FIRST DIVISION

[G.R. No. 118889. March 23, 1998]

FGU
INSURANCE
CORPORATION, petitioner,
vs.,
COURT OF APPEALS, FILCAR
TRANSPORT, INC., and FORTUNE INSURANCE CORPORATION,respondents.
DECISION
BELLOSILLO, J.:
For damages suffered by a third party, may an action based on quasi-delict prosper against a
rent-a-car company and, consequently, its insurer for fault or negligence of the car lessee in driving
the rented vehicle?
This was a two-car collision at dawn. At around 3 o'clock of 21 April 1987, two (2) vehicles, both
Mitsubishi Colt Lancers, cruising northward along Epifanio de los Santos Avenue, Mandaluyong
City, figured in a traffic accident. The car bearing Plate No. PDG 435 owned by Lydia F. Soriano was
being driven at the outer lane of the highway by Benjamin Jacildone, while the other
car, with Plate No. PCT 792, owned by respondent FILCAR Transport, Inc. (FILCAR), and driven by
Peter Dahl-Jensen as lessee, was at the center lane, left of the other vehicle. Upon approaching the
corner of Pioneer Street, the car owned by FILCAR swerved to the right hitting the left side of the
car of Soriano. At that time Dahl-Jensen, a Danish tourist, did not possess a Philippine driver's
license.[1]
As a consequence, petitioner FGU Insurance Corporation, in view of its insurance contract with
Soriano, paid the latter P25,382.20. By way of subrogation,[2] it sued Dahl-Jensen and respondent
FILCAR as well as respondent Fortune Insurance Corporation (FORTUNE) as insurer of FILCAR
for quasi-delict before the Regional Trial Court of Makati City.
Unfortunately, summons was not served on Dahl-Jensen since he was no longer staying at his
given address; in fact, upon motion of petitioner, he was dropped from the complaint.
On 30 July 1991 the trial court dismissed the case for failure of petitioner to substantiate its
claim of subrogation.[3]
On 31 January 1995 respondent Court of Appeals affirmed the ruling of the trial court although
based on another ground, i.e., only the fault or negligence of Dahl-Jensen was sufficientlyproved but
not that of respondent FILCAR.[4] In other words, petitioner failed to establish its cause of action for
sum of money based on quasi-delict.
In this appeal, petitioner insists that respondents are liable on the strength of the ruling in MYCAgro-Industrial Corporation v. Vda. de Caldo[5] that the registered owner of a vehicle is liable for
damages suffered by third persons although the vehicle is leased to another.
We find no reversible error committed by respondent court in upholding the dismissal of
petitioner's complaint. The pertinent provision is Art. 2176 of the Civil Code which states:"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 x x x x"
To sustain a claim based thereon, the following requisites must concur: (a) damage suffered by
the plaintiff; (b) fault or negligence of the defendant; and, (c) connection of cause and effect
between the fault or negligence of the defendant and the damage incurred by the plaintiff.[6]
We agree with respondent court that petitioner failed to prove the existence of the second
requisite, i.e., fault or negligence of defendant FILCAR, because only the fault or negligence of
Dahl-Jensen was sufficiently established, not that of FILCAR. It should be noted that the damage
caused on the vehicle of Soriano was brought about by the circumstance that Dahl-Jensen swerved
to the right while the vehicle that he was driving was at the center lane. It is plain that the negligence
was solely attributable to Dahl-Jensen thus making the damage suffered by the other vehicle his
personal liability. Respondent FILCAR did not have any participation therein.
Article 2180 of the same Code which deals also with quasi-delict provides:
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.
The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons who are under
their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.
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.
The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in whichcase
what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by
their pupils and students or apprentices, so long as they remain in their custody.
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.
The liability imposed by Art. 2180 arises by virtue of a presumption juris tantum of negligence
on the part of the persons made responsible thereunder, derived from their failure toexercise due
care and vigilance over the acts of subordinates to prevent them from causing damage. [7] Yet, as
correctly observed by respondent court, Art. 2180 is hardly applicable because none of the
circumstances mentioned therein obtains in the case under consideration. Respondent
FILCAR
being engaged in a rent-a-car business was only the owner of the car leased to Dahl-Jensen. As
such, there was no vinculum juris between them as employer and employee. Respondent FILCAR
cannot in any way be responsible for the negligent act of Dahl-Jensen, the former not being an
employer of the latter.
We now correlate par. 5 of Art. 2180 with Art. 2184 of the same Code which provides: "In motor
vehicle mishap, the owner is solidarily liable with his driver, if the former, who was in the vehicle,
could have by the use of due diligence, prevented the misfortune x x x x If the owner was not in the
motor vehicle, the provisions of article 2180 are applicable." Obviously, this provision of Art.
2184 is neither applicable because of the absence of master-driver relationship between respondent
FILCAR and Dahl-Jensen. Clearly, petitioner has no cause of action against respondent FILCAR on
the basis of quasi-delict; logically, its claim against respondent FORTUNE can neither prosper.
Petitioner's insistence on MYC-Agro-Industrial Corporation is rooted in a misapprehension of
our ruling therein. In that case, the negligent and reckless operation of the truck owned by petitioner
corporation caused injuries to several persons and damage to property. Intending to exculpate itself
from
liability, the
corporation
raised
the
defense that
at
the
time
of
the
collisionit had no more control over the vehicle as it was leased to another; and, that the
driver was not its employee but of the lessee. The trial court was not persuaded as it found that the
true nature of the alleged lease contract was nothing more than a disguise effected by the
corporation to relieve itself of the burdens and responsibilities of an employer. We upheld this
finding and affirmed the declaration of joint and several liability of the corporation with its driver.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 31
January 1995 sustaining the dismissal of petitioner's complaint by the trial court is
AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr.,(Chairman), Vitug, Panganiban and Quisumbing, JJ., concur.

