lozano's superior, still had
control over the manner the vehicle was operated.
Article 218016 of the Civil Code provides that a person is not
only liable for one's own quasi-delictual acts, but also for
those persons for whom one is responsible for. This liability is
popularly known as vicarious or imputed liability. To sustain
claims against employers for the acts of their employees, the
following requisites must be established: (1) That the
employee was chosen by the employer personally or through
another; (2) That the service to be rendered in accordance
with orders which the employer has the authority to give at
all times; and (3) That the illicit act of the employee was on
the occasion or by reason of the functions entrusted to him.17
Significantly, to make the employee liable under paragraphs 5
and 6 of Article 2180, it must be established that the injurious
or tortuous act was committed at the time the employee was
performing his functions.18
Furthermore, the employer-employee relationship cannot be
assumed. It is incumbent upon the plaintiff to prove the
relationship by preponderant evidence. In Belen v.
Belen,19 this Court ruled that it was enough for defendant to
deny an alleged employment relationship. The defendant is
under no obligation to prove the negative averment. This
Court said:
It is an old and well-settled rule of the courts that
the burden of proving the action is upon the plaintiff,
and that if he fails satisfactorily to show the facts
upon which he bases his claim, the defendant is
under no obligation to prove his exceptions. This rue
is in harmony with the provisions of Section 297 of
the Code of Civil Procedure holding that each party
must prove his own affirmative allegations, etc.20
In resolving the present controversy, it is imperative to find
out if Mayor Miguel is, indeed, the employer of Lozano and
therefore liable for the negligent acts of the latter. To
determine the existence of an employment relationship, We
rely on the four-fold test. This involves: (1) the employer's
power of selection; (2) payment of wages or other
remuneration; (3) the employer's right to control the method
of doing the work; and (4) the employer's right of suspension
or dismissal.21
Applying the foregoing test, the CA correctly held that it was
the Municipality of Koronadal which was the lawful employer
of Lozano at the time of the accident. It is uncontested that
Lozano was employed as a driver by the municipality. That he
was subsequently assigned to Mayor Miguel during the time of
the accident is of no moment. This Court has, on several
occasions, held that an employer-employee relationship still
exists even if the employee was loaned by the employer to
another person or entity because control over the employee
subsists.22 In the case under review, the Municipality of
Koronadal remains to be Lozano's employer notwithstanding
Lozano's assignment to Mayor Miguel.
Spouses Jayme argued that Mayor Miguel had at least
supervision and control over Lozano and how the latter
operated or drove the Isuzu pick-up during the time of the
accident. They, however, failed to buttress this claim.
Even assuming arguendo that Mayor Miguel had authority to
give instructions or directions to Lozano, he still can not be
held liable. In Benson v. Sorrell,23 the New England Supreme
Court ruled that mere giving of directions to the driver does
not establish that the passenger has control over the vehicle.
Neither does it render one the employer of the driver. This
Court, in Soliman, Jr. v. Tuazon,24 ruled in a similar vein, to
wit:
x x x The 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
and omissions. Those instructions or directions are
ordinarily no more than requests commonly
envisaged in the contract for services entered into
with the security agency. x x x25 (Emphasis supplied)
Significantly, no negligence may be imputed against a fellow
employee although the person may have the right to control
the manner of the vehicle's operation.26 In the absence of an
employer-employee relationship establishing vicarious
liability, the driver's negligence should not be attributed to a
fellow employee who only happens to be an occupant of the
vehicle.27 Whatever right of control the occupant may have
over the driver is not sufficient by itself to justify an
application of the doctrine of vicarious liability. Handley v.
Lombardi28 is instructive on this exception to the rule on
vicarious liability:
Plaintiff was not the master or principal of the driver
of the truck, but only an intermediate and superior
employee or agent. This being so, the doctrine
of respondeat superior or qui facit per alium is not
properly applicable to him. His power to direct and
control the driver was not as master, but only by
virtue of the fact that they were both employed by
Kruse, and the further fact that as Kruse's agent he
was delegated Kruse's authority over the driver. x x
x
In the case of actionable negligence, the rule is well
settled both in this state and elsewhere that the
negligence of a subordinate employee or subagent is
not to be imputed to a superior employee or agent,
but only to the master or principal. (Hilton v. Oliver,
204 Cal. 535 [61 A. L. R. 297, 269 Pac. 425; Guild v.
Brown, 115 Cal. App. 374 [1 Pac. (2d) 528; Ellis v.
Southern Ry. Co., 72 S. C. 464 [2 L. R. A. (N. S.)
378, 52 S. E. 228; Thurman v. Pittsburg & M. Copper
Co., 41 Mont. 141 [108 Pac. 588]; 2 Cor. Jur., p.
829; and see the elaborate note in 61 A. L. R. 277,
and particularly that part commencing at p. 290.)
We can see no logical reason for drawing any
distinction in this regard between actionable
negligence and contributory negligence. x x x29
The rule was reiterated in Bryant v. Pacific Elec. Ry. Co.[30
and again in Sichterman v. Hollingshead Co.31
In Swanson v. McQuown,32 a case involving a military officer
who happened to be riding in a car driven by a subordinate
later involved in an accident, the Colorado Supreme Court
adhered to the general rule that a public official is not liable
for the wrongful acts of his subordinates on a vicarious basis
since the relationship is not a true master-servant
situation.33 The court went on to rule that the only exception
is when they cooperate in the act complained of, or direct or
encourage it.34
In the case at bar, Mayor Miguel was neither Lozano's
employer nor the vehicle's registered owner. There existed no
causal relationship between him and Lozano or the vehicle
used that will make him accountable for Marvin's death.
Mayor Miguel was a mere passenger at the time of the
accident.
Parenthetically, it has been held that the failure of a
passenger to assist the driver, by providing him warnings or
by serving as lookout does not make the passenger liable for
the latter's negligent acts.35The driver's duty is not one that
may be delegated to others.36
As correctly held by the trial court, the true and lawful
employer of Lozano is the Municipality of Koronadal.
Unfortunately for Spouses Jayme, the municipality may not
be sued because it is an agency of the State engaged in
governmental functions and, hence, immune from suit. This
immunity is illustrated in Municipality of San Fernando, La
Union v. Firme,37 where this Court held:
It has already been remarked that municipal
corporations are suable because their charters grant
them the competence to sue and be sued.
Nevertheless, they are generally not liable for torts
committed by them in the discharge of governmental
functions and can only be held answerable only if it
can be shown that they were acting in proprietary
capacity. In permitting such entities to be sued, the
State merely gives the claimant the right to show
that the defendant was not acting in governmental
capacity when the injury was committed or that the
case comes under the exceptions recognized by law.
Failing this, the claimant cannot recover.38
Verily, liability attaches to the registered owner, the negligent
driver and his direct employer. The CA observation along this
line are worth restating:
Settled is the rule that the registered owner of a
vehicle is jointly and severally liable with the driver
for damages incurred by passengers and third
persons as a consequence of injuries or death
sustained in the operation of said vehicles.
Regardless of who the actual owner of the vehicle is,
the operator of record continues to be the operator
of the vehicle as regards the public and third
persons, and as such is directly and primarily
responsible for the consequences incident (sic) to its
operation x x x.39
The accidental death of Marvin Jayme is a tragic loss for his
parents. However, justice demands that only those liable
under our laws be held accountable for Marvin's demise.
Justice can not sway in favor of petitioners simply to assuage
their pain and loss. The law on the matter is clear: only the
negligent driver, the driver's employer, and the registered
owner of the vehicle are liable for the death of a third person
resulting from the negligent operation of the vehicle.
WHEREFORE, the petition is DENIED and the appealed
Decision AFFIRMED.
SO ORDERED.
G.R. No. 115024 February 7, 1996
MA. LOURDES VALENZUELA, petitioner,
vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER
COMMERCIAL, INC., respondents.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-
x-x-x
G.R. No. 117944 February 7, 1996
RICHARD LI, petitioner,
vs.
COURT OF APPEALS and LOURDES
VALENZUELA, respondents.
DECISION
KAPUNAN, J.:
These two petitions for review on certiorari under Rule 45 of
the Revised Rules of Court stem from an action to recover
damages by petitioner Lourdes Valenzuela in the Regional
Trial Court of Quezon City for injuries sustained by her in a
vehicular accident in the early morning of June 24, 1990. The
facts found by the trial court are succinctly summarized by
the Court of Appeals below:
This is an action to recover damages based on quasi-
delict, for serious physical injuries sustained in a
vehicular accident.