THIRD DIVISION
[G.R. No. 122445. November 18, 1997]
DR. NINEVETCH CRUZ, petitioner, vs. COURT OF APPEALS and LYDIA UMALI, respondents.
DECISION
FRANCISCO, J.:
"Doctors are protected by a special law. They are not guarantors of care. They do not even warrant a good
result. They are not insurers against mishap or unusual consequences. Furthermore they are not liable for
honest mistake of judgment"[1]
The present case against petitioner is in the nature of a medical malpractice suit, which in
simplest term is the type of claim which a victim has available to him or her to redress a wrong
committed by a medical professional which has cause bodily harm. [2] In this jurisdiction, however,
such claims are most often brought as a civil action for damages under Article 2176 of the Civil
Code,[3] and in some instances, as a criminal case under Article 365 of the Revised Penal
Code[4] with which the civil action for damages is impliedly instituted. It is via the latter type of action
that the heirs of the deceased sought redress for the petitioner's alleged imprudence and
negligence in treating the deceased thereby causing her death. The petitioner and one Dr. Lina
Ercillo who was the attending anaesthesiologist during the operation of the deceased were charged
with "reckless imprudence and negligence resulting to (sic) homicide" in an information which reads:
"That on or about March 23, 1991, in the City of San Pablo, Republic of the Philippines and within the
jurisdiction of this Honorable Court, the accused abovenamed, being then the attending anaesthesiologist and
surgeon, respectively, did then and there, in a negligence (sic), careless, imprudent, and incompetent manner,
and failing to supply or store sufficient provisions and facilities necessary to meet any and all exigencies apt
to arise before, during and/or after a surgical operation causing by such negligence, carelessness, imprudence,
and incompetence, and causing by such failure, including the lack of preparation and foresight needed to avert
a tragedy, the untimely death of said Lydia Umali on the day following said surgical operation." [5]
Trial ensued after both the petitioner and Dr. Lina Ercillo pleaded not guilty to the abovementioned charge. On March 4, 1994, the Municipal Trial Court in Cities (MTCC) of San Pablo City
rendered a decision, the dispositive portion of which is hereunder quoted as follows:
"WHEREFORE, the court finds the accused Dr. Lina Ercillo not guilty of the offense charged for
insufficiency of evidence while her co-accused Dra. Ninevetch Cruz is hereby held responsible for the death
of Lydia Umali on March 24, 1991, and therefore guilty under Art. 365 of the Revised Penal Code, and she is
hereby sentenced to suffer the penalty of 2 months and 1 day imprisonment of arresto mayor with costs." [6]
The petitioner appealed her conviction to the Regional Trial Court (RTC) which affirmed in toto the
decision of the MTCC[7] prompting the petitioner to file a petition for review with the Court of Appeals
but to no avail. Hence this petition for review on certiorari assailing the decision promulgated by the
Court of Appeals on October 24, 1995 affirming petitioner's conviction with modification that she is
further directed to pay the heirs of Lydia Umali P50,000.00 as indemnity for her death.[8]
In substance, the petition brought before this Court raises the issue of whether or not
petitioner's conviction of the crime of reckless imprudence resulting in homicide, arising from an
alleged medical malpractice, is supported by the evidence on record.
First the antecedent facts.
On March 22, 1991, prosecution witness, Rowena Umali De Ocampo, accompanied her mother
to the Perpetual Help Clinic and General Hospital situated in Balagtas Street, San Pablo City,
Laguna. They arrived at the said hospital at around 4:30 in the afternoon of the same day.[9] Prior to
March 22, 1991, Lydia was examined by the petitioner who found a "myoma" [10] in her uterus, and
scheduled her for a hysterectomy operation on March 23, 1991. [11] Rowena and her mother slept in
the clinic on the evening of March 22, 1991 as the latter was to be operated on the next day at 1:00
o'clock in the afternoon.[12] According to Rowena, she noticed that the clinic was untidy and the
window and the floor were very dusty prompting her to ask the attendant for a rag to wipe the
window and the floor with. [13] Because of the untidy state of the clinic, Rowena tried to persuade her
mother not to proceed with the operation. [14] The following day, before her mother was wheeled into
the operating room, Rowena asked the petitioner if the operation could be postponed. The petitioner
called Lydia into her office and the two had a conversation. Lydia then informed Rowena that the
petitioner told her that she must be operated on as scheduled.[15]

Rowena and her other relatives, namely her husband, her sister and two aunts waited outside
the operating room while Lydia underwent operation. While they were waiting, Dr. Ercillo went out of
the operating room and instructed them to buy tagamet ampules which Rowena's sister immediately
bought. About one hour had passed when Dr. Ercillo came out again this time to ask them to buy
blood for Lydia. They bought type "A" blood from the St. Gerald Blood Bank and the same was
brought by the attendant into the operating room. After the lapse of a few hours, the petitioner
informed them that the operation was finished. The operating staff then went inside the petitioner's
clinic to take their snacks. Some thirty minutes after, Lydia was brought out of the operating room in
a stretcher and the petitioner asked Rowena and the other relatives to buy additional blood for
Lydia. Unfortunately, they were not able to comply with petitioner's order as there was no more type
"A" blood available in the blood bank. Thereafter, a person arrived to donate blood which was later
transfused to Lydia. Rowena then noticed her mother, who was attached to an oxygen tank, gasping
for breath. Apparently the oxygen supply had run out and Rowena's husband together with the
driver of the accused had to go to the San Pablo District Hospital to get oxygen. Lydia was given the
fresh supply of oxygen as soon as it arrived. [16] But at around 10:00 o'clock P.M. she went into shock
and her blood pressure dropped to 60/50. Lydia's unstable condition necessitated her transfer to the
San Pablo District Hospital so she could be connected to a respirator and further examined. [17] The
transfer to the San Pablo City District Hospital was without the prior consent of Rowena nor of the
other relatives present who found out about the intended transfer only when an ambulance arrived
to take Lydia to the San Pablo District Hospital. Rowena and her other relatives then boarded a
tricycle and followed the ambulance.[18]
Upon Lydia's arrival at the San Pablo District Hospital, she was wheeled into the operating
room and the petitioner and Dr. Ercillo re-operated on her because there was blood oozing from the
abdominal incision.[19] The attending physicians summoned Dr. Bartolome Angeles, head of the
Obstetrics and Gynecology Department of the San Pablo District Hospital. However, when Dr.
Angeles arrived, Lydia was already in shock and possibly dead as her blood pressure was already
0/0. Dr. Angeles then informed petitioner and Dr. Ercillo that there was nothing he could do to help
save the patient.[20] While petitioner was closing the abdominal wall, the patient died.[21] Thus, on
March 24, 1991, at 3:00 o'clock in the morning, Lydia Umali was pronounced dead. Her death
certificate states "shock" as the immediate cause of death and "Disseminated Intravascular
Coagulation (DIC)" as the antecedent cause.[22]
In convicting the petitioner, the MTCC found the following circumstances as sufficient basis to
conclude that she was indeed negligent in the performance of the operation:
"x x x, the clinic was untidy, there was lack of provision like blood and oxygen to prepare for any contingency
that might happen during the operation. The manner and the fact that the patient was brought to the San Pablo
District Hospital for reoperation indicates that there was something wrong in the manner in which Dra. Cruz
conducted the operation. There was no showing that before the operation, accused Dr. Cruz had conducted a
cardio pulmonary clearance or any typing of the blood of the patient. It was (sic) said in medical parlance that
the "abdomen of the person is a temple of surprises" because you do not know the whole thing the moment it
was open (sic) and surgeon must be prepared for any eventuality thereof. The patient (sic) chart which is a
public document was not presented because it is only there that we could determine the condition of the
patient before the surgery. The court also noticed in Exh. "F-1" that the sister of the deceased wished to
postpone the operation but the patient was prevailed upon by Dra. Cruz to proceed with the surgery. The court
finds that Lydia Umali died because of the negligence and carelessness of the surgeon Dra. Ninevetch Cruz
because of loss of blood during the operation of the deceased for evident unpreparedness and for lack of skill,
the reason why the patient was brought for operation at the San Pablo City District Hospital. As such, the
surgeon should answer for such negligence. With respect to Dra. Lina Ercillo, the anaesthesiologist, there is
no evidence to indicate that she should be held jointly liable with Dra. Cruz who actually did the operation." [23]
The RTC reiterated the abovementioned findings of the MTCC and upheld the latter's
declaration of "incompetency, negligence and lack of foresight and skill of appellant (herein
petitioner) in handling the subject patient before and after the operation."[24] And likewise affirming
the petitioner's conviction, the Court of Appeals echoed similar observations, thus:
"x x x. While we may grant that the untidiness and filthiness of the clinic may not by itself indicate
negligence, it nevertheless shows the absence of due care and supervision over her subordinate employees.
Did this unsanitary condition permeate the operating room? Were the surgical instruments properly sterilized?

Could the conditions in the OR have contributed to the infection of the patient? Only the petitioner could
answer these, but she opted not to testify. This could only give rise to the presumption that she has nothing
good to testify on her defense. Anyway, the alleged "unverified statement of the prosecution witness" remains
unchallenged and unrebutted.
Likewise undisputed is the prosecution's version indicating the following facts: that the accused asked the
patient's relatives to buy Tagamet capsules while the operation was already in progress; that after an hour, they
were also asked to buy type "A" blood for the patient; that after the surgery, they were again asked to procure
more type "A" blood, but such was not anymore available from the source; that the oxygen given to the
patient was empty; and that the son-in-law of the patient, together with a driver of the petitioner, had to rush to
the San Pablo City District Hospital to get the much-needed oxygen. All these conclusively show that the
petitioner had not prepared for any unforeseen circumstances before going into the first surgery, which was
not emergency in nature, but was elective or pre-scheduled; she had no ready antibiotics, no prepared blood,
properly typed and cross-matched, and no sufficient oxygen supply.
Moreover, there are a lot of questions that keep nagging Us. Was the patient given any cardio-pulmonary
clearance, or at least a clearance by an internist, which are standard requirements before a patient is subjected
to surgery. Did the petitioner determine as part of the pre-operative evaluation, the bleeding parameters of the
patient, such as bleeding time and clotting time? There is no showing that these were done. The petitioner just
appears to have been in a hurry to perform the operation, even as the family wanted the postponement to April
6, 1991. Obviously, she did not prepare the patient; neither did she get the family's consent to the operation.
Moreover, she did not prepare a medical chart with instructions for the patient's care. If she did all these, proof
thereof should have been offered. But there is none. Indeed, these are overwhelming evidence of recklessness
and imprudence."[25]
This court, however, holds differently and finds the foregoing circumstances insufficient to
sustain a judgment of conviction against the petitioner for the crime of reckless imprudence resulting
in homicide. The elements of reckless imprudence are: (1) that the offender does or fails to do an
act; (2) that the doing or the failure to do that act is voluntary; (3) that it be without malice; (4) that
material damage results from the reckless imprudence; and (5) that there is inexcusable lack of
precaution on the part of the offender, taking into consideration his employment or occupation,
degree of intelligence, physical condition, and other circumstances regarding persons, time and
place.
Whether or not a physician has committed an "inexcusable lack of precaution" in the treatment
of his patient is to be determined according to the standard of care observed by other members of
the profession in good standing under similar circumstances bearing in mind the advanced state of
the profession at the time of treatment or the present state of medical science. [26] In the recent case
of Leonila Garcia-Rueda v. Wilfred L. Pacasio, et. al.,[27] this Court stated that in accepting a case, a
doctor in effect represents that, having the needed training and skill possessed by physicians and
surgeons practicing in the same field, he will employ such training, care and skill in the treatment of
his patients. He therefore has a duty to use at least the same level of care that any other reasonably
competent doctor would use to treat a condition under the same circumstances. It is in this aspect of
medical malpractice that expert testimony is essential to establish not only the standard of care of
the profession but also that the physician's conduct in the treatment and care falls below such
standard.[28] Further, inasmuch as the causes of the injuries involved in malpractice actions are
determinable only in the light of scientific knowledge, it has been recognized that expert testimony is
usually necessary to support the conclusion as to causation.[29]
Immediately apparent from a review of the records of this case is the absence of any expert
testimony on the matter of the standard of care employed by other physicians of good standing in
the conduct of similar operations. The prosecution's expert witnesses in the persons of Dr. Floresto
Arizala and Dr. Nieto Salvador, Jr. of the National Bureau of Investigation (NBI) only testified as to
the possible cause of death but did not venture to illuminate the court on the matter of the standard
of care that petitioner should have exercised.
All three courts below bewail the inadequacy of the facilities of the clinic and its untidiness; the
lack of provisions such as blood, oxygen, and certain medicines; the failure to subject the patient to
a cardio-pulmonary test prior to the operation; the omission of any form of blood typing before
transfusion; and even the subsequent transfer of Lydia to the San Pablo Hospital and the
reoperation performed on her by the petitioner. But while it may be true that the circumstances

pointed out by the courts below seemed beyond cavil to constitute reckless imprudence on the part
of the surgeon, this conclusion is still best arrived at not through the educated surmises nor
conjectures of laymen, including judges, but by the unquestionable knowledge of expert witnesses.
For whether a physician or surgeon has exercised the requisite degree of skill and care in the
treatment of his patient is, in the generality of cases, a matter of expert opinion. [30] The deference of
courts to the expert opinion of qualified physicians stems from its realization that the latter possess
unusual technical skills which laymen in most instances are incapable of intelligently evaluating.
[31]
Expert testimony should have been offered to prove that the circumstances cited by the courts
below are constitutive of conduct falling below the standard of care employed by other physicians in
good standing when performing the same operation. It must be remembered that when the
qualifications of a physician are admitted, as in the instant case, there is an inevitable presumption
that in proper cases he takes the necessary precaution and employs the best of his knowledge and
skill in attending to his clients, unless the contrary is sufficiently established. [32] This presumption is
rebuttable by expert opinion which is so sadly lacking in the case at bench.
Even granting arguendo that the inadequacy of the facilities and untidiness of the clinic; the lack
of provisions; the failure to conduct pre-operation tests on the patient; and the subsequent transfer
of Lydia to the San Pablo Hospital and the reoperation performed on her by the petitioner do
indicate, even without expert testimony, that petitioner was recklessly imprudent in the exercise of
her duties as a surgeon, no cogent proof exists that any of these circumstances caused petitioner's
death. Thus, the absence of the fourth element of reckless imprudence: that the injury to the person
or property was a consequence of the reckless imprudence.
In litigations involving medical negligence, the plaintiff has the burden of establishing appellant's
negligence and for a reasonable conclusion of negligence, there must be proof of breach of duty on
the part of the surgeon as well as a casual connection of such breach and the resulting death of his
patient.[33] In Chan Lugay v. St Luke's Hospital, Inc.,[34] where the attending physician was absolved
of liability for the death of the complainant's wife and newborn baby, this court held that:
"In order that there may be a recovery for an injury, however, it must be shown that the 'injury for which
recovery is sought must be the legitimate consequence of the wrong done; the connection between the
negligence and the injury must be a direct and natural sequence of events, unbroken by intervening efficient
causes.' In other words, the negligence must be the proximate cause of the injury. For, 'negligence, no matter
in what it consists, cannot create a right of action unless it is the proximate cause of the injury complained of.'
And 'the proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury, and without which the result would not have
occurred.'''[35] (Underscoring supplied.)
Dr. Arizala who conducted an autopsy on the body of the deceased summarized his findings as
follows:
"Atty. Cachero:
Q. You mentioned about your Autopsy Report which has been marked as Exh. "A-1-b".
There appears here a signature above the typewritten name Floresto Arizala, Jr.,
whose signature is that?
A. That is my signature, sir.
Q. Do you affirm the truth of all the contents of Exh. "A-1-b"?
A. Only as to the autopsy report no. 91-09, the time and place and everything after the post
mortem findings, sir.
Q. You mentioned on your "Post Mortem Findings" about surgical incision, 14:0 cm.,
infraumbilical area, anterior abdominal area, midline, will you please explain that in
your own language?
A. There was incision wound (sic) the area just below the navel, sir.
Q. And the last paragraph of the postmortem findings which I read: Uterus, pear-shaped
and pale measuring 7.5 x 5.5 x 5.0 cm, with some surface nodulation of the fundic
area posteriorly. Cut-section shows diffusely pale myometrium with areas of streak
induration. The ovaries and adnexal structures are missing with the raw surfaces
patched with clotted blood. Surgical sutures were noted on the operative site.
Intestines and mesenteries are pale with blood clots noted between the
mesentric folds.