Plaintiff's version of the accident is as follows: At
around 2:00 in the morning of June 24, 1990,
plaintiff Ma. Lourdes Valenzuela was driving a blue
Mitsubishi lancer with Plate No. FFU 542 from her
restaurant at Marcos highway to her home at
Palanza Street, Araneta Avenue. She was travelling
along Aurora Blvd. with a companion, Cecilia Ramon,
heading towards the direction of Manila. Before
reaching A. Lake Street, she noticed something
wrong with her tires; she stopped at a lighted place
where there were people, to verify whether she had
a flat tire and to solicit help if needed. Having been
told by the people present that her rear right tire
was flat and that she cannot reach her home in that
car's condition, she parked along the sidewalk, about
1-1/2 feet away, put on her emergency lights,
alighted from the car, and went to the rear to open
the trunk. She was standing at the left side of the
rear of her car pointing to the tools to a man who
will help her fix the tire when she was suddenly
bumped by a 1987 Mitsubishi Lancer driven by
defendant Richard Li and registered in the name of
defendant Alexander Commercial, Inc. Because of
the impact plaintiff was thrown against the
windshield of the car of the defendant, which was
destroyed, and then fell to the ground. She was
pulled out from under defendant's car. Plaintiff's left
leg was severed up to the middle of her thigh, with
only some skin and sucle connected to the rest of
the body. She was brought to the UERM Medical
Memorial Center where she was found to have a
"traumatic amputation, leg, left up to distal thigh
(above knee)". She was confined in the hospital for
twenty (20) days and was eventually fitted with an
artificial leg. The expenses for the hospital
confinement (P120,000.00) and the cost of the
artificial leg (P27,000.00) were paid by defendants
from the car insurance.
In her complaint, plaintiff prayed for moral damages
in the amount of P1 million, exemplary damages in
the amount of P100,000.00 and other medical and
related expenses amounting to a total of
P180,000.00, including loss of expected earnings.
Defendant Richard Li denied that he was negligent.
He was on his way home, travelling at 55 kph;
considering that it was raining, visibility was affected
and the road was wet. Traffic was light. He testified
that he was driving along the inner portion of the
right lane of Aurora Blvd. towards the direction of
Araneta Avenue, when he was suddenly confronted,
in the vicinity of A. Lake Street, San Juan, with a car
coming from the opposite direction, travelling at 80
kph, with "full bright lights". Temporarily blinded, he
instinctively swerved to the right to avoid colliding
with the oncoming vehicle, and bumped plaintiff's
car, which he did not see because it was midnight
blue in color, with no parking lights or early warning
device, and the area was poorly lighted. He alleged
in his defense that the left rear portion of plaintiff's
car was protruding as it was then "at a standstill
diagonally" on the outer portion of the right lane
towards Araneta Avenue (par. 18, Answer). He
confirmed the testimony of plaintiff's witness that
after being bumped the car of the plaintiff swerved
to the right and hit another car parked on the
sidewalk. Defendants counterclaimed for damages,
alleging that plaintiff was reckless or negligent, as
she was not a licensed driver.
The police investigator, Pfc. Felic Ramos, who
prepared the vehicular accident report and the
sketch of the three cars involved in the accident,
testified that the plaintiff's car was "near the
sidewalk"; this witness did not remember whether
the hazard lights of plaintiff's car were on, and did
not notice if there was an early warning device;
there was a street light at the corner of Aurora Blvd.
and F. Roman, about 100 meters away. It was not
mostly dark, i.e. "things can be seen" (p. 16, tsn,
Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez,
testified that after plaintiff alighted from her car and
opened the trunk compartment, defendant's car
came approaching very fast ten meters from the
scene; the car was "zigzagging". The rear left side of
plaintiff's car was bumped by the front right portion
of defendant's car; as a consequence, the plaintiff's
car swerved to the right and hit the parked car on
the sidewalk. Plaintiff was thrown to the windshield
of defendant's car, which was destroyed, and landed
under the car. He stated that defendant was under
the influence of liquor as he could "smell it very well"
(pp. 43, 79, tsn, June 17, 1991).
After trial, the lower court sustained the plaintiff's
submissions and found defendant Richard Li guilty of gross
negligence and liable for damages under Article 2176 of the
Civil Code. The trial court likewise held Alexander
Commercial, Inc., Li's employer, jointly and severally liable
for damages pursuant to Article 2180. It ordered the
defendants to jointly and severally pay the following
amounts:
1. P41,840.00, as actual damages, representing the
miscellaneous expenses of the plaintiff as a result of
her severed left leg;
2. The sums of (a) P37,500.00, for the unrealized
profits because of the stoppage of plaintiff's Bistro La
Conga restaurant three (3) weeks after the accident
on June 24, 1990; (b) P20,000.00, a month, as
unrealized profits of the plaintiff in her Bistro La
Conga restaurant, from August, 1990 until the date
of this judgment and (c) P30,000.00, a month for
unrealized profits in plaintiff's two (2) beauty salons
from July, 1990 until the date of this decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an
Omnibus Motion for New Trial and for Reconsideration, citing
testimony in Criminal Case O.C. No. 804367 (People vs.
Richard Li), tending to show that the point of impact, as
depicted by the pieces of glass/debris from the parties' cars,
appeared to be at the center of the right lane of Aurora Blvd.
The trial court denied the motion. Defendants forthwith filed
an appeal with the respondent Court of Appeals. In a Decision
rendered March 30, 1994, the Court of Appeals found that
there was "ample basis from the evidence of record for the
trial court's finding that the plaintiff's car was properly parked
at the right, beside the sidewalk when it was bumped by
defendant's car."1 Dismissing the defendants' argument that
the plaintiff's car was improperly parked, almost at the center
of the road, the respondent court noted that evidence which
was supposed to prove that the car was at or near center of
the right lane was never presented during the trial of the
case.2 The respondent court furthermore observed that:
Defendant Li's testimony that he was driving at a
safe speed of 55 km./hour is self serving; it was not
corroborated. It was in fact contradicted by
eyewitness Rodriguez who stated that he was
outside his beerhouse located at Aurora Boulevard
after A. Lake Street, at or about 2:00 a.m. of June
24, 1990 when his attention was caught by a
beautiful lady (referring to the plaintiff) alighting
from her car and opening the trunk compartment; he
noticed the car of Richard Li "approaching very fast
ten (10) meters away from the scene"; defendant's
car was zigzagging", although there were no holes
and hazards on the street, and "bumped the leg of
the plaintiff" who was thrown against the windshield
of defendant's care, causing its destruction. He came
to the rescue of the plaintiff, who was pulled out
from under defendant's car and was able to say
"hurting words" to Richard Li because he noticed that
the latter was under the influence of liquor, because
he "could smell it very well" (p. 36, et. seq., tsn,
June 17, 1991). He knew that plaintiff owned a
beerhouse in Sta. Mesa in the 1970's, but did not
know either plaintiff or defendant Li before the
accident.
In agreeing with the trial court that the defendant Li was
liable for the injuries sustained by the plaintiff, the Court of
Appeals, in its decision, however, absolved the Li's employer,
Alexander Commercial, Inc. from any liability towards
petitioner Lourdes Valenzuela and reduced the amount of
moral damages to P500,000.00. Finding justification for
exemplary damages, the respondent court allowed an award
of P50,000.00 for the same, in addition to costs, attorney's
fees and the other damages. The Court of Appeals, likewise,
dismissed the defendants' counterclaims.3
Consequently, both parties assail the respondent court's
decision by filing two separate petitions before this Court.
Richard Li, in G.R. No. 117944, contends that he should not
be held liable for damages because the proximate cause of
the accident was Ma. Lourdes Valenzuela's own negligence.
Alternatively, he argues that in the event that this Court finds
him negligent, such negligence ought to be mitigated by the
contributory negligence of Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes
Valenzuela assails the respondent court's decision insofar as it
absolves Alexander Commercial, Inc. from liability as the
owner of the car driven by Richard Li and insofar as it reduces
the amount of the actual and moral damages awarded by the
trial court.4
As the issues are intimately related, both petitions are hereby
consolidated.
It is plainly evident that the petition for review in G.R. No.
117944 raises no substantial questions of law. What it, in
effect, attempts to have this Court review are factual findings
of the trial court, as sustained by the Court of Appeals finding
Richard Li grossly negligent in driving the Mitsubishi Lancer
provided by his company in the early morning hours of June
24, 1990. This we will not do. As a general rule, findings of
fact of the Court of Appeals are binding and conclusive upon
us, and this Court will not normally disturb such factual
findings unless the findings of fact of the said court are
palpably unsupported by the evidence on record or unless the
judgment itself is based on a misapprehension of facts.5
In the first place, Valenzuela's version of the incident was
fully corroborated by an uninterested witness, Rogelio
Rodriguez, the owner-operator of an establishment located
just across the scene of the accident. On trial, he testified
that he observed a car being driven at a "very fast" speed,
racing towards the general direction of Araneta
Avenue.6 Rodriguez further added that he was standing in
front of his establishment, just ten to twenty feet away from
the scene of the accident, when he saw the car hit
Valenzuela, hurtling her against the windshield of the
defendant's Mitsubishi Lancer, from where she eventually fell
under the defendant's car. Spontaneously reacting to the
incident, he crossed the street, noting that a man reeking
with the smell of liquor had alighted from the offending
vehicle in order to survey the incident.7 Equally important,
Rodriguez declared that he observed Valenzuela's car parked
parallel and very near the sidewalk,8 contrary to Li's allegation
that Valenzuela's car was close to the center of the right lane.
We agree that as between Li's "self-serving" asseverations
and the observations of a witness who did not even know the
accident victim personally and who immediately gave a
statement of the incident similar to his testimony to the
investigator immediately after the incident, the latter's
testimony deserves greater weight. As the court emphasized:
The issue is one of credibility and from Our own
examination of the transcript, We are not prepared
to set aside the trial court's reliance on the
testimony of Rodriguez negating defendant's
assertion that he was driving at a safe speed. While
Rodriguez drives only a motorcycle, his perception of
speed is not necessarily impaired. He was subjected
to cross-examination and no attempt was made to
question .his competence or the accuracy of his
statement that defendant was driving "very fast".
This was the same statement he gave to the police
investigator after the incident, as told to a
newspaper report (Exh. "P"). We see no compelling
basis for disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony
are not borne out by an examination of the
testimony. Rodriguez testified that the scene of the
accident was across the street where his beerhouse
is located about ten to twenty feet away (pp. 35-36,
tsn, June 17, 1991). He did not state that the
accident transpired immediately in front of his
establishment. The ownership of the Lambingan se
Kambingan is not material; the business is registered
in the name of his mother, but he explained that he
owns the establishment (p. 5, tsn, June 20, 1991).
Moreover, the testimony that the streetlights on his
side of Aurora Boulevard were on the night the
accident transpired (p. 8) is not necessarily
contradictory to the testimony of Pfc. Ramos that
there was a streetlight at the corner of Aurora
Boulevard and F. Roman Street (p. 45, tsn, Oct. 20,
1991).
With respect to the weather condition, Rodriguez
testified that there was only a drizzle, not a heavy
rain and the rain has stopped and he was outside his
establishment at the time the accident transpired
(pp. 64-65, tsn, June 17, 1991). This was consistent
with plaintiff's testimony that it was no longer raining
when she left Bistro La Conga (pp. 10-11, tsn, April
29, 1991). It was defendant Li who stated that it was
raining all the way in an attempt to explain why he
was travelling at only 50-55 kph. (p. 11, tsn, Oct.
14, 1991). As to the testimony of Pfc. Ramos that it
was raining, he arrived at the scene only in response
to a telephone call after the accident had transpired
(pp. 9-10, tsn, Oct. 28, 1991). We find no
substantial inconsistencies in Rodriguez's testimony
that would impair the essential integrity of his
testimony or reflect on his honesty. We are
compelled to affirm the trial court's acceptance of
the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we
note that Li's testimony was peppered with so many
inconsistencies leading us to conclude that his version of the
accident was merely adroitly crafted to provide a version,
obviously self-serving, which would exculpate him from any
and all liability in the incident. Against Valenzuela's
corroborated claims, his allegations were neither backed up
by other witnesses nor by the circumstances proven in the
course of trial. He claimed that he was driving merely at a
speed of 55 kph. when "out of nowhere he saw a dark
maroon lancer right in front of him, which was (the) plaintiff's
car". He alleged that upon seeing this sudden "apparition" he
put on his brakes to no avail as the road was slippery.9
One will have to suspend disbelief in order to give credence to
Li's disingenuous and patently self-serving asseverations. The
average motorist alert to road conditions will have no
difficulty applying the brakes to a car traveling at the speed
claimed by Li. Given a light rainfall, the visibility of the street,
and the road conditions on a principal metropolitan
thoroughfare like Aurora Boulevard, Li would have had ample
time to react to the changing conditions of the road if he were
alert - as every driver should be - to those conditions. Driving
exacts a more than usual toll on the senses. Physiological
"fight or flight" 10 mechanisms are at work, provided such
mechanisms were not dulled by drugs, alcohol, exhaustion,
drowsiness, etc.11 Li's failure to react in a manner which would
have avoided the accident could therefore have been only due
to either or both of the two factors: 1) that he was driving at
a "very fast" speed as testified by Rodriguez; and 2) that he
was under the influence of alcohol.12 Either factor working
independently would have diminished his responsiveness to
road conditions, since normally he would have slowed down
prior to reaching Valenzuela's car, rather than be in a
situation forcing him to suddenly apply his brakes. As the trial
court noted (quoted with approval by respondent court):
Secondly, as narrated by defendant Richard Li to the
San Juan Police immediately after the incident, he
said that while driving along Aurora Blvd., out of
nowhere he saw a dark maroon lancer right in front
of him which was plaintiff's car, indicating, again,
thereby that, indeed, he was driving very fast,
oblivious of his surroundings and the road ahead of
him, because if he was not, then he could not have
missed noticing at a still far distance the parked car
of the plaintiff at the right side near the sidewalk
which had its emergency lights on, thereby avoiding
forcefully bumping at the plaintiff who was then
standing at the left rear edge of her car.
Since, according to him, in his narration to the San
Juan Police, he put on his brakes when he saw the
plaintiff's car in front of him, but that it failed as the
road was wet and slippery, this goes to show again,
that, contrary to his claim, he was, indeed, running
very fast. For, were it otherwise, he could have
easily completely stopped his car, thereby avoiding
the bumping of the plaintiff, notwithstanding that the
road was wet and slippery. Verily, since, if, indeed,
he was running slow, as he claimed, at only about 55
kilometers per hour, then, inspite of the wet and
slippery road, he could have avoided hitting the
plaintiff by the mere expedient or applying his
brakes at the proper time and distance.
It could not be true, therefore, as he now claims
during his testimony, which is contrary to what he
told the police immediately after the accident and is,
therefore, more believable, that he did not actually
step on his brakes but simply swerved a little to the
right when he saw the on-coming car with glaring
headlights, from the opposite direction, in order to
avoid it.
For, had this been what he did, he would not have
bumped the car of the plaintiff which was properly
parked at the right beside the sidewalk. And, it was
 not even necessary for him to swerve a little to the
right in order to safely avoid a collision with the on-
coming car, considering that Aurora Blvd. is a double
lane avenue separated at the center by a dotted
white paint, and there is plenty of space for both
cars, since her car was running at the right lane
going towards Manila on the on-coming car was also
on its right lane going to Cubao.13
Having come to the conclusion that Li was negligent in driving
his company-issued Mitsubishi Lancer, the next question for
us to determine is whether or not Valenzuela was likewise
guilty of contributory negligence in parking her car alongside
Aurora Boulevard, which entire area Li points out, is a no
parking zone.
We agree with the respondent court that Valenzuela was not
guilty of contributory negligence.
Contributory negligence is conduct on the part of the injured
party, contributing as a legal cause to the harm he has
suffered, which falls below the standard to which he is
required to conform for his own protection.14 Based on the
foregoing definition, the standard or act to which, according
to petitioner Li, Valenzuela ought to have conformed for her
own protection was not to park at all at any point of Aurora
Boulevard, a no parking zone. We cannot agree.
Courts have traditionally been compelled to recognize that an
actor who is confronted with an emergency is not to be held
up to the standard of conduct normally applied to an
individual who is in no such situation. The law takes stock of
impulses of humanity when placed in threatening or
dangerous situations and does not require the same standard
of thoughtful and reflective care from persons confronted by
unusual and oftentimes threatening conditions.15
Under the "emergency rule" adopted by this Court in Gan
vs. Court of Appeals,16 an individual who suddenly finds
himself in a situation of danger and is required to act without
much time to consider the best means that may be adopted
to avoid the impending danger, is not guilty of negligence if
he fails to undertake what subsequently and upon reflection
may appear to be a better solution, unless the emergency
was brought by his own negligence.17
Applying this principle to a case in which the victims in a
vehicular accident swerved to the wrong lane to avoid hitting
two children suddenly darting into the street, we held, in Mc
Kee vs. Intermediate Appellate Court,18 that the driver
therein, Jose Koh, "adopted the best means possible in the
given situation" to avoid hitting the children. Using the
"emergency rule" the Court concluded that Koh, in spite of
the fact that he was in the wrong lane when the collision with
an oncoming truck occurred, was not guilty of negligence.19
While the emergency rule applies to those cases in which
reflective thought, or the opportunity to adequately weigh a
threatening situation is absent, the conduct which is required
of an individual in such cases is dictated not exclusively by
the suddenness of the event which absolutely negates
thoroughful care, but by the over-all nature of the
circumstances. A woman driving a vehicle suddenly crippled
by a flat tire on a rainy night will not be faulted for stopping
at a point which is both convenient for her to do so and which
is not a hazard to other motorists. She is not expected to run
the entire boulevard in search for a parking zone or turn on a
dark street or alley where she would likely find no one to help
her. It would be hazardous for her not to stop and assess the
emergency (simply because the entire length of Aurora
Boulevard is a no-parking zone) because the hobbling vehicle
would be both a threat to her safety and to other motorists.