Hemoperitonium: 300 s.s.,

right paracolic gutter,
50 c.c., left paracolic gutter
200 c.c., mesentric area,
100 c.c., right pelvic gutter
stomach empty.
Other visceral organs, pale.',
will you please explain that on (sic) your own language or in ordinary
A. There was a uterus which was not attached to the adnexal structures namely ovaries
which were not present and also sign of previous surgical operation and there were
(sic) clotted blood, sir.
Q. How about the ovaries and adnexal structures?
A. They are missing, sir.
Q. You mean to say there are no ovaries?
A. During that time there are no ovaries, sir.
Q. And there were likewise sign of surgical sutures?
A. Yes, sir.
Q. How about the intestines and mesenteries are place (sic) with blood clots noted
between the mesenteric folds, will you please explain on (sic) this?
A. In the peritoneal cavity, they are mostly perritonial blood.
Q. And what could have caused this blood?
A. Well, ordinarily blood is found inside the blood vessel. Blood were (sic) outside as a
result of the injuries which destroyed the integrity of the vessel allowing blood to sip
(sic) out, sir.
Q. By the nature of the postmortem findings indicated in Exh. A-1-B, can you tell the court
the cause of death?
A. Yes, sir. The cause of death is: Gross findings are compatible with hemorrhagic shock.
Q. Can you tell the us what could have caused this hemorrhagic shock?
A. Well hemorrhagic shock is the result of blood loss.
Q. What could have the effect of that loss of blood?
A. Unattended hemorrhage, sir.[36] (Underscoring supplied.)
The foregoing was corroborated by Dr. Nieto Salvador:
"Q. And were you able to determine the cause of death by virtue of the examination of the
specimen submitted by Dr. Arizala?
A. Without knowledge of the autopsy findings it would be difficult for me to determine the
cause of death, sir.
Q. Have you examined the post mortem of Dr. Arizala?
A. Yes, sir, and by virtue of the autopsy report in connection with your pathology report.
Q. What could have caused the death of the victim?
A. This pathologic examination are (sic) compatible with the person who died, sir.
Q. Will you explain to us the meaning of hemorrhagic compatible?
A. It means that a person died of blood loss. Meaning a person died of non-replacement of
blood and so the victim before she died there was shock of diminish of blood of the
circulation. She died most probably before the actual complete blood loss, sir.
Court: Is it possible doctor that the loss of the blood was due on (sic) operation?
A. Based on my pathology findings, sir.
Q. What could have caused this loss of blood?
A. Many, sir. A patient who have undergone surgery. Another may be a blood vessel may
be cut while on operation and this cause (sic) bleeding, or may be set in the course of
the operation, or may be (sic) he died after the operation. Of course there are other
cause (sic).
Atty. Cachero:
Q. Especially so doctor when there was no blood replacement?
A. Yes, sir."[37] (Underscoring supplied.)

The testimonies of both doctors establish hemorrhage or hemorrhagic shock as the cause of
death. However, as likewise testified to by the expert witnesses in open court, hemorrhage or
hemorrhagic shock during surgery may be caused by several different factors. Thus, Dr. Salvador's
elaboration on the matter:
"Atty. Pascual:
Q. Doctor, among the causes of hemorrhage that you mentioned you said that it could be
at the moment of operation when one losses (sic) control of the presence, is that
correct? During the operation there is lost (sic) of control of the cut vessel?
A. Yes, sir.
Q. Or there is a failure to ligate a vessel of considerable size?
A. Yes, sir.
Q. Or even if the vessel were ligated the knot may have slipped later on?
A. Yes, sir.
Q. And you also mentioned that it may be possible also to some clotting defect, is
that correct?
A. May be (sic)."[38] (Underscoring supplied).
Defense witness, Dr. Bu C. Castro also gave the following expert opinion:
"Q. Doctor even a patient after an operations (sic) would suffer hemorrage what would be
the possible causes of such hemorrage (sic)?
A. Among those would be what we call Intravascular Coagulation and this is the reason for
the bleeding, sir, which cannot be prevented by anyone, it will happen to anyone,
anytime and to any persons (sic), sir.
COURT:
What do you think of the cause of the bleeding, the cutting or the operations done in the
body?
A. Not related to this one, the bleeding here is not related to any cutting or operation that I
(sic) have done.
Q. Aside from the DIC what could another causes (sic) that could be the cause for the
hemorrhage or bleeding in a patient by an operations (sic)?
A. In general sir, if there was an operations (sic) and it is possible that the ligature in the
suture was (sic) become (sic) loose, it is (sic) becomes loose if proven.
xxxxxxxxx
Q. If the person who performed an autopsy does not find any untight (sic) clot (sic) blood
vessel or any suture that become (sic) loose the cause of the bleeding could not be
attributed to the fault of the subject?
A. Definitely, sir."[39] (Underscoring supplied.)
According to both doctors, the possible causes of hemorrhage during an operation are: (1) the
failure of the surgeon to tie or suture a cut blood vessel; (2) allowing a cut blood vessel to get out of
control; (3) the subsequent loosening of the tie or suture applied to a cut blood vessel; and (4) and a
clotting defect known as DIC. It is significant to state at this juncture that the autopsy conducted by
Dr. Arizala on the body of Lydia did not reveal any untied or unsutured cut blood vessel nor was
there any indication that the tie or suture of a cut blood vessel had become loose thereby causing
the hemorrhage.[40] Hence the following pertinent portion of Dr. Arizala's testimony:
"Q: Doctor, in examining these structures did you know whether these were sutured
ligature or plain ligature
A: Ligature, sir.
Q: We will explain that later on. Did you recall if the cut structures were tied by first suturing
it and then tying a knot or the tie was merely placed around the cut structure and tied?
A: I cannot recall, sir.
Q: As a matter of fact, you cannot recall because you did not even bothered (sic) to
examine, is that correct?
A: Well, I bothered enough to know that they were sutured, sir.
Q: So, therefore, Doctor, you would not know whether any of the cut structures were not
sutured or tied neither were you able to determine whether any loose suture was found
in the peritoneal cavity?

A: I could not recall any loose sutured (sic), sir."[41]