In the instant case, Valenzuela, upon reaching that portion of
Aurora Boulevard close to A. Lake St., noticed that she had a
flat tire. To avoid putting herself and other motorists in
danger, she did what was best under the situation. As
narrated by respondent court: "She stopped at a lighted place
where there were people, to verify whether she had a flat tire
and to solicit help if needed. Having been told by the people
present that her rear right tire was flat and that she cannot
reach her home she parked along the sidewalk, about 1 1/2
feet away, behind a Toyota Corona Car."20 In fact, respondent
court noted, Pfc. Felix Ramos, the investigator on the scene of
the accident confirmed that Valenzuela's car was parked very
close to the sidewalk.21 The sketch which he prepared after
the incident showed Valenzuela's car partly straddling the
sidewalk, clear and at a convenient distance from motorists
passing the right lane of Aurora Boulevard. This fact was itself
corroborated by the testimony of witness Rodriguez.22
Under the circumstances described, Valenzuela did exercise
the standard reasonably dictated by the emergency and could
not be considered to have contributed to the unfortunate
circumstances which eventually led to the amputation of one
of her lower extremities. The emergency which led her to
park her car on a sidewalk in Aurora Boulevard was not of her
own making, and it was evident that she had taken all
reasonable precautions.
Obviously in the case at bench, the only negligence ascribable
was the negligence of Li on the night of the accident.
"Negligence, as it is commonly understood is conduct which
creates an undue risk of harm to others."23 It is the failure to
observe that degree of care, precaution, and vigilance which
the circumstances justly demand, whereby such other person
suffers injury.24 We stressed, in Corliss vs. Manila Railroad
Company,25 that negligence is the want of care required by
the circumstances.
The circumstances established by the evidence adduced in the
court below plainly demonstrate that Li was grossly negligent
in driving his Mitsubishi Lancer. It bears emphasis that he was
driving at a fast speed at about 2:00 A.M. after a heavy
downpour had settled into a drizzle rendering the street
slippery. There is ample testimonial evidence on record to
show that he was under the influence of liquor. Under these
conditions, his chances of effectively dealing with changing
conditions on the road were significantly lessened. As Presser
and Keaton emphasize:
[U]nder present day traffic conditions, any driver of
an automobile must be prepared for the sudden
appearance of obstacles and persons on the
highway, and of other vehicles at intersections, such
as one who sees a child on the curb may be required
to anticipate its sudden dash into the street, and his
failure to act properly when they appear may be
found to amount to negligence.26
Li's obvious unpreparedness to cope with the situation
confronting him on the night of the accident was clearly of his
own making.
We now come to the question of the liability of Alexander
Commercial, Inc. Li's employer. In denying liability on the
part of Alexander Commercial, the respondent court held
that:
There is no evidence, not even defendant Li's
testimony, that the visit was in connection with
official matters. His functions as assistant manager
sometimes required him to perform work outside the
office as he has to visit buyers and company clients,
but he admitted that on the night of the accident he
came from BF Homes Paranaque he did not have
"business from the company" (pp. 25-26, ten, Sept.
23, 1991). The use of the company car was partly
required by the nature of his work, but the privilege
of using it for non-official business is a "benefit",
apparently referring to the fringe benefits attaching
to his position.
Under the civil law, an employer is liable for the
negligence of his employees in the discharge of their
respective duties, the basis of which liability is
not respondeat superior, but the relationship of pater
familias, which theory bases the liability of the
master ultimately on his own negligence and not on
that of his servant (Cuison v. Norton and Harrison
Co., 55 Phil. 18). Before an employer may be held
liable for the negligence of his employee, the act or
omission which caused damage must have occurred
while an employee was in the actual performance of
his assigned tasks or duties (Francis High School vs.
Court of Appeals, 194 SCRA 341). In defining an
employer's liability for the acts done within the scope
of the employee's assigned tasks, the Supreme Court
has held that this includes any act done by an
employee, in furtherance of the interests of the
employer or for the account of the employer at the
time of the infliction of the injury or damage (Filamer
Christian Institute vs. Intermediate Appellate Court,
212 SCRA 637). An employer is expected to impose
upon its employees the necessary discipline called
for in the performance of any act "indispensable to
the business and beneficial to their employer" (at p.
645).
In light of the foregoing, We are unable to sustain
the trial court's finding that since defendant Li was
authorized by the company to use the company car
"either officially or socially or even bring it home", he
can be considered as using the company car in the
service of his employer or on the occasion of his
functions. Driving the company car was not among
his functions as assistant manager; using it for non-
official purposes would appear to be a fringe benefit,
one of the perks attached to his position. But to
impose liability upon the employer under Article
2180 of the Civil Code, earlier quoted, there must be
a showing that the damage was caused by their
employees in the service of the employer or on the
occasion of their functions. There is no evidence that
Richard Li was at the time of the accident performing
any act in furtherance of the company's business or
its interests, or at least for its benefit. The imposition
of solidary liability against defendant Alexander
Commercial Corporation must therefore fail.27
We agree with the respondent court that the relationship in
question is not based on the principle of respondeat superior,
which holds the master liable for acts of the servant, but that
of pater familias, in which the liability ultimately falls upon the
employer, for his failure to exercise the diligence of a good
father of the family in the selection and supervision of his
employees. It is up to this point, however, that our
agreement with the respondent court ends. Utilizing
the bonus pater familias standard expressed in Article 2180 of
the Civil Code, 28 we are of the opinion that Li's employer,
Alexander Commercial, Inc. is jointly and solidarily liable for
the damage caused by the accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of
Appeals29 upon which respondent court has placed undue
reliance, dealt with the subject of a school and its teacher's
supervision of students during an extracurricular activity.
These cases now fall under the provision on special parental
authority found in Art. 218 of the Family Code which generally
encompasses all authorized school activities, whether inside
or outside school premises.
Second, the employer's primary liability under the concept
of pater familias embodied by Art 2180 (in relation to Art.
2176) of the Civil Code is quasi-delictual or tortious in
character. His liability is relieved on a showing that he
exercised the diligence of a good father of the family in the
selection and supervision of its employees. Once evidence is
introduced showing that the employer exercised the required
amount of care in selecting its employees, half of the
employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances
of employment.
Ordinarily, evidence demonstrating that the employer has
exercised diligent supervision of its employee during the
performance of the latter's assigned tasks would be enough to
relieve him of the liability imposed by Article 2180 in relation
to Article 2176 of the Civil Code. The employer is not
expected to exercise supervision over either the employee's
private activities or during the performance of tasks either
unsanctioned by the former or unrelated to the employee's
tasks. The case at bench presents a situation of a different
character, involving a practice utilized by large companies
with either their employees of managerial rank or their
representatives.
It is customary for large companies to provide certain classes
of their employees with courtesy vehicles. These company
cars are either wholly owned and maintained by the company
itself or are subject to various plans through which employees
eventually acquire their vehicles after a given period of
service, or after paying a token amount. Many companies
provide liberal "car plans" to enable their managerial or other
employees of rank to purchase cars, which, given the cost of
vehicles these days, they would not otherwise be able to
purchase on their own.
Under the first example, the company actually owns and
maintains the car up to the point of turnover of ownership to
the employee; in the second example, the car is really owned
and maintained by the employee himself. In furnishing
vehicles to such employees, are companies totally absolved of
responsibility when an accident involving a company-issued
car occurs during private use after normal office hours?
Most pharmaceutical companies, for instance, which provide
cars under the first plan, require rigorous tests of road
worthiness from their agents prior to turning over the car
(subject of company maintenance) to their representatives. In unlimited use of a company car.31 Not having been able to
other words, like a good father of a family, they entrust the overcome the burden of demonstrating that it should be
company vehicle only after they are satisfied that the absolved of liability for entrusting its company car to Li, said
employee to whom the car has been given full use of the said company, based on the principle of bonus pater familias,
company car for company or private purposes will not be a ought to be jointly and severally liable with the former for the
threat or menace to himself, the company or to others. When injuries sustained by Ma. Lourdes Valenzuela during the
a company gives full use and enjoyment of a company car to accident.
its employee, it in effect guarantees that it is, like every good
father, satisfied that its employee will use the privilege
Finally, we find no reason to overturn the amount of damages
reasonably and responsively.
awarded by the respondent court, except as to the amount of
moral damages. In the case of moral damages, while the said
In the ordinary course of business, not all company damages are not intended to enrich the plaintiff at the
employees are given the privilege of using a company-issued expense of a defendant, the award should nonetheless be
car. For large companies other than those cited in the commensurate to the suffering inflicted. In the instant case
example of the preceding paragraph, the privilege serves we are of the opinion that the reduction in moral damages
important business purposes either related to the image of from an amount of P1,000,000.00 to P800,000,00 by the
success an entity intends to present to its clients and to the Court of Appeals was not justified considering the nature of
public in general, or - for practical and utilitarian reasons - to the resulting damage and the predictable sequelae of the
enable its managerial and other employees of rank or its sales injury.
agents to reach clients conveniently. In most cases, providing
a company car serves both purposes. Since important
As a result of the accident, Ma. Lourdes Valenzuela underwent
business transactions and decisions may occur at all hours in
a traumatic amputation of her left lower extremity at the
all sorts of situations and under all kinds of guises, the
distal left thigh just above the knee. Because of this,
provision for the unlimited use of a company car
Valenzuela will forever be deprived of the full ambulatory
therefore principally serves the business and goodwill of a
functions of her left extremity, even with the use of state of
company and only incidentally the private purposes of the
the art prosthetic technology. Well beyond the period of
individual who actually uses the car, the managerial employee
hospitalization (which was paid for by Li), she will be required
or company sales agent. As such, in providing for a company
to undergo adjustments in her prosthetic devise due to the
car for business use and/or for the purpose of furthering the
shrinkage of the stump from the process of healing.
company's image, a company owes a responsibility to the
public to see to it that the managerial or other employees to
whom it entrusts virtually unlimited use of a company issued These adjustments entail costs, prosthetic replacements and
car are able to use the company issue capably and months of physical and occupational rehabilitation and
responsibly. therapy. During her lifetime, the prosthetic devise will have to
be replaced and re-adjusted to changes in the size of her
lower limb effected by the biological changes of middle-age,
In the instant case, Li was an Assistant Manager of Alexander
menopause and aging. Assuming she reaches menopause, for
Commercial, Inc. In his testimony before the trial court, he
example, the prosthetic will have to be adjusted to respond to
admitted that his functions as Assistant Manager did not
the changes in bone resulting from a precipitate decrease in
require him to scrupulously keep normal office hours as he
calcium levels observed in the bones of all post-menopausal
was required quite often to perform work outside the office,
women. In other words, the damage done to her would not
visiting prospective buyers and contacting and meeting with
only be permanent and lasting, it would also be permanently
company clients. 30 These meetings, clearly, were not strictly
changing and adjusting to the physiologic changes which her
confined to routine hours because, as a managerial employee
body would normally undergo through the years. The
tasked with the job of representing his company with its
replacements, changes, and adjustments will require
clients, meetings with clients were both social as well as
corresponding adjustive physical and occupational therapy. All
work-related functions. The service car assigned to Li by
of these adjustments, it has been documented, are painful.
Alexander Commercial, Inc. therefore enabled both Li - as
well as the corporation - to put up the front of a highly
successful entity, increasing the latter's goodwill before its The foregoing discussion does not even scratch the surface of
clientele. It also facilitated meeting between Li and its clients the nature of the resulting damage because it would be highly
by providing the former with a convenient mode of travel. speculative to estimate the amount of psychological pain,
damage and injury which goes with the sudden severing of a
vital portion of the human body. A prosthetic device, however
Moreover, Li's claim that he happened to be on the road on
technologically advanced, will only allow a reasonable amount
the night of the accident because he was coming from a social
of functional restoration of the motor functions of the lower
visit with an officemate in Paranaque was a bare allegation
limb. The sensory functions are forever lost. The resultant
which was never corroborated in the court below. It was
anxiety, sleeplessness, psychological injury, mental and
obviously self-serving. Assuming he really came from his
physical pain are inestimable.
officemate's place, the same could give rise to speculation
that he and his officemate had just been from a work-related
function, or they were together to discuss sales and other As the amount of moral damages are subject to this Court's
work related strategies. discretion, we are of the opinion that the amount of
P1,000,000.00 granted by the trial court is in greater accord
with the extent and nature of the injury - physical and
In fine, Alexander Commercial, inc. has not demonstrated, to
psychological - suffered by Valenzuela as a result of Li's
our satisfaction, that it exercised the care and diligence of a
grossly negligent driving of his Mitsubishi Lancer in the early
good father of the family in entrusting its company car to Li.
morning hours of the accident.
No allegations were made as to whether or not the company
took the steps necessary to determine or ascertain the driving
proficiency and history of Li, to whom it gave full and
WHEREFORE, PREMISES CONSIDERED, the decision of the
Court of Appeals is modified with the effect of REINSTATING
the judgment of the Regional Trial Court.
SO ORDERED.
G.R. No. L-27155 May 18, 1978
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS, RITA GUECO TAPNIO,
CECILIO GUECO and THE PHILIPPINE AMERICAN
GENERAL INSURANCE COMPANY, INC., respondents.
Medina, Locsin, Coruña, & Sumbillo for petitioner.
Manuel Lim & Associates for private respondents.
ANTONIO, J.:
Certiorari to review the decision of the Court of Appeals which
affirmed the judgment of the Court of First Instance of Manila
in Civil Case No. 34185, ordering petitioner, as third-party
defendant, to pay respondent Rita Gueco Tapnio, as third-
party plaintiff, the sum of P2,379.71, plus 12% interest per
annum from September 19, 1957 until the same is fully paid,
P200.00 attorney's fees and costs, the same amounts which
Rita Gueco Tapnio was ordered to pay the Philippine American
General Insurance Co., Inc., to be paid directly to the
Philippine American General Insurance Co., Inc. in full
satisfaction of the judgment rendered against Rita Gueco
Tapnio in favor of the former; plus P500.00 attorney's fees for
Rita Gueco Tapnio and costs. The basic action is the complaint
filed by Philamgen (Philippine American General Insurance
Co., Inc.) as surety against Rita Gueco Tapnio and Cecilio
Gueco, for the recovery of the sum of P2,379.71 paid by
Philamgen to the Philippine National Bank on behalf of
respondents Tapnio and Gueco, pursuant to an indemnity
agreement. Petitioner Bank was made third-party defendant
by Tapnio and Gueco on the theory that their failure to pay
the debt was due to the fault or negligence of petitioner.
The facts as found by the respondent Court of Appeals, in
affirming the decision of the Court of First Instance of Manila,
are quoted hereunder:
Plaintiff executed its Bond, Exh. A, with
defendant Rita Gueco Tapnio as principal, in
favor of the Philippine National Bank Branch
at San Fernando, Pampanga, to guarantee
the payment of defendant Rita Gueco
Tapnio's account with said Bank. In turn, to
guarantee the payment of whatever amount
the bonding company would pay to the
Philippine National Bank, both defendants
executed the indemnity agreement, Exh. B.
Under the terms and conditions of this
indemnity agreement, whatever amount the
plaintiff would pay would earn interest at
the rate of 12% per annum, plus attorney's
fees in the amount of 15 % of the whole
amount due in case of court litigation.
The original amount of the bond was for
P4,000.00; but the amount was later
reduced to P2,000.00.
It is not disputed that defendant Rita Gueco
Tapnio was indebted to the bank in the sum
of P2,000.00, plus accumulated interests
unpaid, which she failed to pay despite
demands. The Bank wrote a letter of
demand to plaintiff, as per Exh. C;
whereupon, plaintiff paid the bank on
September 18, 1957, the full amount due
and owing in the sum of P2,379.91, for and
on account of defendant Rita Gueco's
obligation (Exhs. D and D-1).
Plaintiff, in turn, made several demands,
both verbal and written, upon defendants
(Exhs. E and F), but to no avail.
Defendant Rita Gueco Tapnio admitted all
the foregoing facts. She claims, however,
when demand was made upon her by
plaintiff for her to pay her debt to the Bank,
that she told the Plaintiff that she did not
consider herself to be indebted to the Bank
at all because she had an agreement with
one Jacobo-Nazon whereby she had leased
to the latter her unused export sugar quota
for the 1956-1957 agricultural year,
consisting of 1,000 piculs at the rate of
P2.80 per picul, or for a total of P2,800.00,
which was already in excess of her
obligation guaranteed by plaintiff's bond,
Exh. A. This lease agreement, according to
her, was with the knowledge of the bank.
But the Bank has placed obstacles to the
consummation of the lease, and the delay
caused by said obstacles forced 'Nazon to
rescind the lease contract. Thus, Rita Gueco
Tapnio filed her third-party complaint
against the Bank to recover from the latter
any and all sums of money which may be
adjudged against her and in favor of the
plaitiff plus moral damages, attorney's fees
and costs.
Insofar as the contentions of the parties
herein are concerned, we quote with
approval the following findings of the lower
court based on the evidence presented at
the trial of the case:
It has been established during the trial that Mrs.
Tapnio had an export sugar quota of 1,000 piculs for
the agricultural year 1956-1957 which she did not
need. She agreed to allow Mr. Jacobo C. Tuazon to
use said quota for the consideration of P2,500.00
(Exh. "4"-Gueco). This agreement was called a
contract of lease of sugar allotment.