On the other hand, the findings of all three doctors do not preclude the probability that DIC
caused the hemorrhage and consequently, Lydia's death. DIC which is a clotting defect creates a
serious bleeding tendency and when massive DIC occurs as a complication of surgery leaving raw
surface, major hemorrhage occurs.[42] And as testified to by defense witness, Dr. Bu C. Castro,
hemorrhage due to DIC "cannot be prevented, it will happen to anyone, anytime." [43] He testified
further:
"Q. Now, under the circumstance one of the possibility as you mentioned in (sic) DIC?
A. Yes, sir.
Q. And you mentioned that it cannot be prevented?
A. Yes, sir.
Q. Can you even predict if it really happen (sic)?
A. Possible, sir.
Q. Are there any specific findings of autopsy that will tell you whether this patient suffered
among such things as DIC?
A. Well, I did reserve because of the condition of the patient.
Q. Now, Doctor you said that you went through the record of the deceased Lydia Umali
looking for the chart, the operated (sic) records, the post mortem findings on the
histophanic (sic) examination based on your examination of record, doctor, can you
more or less says (sic) what part are (sic) concerned could have been the caused (sic)
of death of this Lydia Umali?
A. As far as the medical record is concern (sic) the caused (sic) of death is dessimulated
(sic) Intra Vascular Coagulation or the DIC which resulted to hemorrhage or bleedings,
sir.
Q. Doctor based on your findings then there is knowing (sic) the doctor would say whether
the doctor her (sic) has been (sic) fault?
ATTY. MALVEDA:
We will moved (sic) to strike out the (sic) based on finding they just read the chart as well
as the other record.
ATTY. PASCUAL:
Precisely based on this examination.
ATTY. MALVEDA:
Not finding, there was no finding made.
COURT:
He is only reading the record.
ATTY. PASCUAL:
Yes, sir.
A. No, sir, there is no fault on the part of the surgeon, sir." [44]
This court has no recourse but to rely on the expert testimonies rendered by both prosecution
and defense witnesses that substantiate rather than contradict petitioner's allegation that the cause
of Lydia's death was DIC which, as attested to by an expert witness, cannot be attributed to the
petitioner's fault or negligence. The probability that Lydia's death was caused by DIC was
unrebutted during trial and has engendered in the mind of this Court a reasonable doubt as to the
petitioner's guilt. Thus, her acquittal of the crime of reckless imprudence resulting in homicide. While
we condole with the family of Lydia Umali, our hands are bound by the dictates of justice and fair
dealing which hold inviolable the right of an accused to be presumed innocent until proven guilty
beyond reasonable doubt. Nevertheless, this Court finds the petitioner civilly liable for the death of
Lydia Umali, for while a conviction of a crime requires proof beyond reasonable doubt, only a
preponderance of evidence is required to establish civil liability.[45]
The petitioner is a doctor in whose hands a patient puts his life and limb. For insufficiency of
evidence this Court was not able to render a sentence of conviction but it is not blind to the reckless
and imprudent manner in which the petitioner carried out her duties. A precious life has been lost
and the circumstances leading thereto exacerbated the grief of those left behind. The heirs of the
deceased continue to feel the loss of their mother up to the present time [46] and this Court is aware
that no amount of compassion and commiseration nor words of bereavement can suffice to assuage

the sorrow felt for the loss of a loved one. Certainly, the award of moral and exemplary damages in
favor of the heirs of Lydia Umali are proper in the instant case.
WHEREFORE, premises considered, petitioner DR. NINEVETCH CRUZ is hereby
ACQUITTED of the crime of reckless imprudence resulting in homicide but is ordered to pay the
heirs of the deceased Lydia Umali the amount of FIFTY THOUSAND PESOS (P50,000.00) as civil
liability, ONE HUNDRED THOUSAND PESOS (P100,000.00) as moral damages, and FIFTY
THOUSAND PESOS (P50,000.00) as exemplary damages.
Let the copy of this decision be furnished to the Professional Regulation Commission (PRC) for
appropriate action.
SO ORDERED.
Romero, Melo, and Panganiban, JJ., concur.
Narvasa, C.J., (Chairman), on leave.

Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION
SPOUSES ERLINDA BATAL AND
FRANK BATAL,
Petitioners ,

G.R. No. 164601

Present:

- versus -

PANGANIBAN, C.J. ,
(Chairperson)
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR. and
SPOUSES LUZ SAN PEDRO AND CHICO-NAZARIO, JJ .
KENICHIRO TOMINAGA,
Respondents.
Promulgated:
September 27, 2006
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I O N
AUSTRIA-MARTINEZ, J .:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court questioning the Decision [ 1 ] dated September 29, 2003 promulgated
by the Court of Appeals (CA) in CA-G.R. CV No. 71758, which affirmed the
Decision dated May 31, 2004 of the Regional Trial Court, Branch 7, Malolos,
Bulacan (RTC); and the CA Resolution [ 2 ] dated July 19, 2004.
This case originated from an action for damages filed with the RTC by
Spouses Luz San Pedro and Kenichiro Tominaga (respondents) against Spouses
Erlinda Batal and Frank Batal (petitioners) for failure to exercise due care and
diligence by the latter in the preparation of a survey which formed the basis for the
construction of a perimeter fence that was later discovered to have encroached on a
right of way.
The facts of the case, as found by the RTC and summarized by the CA, are as
follows:
The spouses Luz San Pedro (Luz) and Kenichiro Tominaga
(Kenichiro) are the owners of a parcel of land, on which their house
was erected, described asLot 1509-C-3 with an area of 700 square
meters situated in Barangay Malis, Guiguinto, Bulacan. Said property

was acquired by them from one Guillermo Narciso as evidenced by

a Bilihan ng Bahagi ng Lupa dated March 18, 1992.
The spouses Luz and Kenichiro then contracted the services of
Frank Batal (Frank) who represented himself as a surveyor to conduct a
survey of their lot for the sum of P 6,500.00. As Luz and Kenichiro
wanted to enclose their property, they again procured the services of
Frank for an additional fee of P 1,500.00 in order to determine the exact
boundaries of the same by which they will base the construction of
their perimeter fence.
Consequently, Frank placed concrete monuments marked P.S. on all
corners of the lot which were used as guides by Luz and Kenichiro in
erecting a concrete fence measuring about eight (8) feet in height and
cost them P 250,000.00 to build.
Sometime in 1996, a complaint was lodged against Luz and Kenichiro
before the barangay on the ground that the northern portion of their
fence allegedly encroached upon a designated right-of-way known as
Lot 1509-D. Upon verification with another surveyor, Luz and
Kenichiro found that their wall indeed overlapped the adjoining
lot. They also discovered that it was not Frank but his wife Erlinda
Batal (Erlinda), who is a licensed geodetic engineer.
During their confrontations before the barangay, Frank admitted that he
made a mistake and offered to share in the expenses for the demolition
and reconstruction of the questioned portion of Luz and Kenichiros
fence. He however failed to deliver on his word, thus the filing of the
instant suit.
In their defense, the defendants-spouses Frank and Erlinda Batal
submitted that Frank never represented himself to be a licensed
geodetic engineer. It was Erlinda who supervised her husbands work
[and t]hat the house and lot of plaintiffs, Luz and Kenichiro, were
already fenced even before they were contracted to do a resurvey of the
same and the laying out of the concrete monuments. The spouses Frank
and Erlinda also refuted the spouses Luzs and Kenichiros allegation of
negligence and averred that the subject complaint was instituted to
harass them. [ 3 ]
On May 31, 2001, the RTC rendered its Decision, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs
and against defendants, as follows:
1. Ordering the defendants [petitioners] to pay to plaintiffs
[respondents] the sum of P 6,500.00 as refund for their professional fees

by reason of the erroneous relocation survey of the property in

question;
2. Ordering the defendants to pay to plaintiffs the sum of Three
Hundred Thousand Pesos ( P 300,000.00) as actual damages;
3. Ordering the defendants to pay to plaintiffs the sum of P 50,000.00 as
attorneys fees; and
4. Ordering the defendants to pay to plaintiffs the costs of this suit.
SO ORDERED. [ 4 ]
Regarding the issue whether the petitioners failed to exercise due care and
diligence in the conduct of the resurvey which eventually caused damage to the
respondents, the RTC held:
As against the bare and self-serving denials of the [petitioners],
the testimony of [respondent] Luz San Pedro that she constructed the
encroaching perimeter fence in question using as guide the cyclone
concrete monuments marked P.S. that were installed by [petitioner]
Frank Batal and his survey team, is more credible. As testified to by
[respondent] Luz San Pedro, she proceeded with the construction of the
perimeter fence in question upon assurance given by [petitioner]
Frank Batal that she could already do so as there were already concrete
monuments placed on the boundaries of her property x x x.
x x x x
It does not matter that the location plan dated May 3, 1992
(Exhibit B) was later approved by the DENR, as it is quite apparent
that the mistake committed by [petitioner] Frank Batal pertains to the
wrong locations of the concrete monuments that he placed on the
subject property and which were used or relied upon by the
[respondents] in putting up the fence in question. Such mistake or
negligence happened because quite obviously the installation of said
concrete monuments was without the needed supervision of
[respondent] Erlinda Batal, the one truly qualified to supervise the
same. x x x x
x x x x[5]
The RTC found that indeed the perimeter fence constructed by the
respondents encroached on the right-of-way in question; that the preponderance of
evidence supports the finding that the encroachment was caused by the negligence
of the petitioners; that, in particular, respondents constructed the fence based on the
concrete cyclone monuments that were installed by petitioner Frank Batal and after
he gave his assurance that they can proceed accordingly; that the negligence in the
installation of the monuments was due to the fact that petitioner Erlinda Batal, the