At the time of the agreement, Mrs. Tapnio was
indebted to the Philippine National Bank at San
Fernando, Pampanga. Her indebtedness was known
as a crop loan and was secured by a mortgage on
her standing crop including her sugar quota
allocation for the agricultural year corresponding to
 said standing crop. This arrangement was necessary
in order that when Mrs. Tapnio harvests, the P.N.B.,
having a lien on the crop, may effectively enforce
collection against her. Her sugar cannot be exported
without sugar quota allotment Sometimes, however,
a planter harvest less sugar than her quota, so her
excess quota is utilized by another who pays her for
its use. This is the arrangement entered into
between Mrs. Tapnio and Mr. Tuazon regarding the
former's excess quota for 1956-1957 (Exh. "4"-
Gueco).
Since the quota was mortgaged to the P.N.B., the
contract of lease had to be approved by said Bank,
The same was submitted to the branch manager at
San Fernando, Pampanga. The latter required the
parties to raise the consideration of P2.80 per picul
or a total of P2,800.00 (Exh. "2-Gueco") informing
them that "the minimum lease rental acceptable to
the Bank, is P2.80 per picul." In a letter addressed to
the branch manager on August 10, 1956, Mr. Tuazon
informed the manager that he was agreeable to
raising the consideration to P2.80 per picul. He
further informed the manager that he was ready to
pay said amount as the funds were in his folder
which was kept in the bank.
Explaining the meaning of Tuazon's statement as to
the funds, it was stated by him that he had an
approved loan from the bank but he had not yet
utilized it as he was intending to use it to pay for the
quota. Hence, when he said the amount needed to
pay Mrs. Tapnio was in his folder which was in the
bank, he meant and the manager understood and
knew he had an approved loan available to be used
in payment of the quota. In said Exh. "6-Gueco",
Tuazon also informed the manager that he would
want for a notice from the manager as to the time
when the bank needed the money so that Tuazon
could sign the corresponding promissory note.
Further Consideration of the evidence discloses that when the
branch manager of the Philippine National Bank at San
Fernando recommended the approval of the contract of lease
at the price of P2.80 per picul (Exh. 1 1-Bank), whose
recommendation was concurred in by the Vice-president of
said Bank, J. V. Buenaventura, the board of directors required
that the amount be raised to 13.00 per picul. This act of the
board of directors was communicated to Tuazon, who in turn
asked for a reconsideration thereof. On November 19, 1956,
the branch manager submitted Tuazon's request for
reconsideration to the board of directors with another
recommendation for the approval of the lease at P2.80 per
picul, but the board returned the recommendation unacted
upon, considering that the current price prevailing at the time
was P3.00 per picul (Exh. 9-Bank).
The parties were notified of the refusal on the part of the
board of directors of the Bank to grant the motion for
reconsideration. The matter stood as it was until February 22,
1957, when Tuazon wrote a letter (Exh. 10-Bank informing
the Bank that he was no longer interested to continue the
deal, referring to the lease of sugar quota allotment in favor
of defendant Rita Gueco Tapnio. The result is that the latter
lost the sum of P2,800.00 which she should have received
from Tuazon and which she could have paid the Bank to
cancel off her indebtedness,
The court below held, and in this holding we concur that
failure of the negotiation for the lease of the sugar quota
allocation of Rita Gueco Tapnio to Tuazon was due to the fault
of the directors of the Philippine National Bank, The refusal on
the part of the bank to approve the lease at the rate of P2.80
per picul which, as stated above, would have enabled Rita
Gueco Tapnio to realize the amount of P2,800.00 which was
more than sufficient to pay off her indebtedness to the Bank,
and its insistence on the rental price of P3.00 per picul thus
unnecessarily increasing the value by only a difference of
P200.00. inevitably brought about the rescission of the lease
contract to the damage and prejudice of Rita Gueco Tapnio in
the aforesaid sum of P2,800.00. The unreasonableness of the
position adopted by the board of directors of the Philippine
National Bank in refusing to approve the lease at the rate of
P2.80 per picul and insisting on the rate of P3.00 per picul, if
only to increase the retail value by only P200.00 is shown by
the fact that all the accounts of Rita Gueco Tapnio with the
Bank were secured by chattel mortgage on standing crops,
assignment of leasehold rights and interests on her
properties, and surety bonds, aside from the fact that from
Exh. 8-Bank, it appears that she was offering to execute a
real estate mortgage in favor of the Bank to replace the
surety bond This statement is further bolstered by the fact
that Rita Gueco Tapnio apparently had the means to pay her
obligation fact that she has been granted several value of
almost P80,000.00 for the agricultural years from 1952 to
56. 1
Its motion for the reconsideration of the decision of the Court
of Appeals having been denied, petitioner filed the present
petition.
The petitioner contends that the Court of Appeals erred:
(1) In finding that the rescission of the lease contract of the
1,000 piculs of sugar quota allocation of respondent Rita
Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified
refusal of petitioner to approve said lease contract, and its
unreasonable insistence on the rental price of P3.00 instead
of P2.80 per picul; and
(2) In not holding that based on the statistics of sugar price
and prices of sugar quota in the possession of the petitioner,
the latter's Board of Directors correctly fixed the rental of
price per picul of 1,000 piculs of sugar quota leased by
respondent Rita Gueco Tapnio to Jacobo C. Tuazon at P3.00
per picul.
Petitioner argued that as an assignee of the sugar quota of
Tapnio, it has the right, both under its own Charter and under
the Corporation Law, to safeguard and protect its rights and
interests under the deed of assignment, which include the
right to approve or disapprove the said lease of sugar quota
and in the exercise of that authority, its
Board of Directors necessarily had authority to determine and
fix the rental price per picul of the sugar quota subject of the
lease between private respondents and Jacobo C. Tuazon. It
argued further that both under its Charter and the
Corporation Law, petitioner, acting thru its Board of Directors,
has the perfect right to adopt a policy with respect to fixing of
rental prices of export sugar quota allocations, and in fixing
the rentals at P3.00 per picul, it did not act arbitrarily since
the said Board was guided by statistics of sugar price and
prices of sugar quotas prevailing at the time. Since the fixing
of the rental of the sugar quota is a function lodged with
petitioner's Board of Directors and is a matter of policy, the
respondent Court of Appeals could not substitute its own
judgment for that of said Board of Directors, which acted in
good faith, making as its basis therefore the prevailing
market price as shown by statistics which were then in their
possession.
Finally, petitioner emphasized that under the appealed
judgment, it shall suffer a great injustice because as a
creditor, it shall be deprived of a just claim against its debtor
(respondent Rita Gueco Tapnio) as it would be required to
return to respondent Philamgen the sum of P2,379.71, plus
interest, which amount had been previously paid to petitioner
by said insurance company in behalf of the principal debtor,
herein respondent Rita Gueco Tapnio, and without recourse
against respondent Rita Gueco Tapnio.
We must advert to the rule that this Court's appellate
jurisdiction in proceedings of this nature is limited to
reviewing only errors of law, accepting as conclusive the
factual fin dings of the Court of Appeals upon its own
assessment of the evidence. 2
The contract of lease of sugar quota allotment at P2.50 per
picul between Rita Gueco Tapnio and Jacobo C. Tuazon was
executed on April 17, 1956. This contract was submitted to
the Branch Manager of the Philippine National Bank at San
Fernando, Pampanga. This arrangement was necessary
because Tapnio's indebtedness to petitioner was secured by a
mortgage on her standing crop including her sugar quota
allocation for the agricultural year corresponding to said
standing crop. The latter required the parties to raise the
consideration to P2.80 per picul, the minimum lease rental
acceptable to the Bank, or a total of P2,800.00. Tuazon
informed the Branch Manager, thru a letter dated August 10,
1956, that he was agreeable to raising the consideration to
P2.80 per picul. He further informed the manager that he was
ready to pay the said sum of P2,800.00 as the funds were in
his folder which was kept in the said Bank. This referred to
the approved loan of Tuazon from the Bank which he intended
to use in paying for the use of the sugar quota. The Branch
Manager submitted the contract of lease of sugar quota
allocation to the Head Office on September 7, 1956, with a
recommendation for approval, which recommendation was
concurred in by the Vice-President of the Bank, Mr. J. V.
Buenaventura. This notwithstanding, the Board of Directors of
petitioner required that the consideration be raised to P3.00
per picul.
Tuazon, after being informed of the action of the Board of
Directors, asked for a reconsideration thereof. On November
19, 1956, the Branch Manager submitted the request for
reconsideration and again recommended the approval of the
lease at P2.80 per picul, but the Board returned the
recommendation unacted, stating that the current price
prevailing at that time was P3.00 per picul.