one truly qualified, did not provide the needed supervision over the work; and,
lastly, that the testimonies of the petitioners on the whole were not credible.
The petitioners appealed to the CA. On September 29, 2003, the CA rendered
its Decision affirming the RTC decision in its entirety. [ 6 ]
In concurring with the findings of the RTC, the CA in addition held that the
petitioners cannot claim that the error of the construction of the fence was due to
the unilateral act of respondents in building the same without their consent, since
the former gave their word that the arrangement of the monuments of title
accurately reflected the boundaries of the lot; and that, as a result, the northern
portion of the fence had to be demolished and rebuilt in order to correct the error.
Hence, the instant Petition assigning the following errors:
I.
The Court of Appeals erred in ruling for the Respondents and basing its
decision [o]n the following jurisprudence:
(a)

[A] party, having performed affirmative acts upon which another

person based his subsequent actions, cannot thereafter refute his
acts or renege on the effects of the same, to the prejudice of the
latter. (Pureza vs. Court of Appeals, 290 SCRA 110); and

(b)

Findings of fact made by the trial court [are] entitled to great

weight and respect. (Lopez vs. Court of Appeals, 322 SCRA 686).
II.

The Court of Appeals erred in ruling in favor of Respondents by

premising its Decision on [a] misapprehension of facts amounting to
grave abuse of discretion . . . which is also a ground for a Petition for
Review. [ 7 ]
The petition must fail.
The petitioners insist that there had been no error in their resurvey, but rather, the
error occurred in respondents fencing; that the proximate cause of the damage had
been respondents own negligence such that the fencing was done unilaterally and
solely by them without the prior approval and supervision of the petitioners. And to
justify their case, the petitioners argue that the courts a quo misapprehended the
facts. Accordingly, they ask this Court to review findings of fact.
A review of the factual findings of the CA and the RTC are matters not
ordinarily reviewable in a petition for review on certiorari. [ 8 ] Well-established is
the rule that factual findings of the trial court and the CA are entitled to great
weight and respect [ 9 ] and will not be disturbed on appeal save in exceptional
circumstances, [ 1 0 ] none of which obtains in the present case. This Court must stress
that the findings of fact of the CA are conclusive on the parties and carry even more

weight when these coincide with the factual findings of the trial court, [ 1 1 ] as in this
case.
The Court will not weigh the evidence all over again unless there is a
showing that the findings of the lower court are totally devoid of support or are
clearly erroneous so as to constitute serious abuse of discretion. [ 1 2 ] The petitioners
failed to demonstrate this point. On the contrary, the finding of the courts a
quo that the damage caused to the respondents was due to petitioners negligence is
sufficiently supported by the evidence on record. For these reasons, the petitioner's
contentions bear no import.
Culpa, or negligence, may be understood in two different senses: either
as culpa aquiliana, which is the wrongful or negligent act or omission which
creates a vinculum juris and gives rise to an obligation between two persons not
formally bound by any other obligation, or as culpa contractual, which is the fault
or negligence incident in the performance of an obligation which already existed,
and which increases the liability from such already existing obligation.
[13]
Culpa aquiliana is governed by Article 2176 of the Civil Code and the
immediately following Articles; while culpa contractual is governed by Articles
1170 to 1174 of the same Code. [ 1 4 ]
Articles 1170 and 1173 provide:
ART. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good father of
a family shall be required.
In the present case, it is clear that the petitioners, in carrying out their
contractual obligations, failed to exercise the requisite diligence in the placement
of the markings for the concrete perimeter fence that was later constructed. The
placement of the markings had been done solely by petitioner Frank Batal who is
not a geodetic engineer. It was later discovered that it was not he but his wife,
petitioner Erlinda Batal, who is the licensed geodetic engineer and who is,
therefore, the one qualified to do the work. Petitioner Frank Batals installation of
the concrete cyclone monuments had been done without the adequate supervision of
his wife, Erlinda. As a result, the placement of the monuments did not accurately
reflect the dimensions of the lot. The respondents, upon assurance given by
petitioner Frank Batal that they could proceed with the construction of the
perimeter fence by relying on the purported accuracy of the placement of the
monuments, erected their fence which turned out to encroach on an adjacent

easement. Because of the encroachment, the respondents had to demolish and

reconstruct the fence and, thus, suffered damages.
The Court affirms and adopts the findings of the CA, to wit:
Records show that the services of the [petitioners] Frank and Erlinda
were initially contracted to segregate Luz and Kenichiros property from
its adjoining lots.When the [respondent] spouses Luz and Kenichiro
planned to fence the segregated lot, they again commissioned
[petitioners] Frank and Erlinda to conduct a resurvey in order to
determine the precise boundaries of their property upon which they will
base the construction of their fence. It was also shown that in the
course of the resurvey, Frank caused the installation of monuments of
title on the four (4) corners of Luz and Kenichiros property and that he
instructed them to just follow the same in building their fence.
[Petitioners] Frank and Erlinda cannot thus validly claim that the error
in the construction of the northern portion of the fence was due to the
spouses Luz and Kenichiros act of building the same without their
consent. This is considering that the former led the latter to believe the
purported accuracy of the resurvey and exactness of the lots boundaries
based on the monuments of title which they installed.
It has been ruled that [A] party, having performed affirmative acts upon
which another person based his subsequent actions, cannot thereafter
refute his acts or renege on the effects of the same, to the prejudice of
the latter. (Pureza v. Court of Appeals, 290 SCRA 110)
The foregoing clearly supports the findings of the RTC that the spouses
Batal committed a mistake in the conduct of their business that led to
the encroachment of plaintiffs-appellees fence on the adjoining alleylot. As a result, the northern portion ha[d] to be torn down and rebuilt
in order to correct the error in its original construction. The
defendants-appellants cannot be excused from the effects of their
actions in the survey of plaintiffs-appellees lot.
We therefore concur with the findings of the RTC holding
defendants-appellants liable for damages in the case at bar. Findings of
fact made by the trial court is entitled to great weight and
respect. (Lopez v. Court of Appeals, 322 SCRA 686) [ 1 5 ]
Being guilty of a breach of their contract, petitioners are liable for damages
suffered by the respondents in accordance with Articles 1170 and 2201 of the Civil
Code, [ 1 6 ] which state:
Art. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay and those who in any manner
contravene the tenor thereof are liable for damages