On February 22, 1957, Tuazon wrote a letter, informing the
Bank that he was no longer interested in continuing the lease
of sugar quota allotment. The crop year 1956-1957 ended
and Mrs. Tapnio failed to utilize her sugar quota, resulting in
her loss in the sum of P2,800.00 which she should have
received had the lease in favor of Tuazon been implemented.
It has been clearly shown that when the Branch Manager of
petitioner required the parties to raise the consideration of
the lease from P2.50 to P2.80 per picul, or a total of P2,800-
00, they readily agreed. Hence, in his letter to the Branch
Manager of the Bank on August 10, 1956, Tuazon informed
him that the minimum lease rental of P2.80 per picul was
acceptable to him and that he even offered to use the loan
secured by him from petitioner to pay in full the sum of
P2,800.00 which was the total consideration of the lease. This
arrangement was not only satisfactory to the Branch Manager
but it was also approves by Vice-President J. V. Buenaventura
of the PNB. Under that arrangement, Rita Gueco Tapnio could
have realized the amount of P2,800.00, which was more than
enough to pay the balance of her indebtedness to the Bank
which was secured by the bond of Philamgen.
There is no question that Tapnio's failure to utilize her sugar
quota for the crop year 1956-1957 was due to the disapproval
of the lease by the Board of Directors of petitioner. The issue,
therefore, is whether or not petitioner is liable for the damage
caused.
As observed by the trial court, time is of the essence in the
approval of the lease of sugar quota allotments, since the
same must be utilized during the milling season, because any
allotment which is not filled during such milling season may
be reallocated by the Sugar Quota Administration to other
holders of allotments. 3 There was no proof that there was
any other person at that time willing to lease the sugar quota
allotment of private respondents for a price higher than P2.80
per picul. "The fact that there were isolated transactions
wherein the consideration for the lease was P3.00 a picul",
according to the trial court, "does not necessarily mean that
there are always ready takers of said price. " The
unreasonableness of the position adopted by the petitioner's
Board of Directors is shown by the fact that the difference
between the amount of P2.80 per picul offered by Tuazon and
the P3.00 per picul demanded by the Board amounted only to
a total sum of P200.00. Considering that all the accounts of
Rita Gueco Tapnio with the Bank were secured by chattel
mortgage on standing crops, assignment of leasehold rights
and interests on her properties, and surety bonds and that
she had apparently "the means to pay her obligation to the
Bank, as shown by the fact that she has been granted several
sugar crop loans of the total value of almost P80,000.00 for
the agricultural years from 1952 to 1956", there was no
reasonable basis for the Board of Directors of petitioner to
have rejected the lease agreement because of a measly sum
of P200.00.
While petitioner had the ultimate authority of approving or
disapproving the proposed lease since the quota was
mortgaged to the Bank, the latter certainly cannot escape its
responsibility of observing, for the protection of the interest of
private respondents, that degree of care, precaution and
vigilance which the circumstances justly demand in approving
or disapproving the lease of said sugar quota. The law makes
it imperative 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, 4 This petitioner failed to do. Certainly, it knew that the
agricultural year was about to expire, that by its disapproval
of the lease private respondents would be unable to utilize the
sugar quota in question. In failing to observe the reasonable
degree of care and vigilance which the surrounding
circumstances reasonably impose, petitioner is consequently
liable for the damages caused on private respondents. Under
Article 21 of the New Civil Code, "any person who wilfully
causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the
latter for the damage." The afore-cited provisions on human
relations were intended to expand the concept of torts in this
jurisdiction by granting adequate legal remedy for the untold
number of moral wrongs which is impossible for human
foresight to specifically provide in the statutes. 5
A corporation is civilly liable in the same manner as natural
persons for torts, because "generally speaking, the rules
governing the liability of a principal or master for a tort
committed by an agent or servant are the same whether the
principal or master be a natural person or a corporation, and
whether the servant or agent be a natural or artificial person.
All of the authorities agree that a principal or master is liable
for every tort which he expressly directs or authorizes, and
this is just as true of a corporation as of a natural person, A
corporation is liable, therefore, whenever a tortious act is
committed by an officer or agent under express direction or
authority from the stockholders or members acting as a body,
or, generally, from the directors as the governing body." 6
WHEREFORE, in view of the foregoing, the decision of the
Court of Appeals is hereby AFFIRMED.
G.R. No. 141480 November 29, 2006
CARLOS B. DE GUZMAN, Petitioner,
vs.
TOYOTA CUBAO, INC., Respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to annul the Order,1 dated September
9, 1999, of the Regional Trial Court of Quezon City (the RTC),
Branch 105, which dismissed the complaint for damages filed
by petitioner Carlos B. De Guzman against respondent Toyota
Cubao, Inc.
On November 27, 1997, petitioner purchased from
respondent a brand new white Toyota Hi-Lux 2.4 SS double
cab motor vehicle, 1996 model, in the amount of ₱508,000.
Petitioner made a down payment of ₱152,400, leaving a
balance of ₱355,600 which was payable in 36 months with
54% interest. The vehicle was delivered to petitioner two
days later. On October 18, 1998, petitioner demanded the
replacement of the engine of the vehicle because it developed
a crack after traversing Marcos Highway during a heavy rain.
Petitioner asserted that respondent should replace the engine
with a new one based on an implied warranty. Respondent
countered that the alleged damage on the engine was not
covered by a warranty.
On April 20, 1999, petitioner filed a complaint for
damages2 against respondent with the RTC. Respondent
moved to dismiss the case on the ground that under Article
1571 of the Civil Code, the petitioner’s cause of action had
prescribed as the case was filed more than six months from
the date the vehicle was sold and/or delivered.
In an Order dated September 9, 1999, the RTC granted
respondent’s motion and dismissed the complaint, thus:
For the Court’s consideration are: (1) defendant’s Motion to
Dismiss; (2) plaintiff’s Opposition thereto; (3) defendant’s
Reply; and (4) plaintiff’s Rejoinder.
The Court agrees with the plaintiff’s counsel that the subject
pick-up is a consumer product because it is used for personal,
family or agricultural purposes, contrary to defendant
counsel’s claim that it is not because it is a non-consumable
item.
Since no warranty card or agreement was attached to the
complaint, the contract of sale of the subject pick-up carried
an implied warranty that it was free from any hidden faults or
defects, or any charge or encumbrance not declared or known
to the buyer. The prescriptive period thereof is six (6) months
under the Civil Code (Art. 1571).
Under RA No. 7394, the provisions of the Civil Code on
conditions and warranties shall govern all contracts of sale
with condition and warranties (Art. 67). The duration of the
implied warranty (not accompanied by an express warranty)
shall endure not less than sixty days nor more than one (1)
year following the sale of new consumer products (Art. 68,
par. [e]). The two (2) year prescriptive period under Art. 169
cannot prevail over Art. 68 because the latter is the specific
provision on the matter.
The Court has noted that the prescriptive period for implied
and express warranties cannot be the same. In the Civil Code,
a redhibitory action for violation of an implied warranty
against hidden defects prescribes in six (6) months, while if it
based on an express warranty[,] the action prescribes in four
(4) years. Under RA No. 7394, the implied warranty cannot
be more than one (1) year; however, the implied warranty
can only be of equal duration to that an express warranty
when the implied warranty of merchantability accompanies an
express warranty (Art. 68, par. [e]). Therefore, the
prescriptive period of two years under Art. 169 does not cover
an implied warranty, which is not accompanied by an express
warranty. It is applicable to cases where there is an express
warranty in the sale of the consumer product.
Relative to plaintiff’s argument that the claim for moral and
exemplary damages and attorney’s fees is based on quasi-
delict or breach of contract, such are merely ancillary to the
main cause of action which is based on warranty against
hidden defects. Without the latter, the former cannot stand
alone.
Based on the record, the subject vehicle was purchased on 27
November 1997 and delivered on 29 November 1997. This
case was filed only on 20 April 1999 or almost nineteen (19)
months from [the] sale and/or delivery. Applying Art. 1571 of
Civil Code, the action is barred by prescription because the
complaint was filed more than six (6) months after the sale
and/or delivery of the vehicle. In addition, the duration of the
implied warranty of not more than one (1) year under Art. 68,
par (e) of RA No. 7394 has already elapsed.
Accordingly, defendant’s Motion is granted and the plaintiff’s
Complaint is ordered dismissed.
SO ORDERED3
On December 21, 1999, the RTC denied petitioner’s motion
for reconsideration, as follows:
Submitted for resolution are: (1) plaintiff’s Motion for
Reconsideration; (2) defendant’s Opposition; and (3)
plaintiff’s Reply.
Although plaintiff’s motion was filed beyond the ten-day
period, the Court is convinced that it was not for the purpose
of delay; hence, it cannot be considered as a mere scrap of
paper.
After a thorough study, the Court resolves that while
reference to Art. 68, par. (e) of RA No. 7394 may have been
misplaced, yet the subject sale carried an implied warranty
whose prescriptive period is six (6) months under Art. 1571 of
the Civil Code.