Art. 2201. In contracts and quasi-contracts, the damages for

which the obligor who acted in good faith is liable shall be those that
are the natural and probable consequences of the breach of the
obligation, and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor
shall be responsible for all damages which may be reasonably
attributed to the non-performance of the obligation.
Thus, the Court agrees with the CAs affirmance of the findings of the RTC on
the matter of damages, to wit:
Going now to the claims for damages, Engr. Arnold Martin
testified on his computation and estimate (Exhibits G and G-1) that the
total cost for the demolition and reconstruction of the perimeter fence
in question would be in the total amount of P 428,163.90, and this was
not at all disputed by the defendants, whose counsel waived crossexamination. This estimate is practically double the amount of the cost
of constructing said fence as testified to by plaintiff Luz San Pedro as
she was told that it is much costlier to demolish and reconstruct a fence
than to simply erect one because of the added expense involved in
tearing it down and hauling its debris. On the other hand, said plaintiff
stated that the iron decorative grills of the fence, which is re-usable,
cost her P 50,000.00, and it is only proper to deduct said amount from
the total cost of reconstructing the fence in question. At the same time,
some figures in the said estimate appear to be quite excessive, such as
the estimated cost for demolition which was quoted at P 25,000.00 in
addition to the amount of excavation priced at P 30,000.00 and the cost
of hauling of scrap materials at P 10,000.00. The court believes that the
sum of P 300,000.00 for the demolition and reconstruction of the fence
in question would be reasonable considering that the original cost for
its construction was only about P 200,000.00, and considering further
that its iron grills are re-usable.
The plaintiffs are likewise entitled to recover attorneys fees
considering that they were compelled by the defendants to resort to
court action in order to protect their rights and interest, as defendants,
particularly defendant Frank Batal, failed and refused repeatedly to
even attend the confrontation of conciliation meetings arranged
between him and the plaintiffs by the barangay authorities concerned,
and to honor his promise to help in shouldering the cost of
reconstructing the fence in question.
On the other hand, there is no legal or factual bases for the claim
of the plaintiffs for moral or exemplary damages as there was no
showing at all that defendants acted with malice or in bad faith.
In a long line of cases, we have consistently ruled
that in the absence of a wrongful act or omission or of

fraud or bad faith, moral damages cannot be awarded. (R &

B Surety Insurance Co. v. Intermediate Court of Appeals,
129 SCRA 736; Guita v. Court of Appeals, 139 SCRA 576).
[17]

WHEREFORE, the instant petition is DENIED and the assailed Decision and
Resolution of the Court of Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.

Baguio City
THIRD DIVISION
JOSEPH SALUDAGA, G.R. No. 179337
Petitioner,
Present:

Ynares-Santiago, J. (Chairperson),
Austria-Martinez,
Chico-Nazario,
Nachura, and
Reyes, JJ.

- versus -

FAR EASTERN UNIVERSITY and

EDILBERTO C. DE JESUS in his Promulgated:
capacity as President of FEU,
Respondents. April 30, 2008
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the June
29, 2007 Decision[2] of the Court of Appeals in CA-G.R. CV No. 87050, nullifying and setting aside
the November 10, 2004 Decision[3] of the Regional Trial Court of Manila, Branch 2, in Civil Case No.
98-89483 and dismissing the complaint filed by petitioner; as well as its August 23, 2007
Resolution[4] denying the Motion for Reconsideration.[5]
The antecedent facts are as follows:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern
University (FEU) when he was shot by Alejandro Rosete (Rosete), one of the security guards on
duty at the school premises on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes
Medical Foundation (FEU-NRMF) due to the wound he sustained. [6]Meanwhile, Rosete was brought
to the police station where he explained that the shooting was accidental. He was eventually
released considering that no formal complaint was filed against him.
Petitioner thereafter filed a complaint for damages against respondents on the ground that
they breached their obligation to provide students with a safe and secure environment and an
atmosphere conducive to learning. Respondents, in turn, filed a Third-Party Complaint [7] against
Galaxy Development and Management Corporation (Galaxy), the agency contracted by respondent
FEU to provide security services within its premises and Mariano D. Imperial (Imperial), Galaxys
President, to indemnify them for whatever would be adjudged in favor of petitioner, if any; and to
pay attorneys fees and cost of the suit. On the other hand, Galaxy and Imperial filed a Fourth-Party
Complaint against AFP General Insurance.[8]
On November 10, 2004, the trial court rendered a decision in favor of petitioner, the
dispositive portion of which reads:
WHEREFORE, from the foregoing, judgment is hereby rendered ordering:
1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay
jointly and severally Joseph Saludaga the amount of P35,298.25 for
actual damages with 12% interest per annum from the filing of the
complaint until fully paid; moral damages of P300,000.00, exemplary
damages of P500,000.00, attorneys fees of P100,000.00 and cost of
the suit;

2. Galaxy Management and Development Corp. and its president, Col.

Mariano Imperial to indemnify jointly and severally 3rd party plaintiffs
(FEU and Edilberto de Jesus in his capacity as President of FEU) for
the above-mentioned amounts;
3. And the 4th party complaint is dismissed for lack of cause of action. No
pronouncement as to costs.
SO ORDERED.[9]
Respondents appealed to the Court of Appeals which rendered the assailed Decision, the
decretal portion of which provides, viz:
WHEREFORE, the appeal is hereby GRANTED. The Decision dated
November 10, 2004 is hereby REVERSED and SET ASIDE. The complaint filed by
Joseph Saludaga against appellant Far Eastern University and its President in Civil
Case No. 98-89483 is DISMISSED.
SO ORDERED.[10]
Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition
based on the following grounds:
THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY TO LAW
AND JURISPRUDENCE IN RULING THAT:
5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;
5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY
RESULTING FROM A GUNSHOT WOUND SUFFERED BY THE PETITIONER
FROM THE HANDS OF NO LESS THAN THEIR OWN SECURITY GUARD IN
VIOLATION OF THEIR BUILT-IN CONTRACTUAL OBLIGATION TO PETITIONER,
BEING THEIR LAW STUDENT AT THAT TIME, TO PROVIDE HIM WITH A SAFE
AND SECURE EDUCATIONAL ENVIRONMENT;
5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT PETITIONER WHILE
HE WAS WALKING ON HIS WAY TO THE LAW LIBRARY OF RESPONDENT FEU
IS NOT THEIR EMPLOYEE BY VIRTUE OF THE CONTRACT FOR SECURITY
SERVICES BETWEEN GALAXY AND FEU NOTWITHSTANDING THE FACT THAT
PETITIONER, NOT BEING A PARTY TO IT, IS NOT BOUND BY THE SAME UNDER
THE PRINCIPLE OF RELATIVITY OF CONTRACTS; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS
THE AGENCY WHICH WOULD PROVIDE SECURITY SERVICES WITHIN THE
PREMISES OF RESPONDENT FEU.[11]
Petitioner is suing respondents for damages based on the alleged breach of student-school contract
for a safe learning environment. The pertinent portions of petitioners Complaint read:
6.0. At the time of plaintiffs confinement, the defendants or any of their representative
did not bother to visit and inquire about his condition. This abject indifference on the
part of the defendants continued even after plaintiff was discharged from the hospital
when not even a word of consolation was heard from them. Plaintiff waited for more
than one (1) year for the defendants to perform their moral obligation but the wait
was fruitless. This indifference and total lack of concern of defendants served to
exacerbate plaintiffs miserable condition.