Accordingly, plaintiff’s Motion for Reconsideration is DENIED.
SO ORDERED.4
Petitioner thereupon filed a petition for review
on certiorari with this Court.
The petition should be denied.
First, on procedural grounds, the petition should forthwith be
denied for violation of the hierarchy of courts. Petitioner
states that the present petition is an "appeal by certiorari on
pure questions of law, from the final Order of Branch 105 of
the Regional Trial Court of Quezon City in Civil Case No. Q-
99-37381 … under Rule 45 of the Rules of Court." Upon
receipt of the Order of the RTC, dated September 9, 1999, on
September 21, 1999, petitioner filed a motion for
reconsideration on September 28, 1999. On December 21,
1999, the RTC denied petitioner’s motion. When petitioner
received a copy of the said order on January 18, 2000, he had
fifteen (15) days from receipt within which to appeal to the
Court of Appeals by filing a notice of appeal under Section
2(a) of Rule 41, from an order of the RTC issued in the
exercise of its original jurisdiction. The RTC’s order dated
September 9, 1999 and its subsequent order dated December
21, 1999 partake of the nature of a final disposition of the
case. Hence, the appropriate remedy petitioner should have
taken was to file a notice of appeal from the RTC to the Court
of Appeals, not a petition for review on certiorari directly with
this Court.
Although petitioner intended his petition, filed on February 2,
2000, to be one filed under Rule 45 and he filed it well within
the 15-day reglementary period counted from January 18,
2000, the same was in effect a petition for certiorariunder
Rule 65, and is therefore dismissible for violation of the
hierarchy of courts under Section 4 thereof. Petitioner failed
to show that special and important reasons or exceptional and
compelling circumstances exist to justify a direct filing of the
petition with this Court instead of first taking an appeal to the
Court of Appeals.5 Likewise, petitioner cannot find refuge in
the argument that he was raising pure questions of law. The
sole matter petitioner assails in this action is the RTC’s order
of dismissal of his complaint for damages on the ground of
prescription which was tantamount to an adjudication on the
merits. Again, petitioner should have resorted to the remedy
of appealing the case to the Court of Appeals by filing a notice
of appeal with the RTC.
Second, even if the Court were to disregard the procedural
infirmity, the petition should be denied for lack of merit.
In his complaint, petitioner alleged and prayed, thus:
2. Last 27 November 1997, the plaintiff purchased
from the defendant a brand new Toyota Hilux 2.4
motor vehicle with [E]ngine [N]o. 2-L-9514743. It
was delivered to the plaintiff on 29 November 1997.
Copies of the Vehicle Sales Invoice and Vehicle
Delivery Note issued by the defendant are hereto
attached as Annexes "A" and "B," respectively.
3. Last 18 October 1998, after only 12,000
kilometers of use, the vehicle’s engine cracked.
Although it was previously driven through a heavy
rain, it didn’t pass through flooded streets high
enough to stop sturdy and resistant vehicles.
Besides, vehicles of this class are advertised as being
capable of being driven on flooded areas or rugged
terrain.
4. As plaintiff knows no reason why the vehicle’s
engine would crack just like that, the same could
only be due to the fact that said engine and/or the
vehicle itself was defective even from the time it was
bought.
5. Brought to the attention, defendant refused to
answer for this defect saying it is not covered by the
vehicle’s warranty. It refused to replace the vehicle
as plaintiff demanded (or at least its engine, or even
repair the damage).
6. As a result of defendant’s actions, plaintiff
suffered mental anxiety and sleepless nights for
which he demands an award of ₱200,000.00 moral
damages.
7. By way of example for the public good, plaintiff
should also be awarded exemplary damages in the
amount of ₱200,000.00.
8. Forced to litigate to enforce his rights, plaintiff
incurred, and shall further incur, litigation-related
expenses (including those for his counsel’s fees) in
the total estimated sum of ₱100,000.
WHEREFORE, it is respectfully prayed that judgment be
rendered ordering defendant:
a. to replace the subject vehicle with a brand new
one or at least to replace its engine all at defendant’s
cost;
b. pay the plaintiff:
i. ₱200,000 – moral damages;
ii. ₱200,000 – exemplary damages;
iii. ₱200,000 – attorney’s fees and litigation
expenses; and
iv. the costs of suit.
Other reliefs just and equitable are, likewise, prayed for.6
Petitioner contends that the dismissal on the ground of
prescription was erroneous because the applicable provision is
Article 169 of Republic Act No. 7394 (otherwise known as
"The Consumer Act of the Philippines" which was approved on
April 13, 1992), and not Article 1571 of the Civil Code.
Petitioner specifies that in his complaint, he neither asked for
a rescission of the contract of sale nor did he pray for a
proportionate reduction of the purchase price. What petitioner
claims is the enforcement of the contract, that is, that
respondent should replace either the vehicle or its engine with
a new one. In this regard, petitioner cites Article 169 of
Republic Act No. 7394 as the applicable provision, so as to
make his suit come within the purview of the two-year
prescriptive period. Tangentially, petitioner also justifies that
his cause of action has not yet prescribed because this
present suit, which was an action based on quasi-delict,
prescribes in four years.
On the other hand, respondent maintains that petitioner’s
cause of action was already barred by the statute of
limitations under Article 1571 of the Civil Code for having
been filed more than six months from the time the vehicle
was purchased and/or delivered. Respondent reiterates that
Article 169 of Republic Act No. 7394 does not apply.
Petitioner’s argument is erroneous. Article 1495 of the Civil
Code states that in a contract of sale, the vendor is bound to
transfer the ownership of and to deliver the thing that is the
object of sale. Corollarily, the pertinent provisions of the Code
set forth the available remedies of a buyer against the seller
on the basis of a warranty against hidden defects:
Art. 1561. The vendor shall be responsible for warranty
against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is intended,
or should they diminish its fitness for such use to such an
extent that, had the vendee been aware thereof, he would not
have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or
those which may be visible, or for those which are not visible
if the vendee is an expert who, by reason of this trade or
profession, should have known them. (Emphasis supplied)
Art. 1566. The vendor is responsible to the vendee for any
hidden faults or defects in the thing sold, even though he was
not aware thereof.
to hold respondent responsible for breach of implied warranty
for having sold a vehicle with defective engine. Such being
the case, petitioner should have exercised this right within six
months from the delivery of the thing sold.7 Since petitioner
filed the complaint on April 20, 1999, or more than nineteen
months counted from November 29, 1997 (the date of the
delivery of the motor vehicle), his cause of action had become
time-barred.
Petitioner contends that the subject motor vehicle comes
within the context of Republic Act No. 7394. Thus, petitioner
relies on Article 68 (f) (2) in relation to Article 169 of Republic
Act No. 7394. Article 4 (q) of the said law defines "consumer
products and services" as goods, services and credits, debts
or obligations which are primarily for personal, family,
household or agricultural purposes, which shall include, but
not limited to, food, drugs, cosmetics, and devices. The
following provisions of Republic Act No. 7394 state:
Art. 67. Applicable Law on Warranties. — The provisions of
the Civil Code on conditions and warranties shall govern all
contracts of sale with conditions and warranties.
Art. 68. Additional Provisions on Warranties. — In addition to
the Civil Code provisions on sale with warranties, the
following provisions shall govern the sale of consumer
products with warranty:
e) Duration of warranty. The seller and the consumer may
stipulate the period within which the express warranty shall
be enforceable. If the implied warranty on merchantability
accompanies an express warranty, both will be of equal
duration.1âwphi1
Any other implied warranty shall endure not less than sixty
(60) days nor more than one (1) year following the sale of
new consumer products.
f) Breach of warranties — xxx
2) In case of breach of implied warranty, the consumer may
retain in the goods and recover damages, or reject the goods,
cancel the contract and recover from the seller so much of the
purchase price as has been paid, including damages.
(Emphasis supplied.)

This provision shall not apply if the contrary has been
stipulated and the vendor was not aware of the hidden faults
or defects in the thing sold.
Art. 1571. Actions arising from the provisions of the preceding
ten articles shall be barred after six months from the delivery
of the thing sold.
Consequently, even if the complaint is made to fall under the
Republic Act No. 7394, the same should still be dismissed
since the prescriptive period for implied warranty thereunder,
which is one year, had likewise lapsed.
WHEREFORE, the petition is DENIED for being in violation of
the hierarchy of courts, and in any event, for lack of merit.

(Emphasis supplied)

Under Article 1599 of the Civil Code, once an express

warranty is breached, the buyer can accept or keep the goods
and maintain an action against the seller for damages. In the
absence of an existing express warranty on the part of the
respondent, as in this case, the allegations in petitioner’s
complaint for damages were clearly anchored on the
enforcement of an implied warranty against hidden defects,
i.e., that the engine of the vehicle which respondent had sold
to him was not defective. By filing this case, petitioner wants