xxxx
11.0. Defendants are responsible for ensuring the safety of its students while the
latter are within the University premises. And that should anything untoward happens
to any of its students while they are within the Universitys premises shall be the
responsibility of the defendants. In this case, defendants, despite being legally and
morally bound, miserably failed to protect plaintiff from injury and thereafter, to
mitigate and compensate plaintiff for said injury;
12.0. When plaintiff enrolled with defendant FEU, a contract was entered into
between them. Under this contract, defendants are supposed to ensure that
adequate steps are taken to provide an atmosphere conducive to study and ensure
the safety of the plaintiff while inside defendant FEUs premises. In the instant case,
the latter breached this contract when defendant allowed harm to befall upon the
plaintiff when he was shot at by, of all people, their security guard who was tasked to
maintain peace inside the campus.[12]
In Philippine School of Business Administration v. Court of Appeals,[13] we held that:
When an academic institution accepts students for enrollment, there is
established a contract between them, resulting in bilateral obligations which both
parties are bound to comply with. For its part, the school undertakes to provide the
student with an education that would presumably suffice to equip him with the
necessary tools and skills to pursue higher education or a profession. On the other
hand, the student covenants to abide by the school's academic requirements and
observe its rules and regulations.
Institutions of learning must also meet the implicit or "built-in" obligation of
providing their students with an atmosphere that promotes or assists in attaining its
primary undertaking of imparting knowledge. Certainly, no student can absorb the
intricacies of physics or higher mathematics or explore the realm of the arts and other
sciences when bullets are flying or grenades exploding in the air or where there
looms around the school premises a constant threat to life and limb. Necessarily, the
school must ensure that adequate steps are taken to maintain peace and order within
the campus premises and to prevent the breakdown thereof.[14]
It is undisputed that petitioner was enrolled as a sophomore law student in respondent
FEU. As such, there was created a contractual obligation between the two parties. On petitioners
part, he was obliged to comply with the rules and regulations of the school. On the other hand,
respondent FEU, as a learning institution is mandated to impart knowledge and equip its students
with the necessary skills to pursue higher education or a profession. At the same time, it is obliged
to ensure and take adequate steps to maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief. [15]In the instant case, we
find that, when petitioner was shot inside the campus by no less the security guard who was hired to
maintain peace and secure the premises, there is a prima facie showing that respondents failed to
comply with its obligation to provide a safe and secure environment to its students.
In order to avoid liability, however, respondents aver that the shooting incident was a
fortuitous event because they could not have reasonably foreseen nor avoided the accident caused
by Rosete as he was not their employee; [16] and that they complied with their obligation to ensure a
safe learning environment for their students by having exercised due diligence in selecting the
security services of Galaxy.

After a thorough review of the records, we find that respondents failed to discharge the
burden of proving that they exercised due diligence in providing a safe learning environment for
their students. They failed to prove that they ensured that the guards assigned in the campus met
the requirements stipulated in the Security Service Agreement.Indeed, certain documents about
Galaxy were presented during trial; however, no evidence as to the qualifications of Rosete as a
security guard for the university was offered.
Respondents also failed to show that they undertook steps to ascertain and confirm that the
security guards assigned to them actually possess the qualifications required in the Security Service
Agreement. It was not proven that they examined the clearances, psychiatric test results, 201 files,
and other vital documents enumerated in its contract with Galaxy. Total reliance on the security
agency about these matters or failure to check the papers stating the qualifications of the guards is
negligence on the part of respondents. A learning institution should not be allowed to completely
relinquish or abdicate security matters in its premises to the security agency it hired. To do so would
result to contracting away its inherent obligation to ensure a safe learning environment for its
students.
Consequently, respondents defense of force majeure must fail. In order for force majeure to
be considered, respondents must show that no negligence or misconduct was committed that may
have occasioned the loss. An act of God cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse consequences of such a loss. Ones negligence may
have concurred with an act of God in producing damage and injury to another; nonetheless,
showing that the immediate or proximate cause of the damage or injury was a fortuitous event
would not exempt one from liability. When the effect is found to be partly the result of a persons
participation whether by active intervention, neglect or failure to act the whole occurrence is
humanized and removed from the rules applicable to acts of God.[17]
Article 1170 of the Civil Code provides that those who are negligent in the performance of
their obligations are liable for damages. Accordingly, for breach of contract due to negligence in
providing a safe learning environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have satisfactorily proven during the trial
the existence of the factual basis of the damages and its causal connection to defendants acts.[18]
In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization
and other medical expenses.[19] While the trial court correctly imposed interest on said amount,
however, the case at bar involves an obligation arising from a contract and not a loan or
forbearance of money. As such, the proper rate of legal interest is six percent (6%) per annum of the
amount demanded. Such interest shall continue to run from the filing of the complaint until the
finality of this Decision.[20] After this Decision becomes final and executory, the applicable rate shall
be twelve percent (12%) per annum until its satisfaction.
The other expenses being claimed by petitioner, such as transportation expenses and those
incurred in hiring a personal assistant while recuperating were however not duly supported by
receipts.[21] In the absence thereof, no actual damages may be awarded. Nonetheless, temperate
damages under Art. 2224 of the Civil Code may be recovered where it has been shown that the
claimant suffered some pecuniary loss but the amount thereof cannot be proved with
certainty. Hence, the amount of P20,000.00 as temperate damages is awarded to petitioner.
As regards the award of moral damages, there is no hard and fast rule in the determination
of what would be a fair amount of moral damages since each case must be governed by its own
peculiar circumstances.[22] The testimony of petitioner about his physical suffering, mental anguish,
fright, serious anxiety, and moral shock resulting from the shooting incident [23] justify the award of
moral damages. However, moral damages are in the category of an award designed to compensate
the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. The award is

not meant to enrich the complainant at the expense of the defendant, but to enable the injured party
to obtain means, diversion, or amusements that will serve to obviate the moral suffering he has
undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status quo
ante, and should be proportionate to the suffering inflicted. Trial courts must then guard against the
award of exorbitant damages; they should exercise balanced restrained and measured objectivity to
avoid suspicion that it was due to passion, prejudice, or corruption on the part of the trial court.
[24]
We deem it just and reasonable under the circumstances to award petitioner moral damages in
the amount of P100,000.00.
Likewise, attorneys fees and litigation expenses in the amount of P50,000.00 as part of
damages is reasonable in view of Article 2208 of the Civil Code. [25] However, the award of exemplary
damages is deleted considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
We note that the trial court held respondent De Jesus solidarily liable with respondent
FEU. In Powton Conglomerate, Inc. v. Agcolicol,[26] we held that:
[A] corporation is invested by law with a personality separate and distinct from those
of the persons composing it, such that, save for certain exceptions, corporate officers
who entered into contracts in behalf of the corporation cannot be held personally
liable for the liabilities of the latter. Personal liability of a corporate director, trustee or
officer along (although not necessarily) with the corporation may so validly attach, as
a rule, only when (1) he assents to a patently unlawful act of the corporation, or when
he is guilty of bad faith or gross negligence in directing its affairs, or when there is a
conflict of interest resulting in damages to the corporation, its stockholders or other
persons; (2) he consents to the issuance of watered down stocks or who, having
knowledge thereof, does not forthwith file with the corporate secretary his written
objection thereto; (3) he agrees to hold himself personally and solidarily liable with
the corporation; or (4) he is made by a specific provision of law personally
answerable for his corporate action.[27]
None of the foregoing exceptions was established in the instant case; hence, respondent De
Jesus should not be held solidarily liable with respondent FEU.
Incidentally, although the main cause of action in the instant case is the breach of the
school-student contract, petitioner, in the alternative, also holds respondents vicariously liable under
Article 2180 of the Civil Code, which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones
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.
We agree with the findings of the Court of Appeals that respondents cannot be held liable for
damages under Art. 2180 of the Civil Code because respondents are not the employers of
Rosete. The latter was employed by Galaxy. The instructions issued by respondents Security

Consultant to Galaxy and its security guards are ordinarily no more than requests commonly
envisaged in the contract for services entered into by a principal and a security agency. They cannot
be construed as the element of control as to treat respondents as the employers of Rosete.[28]
As held in Mercury Drug Corporation v. Libunao:[29]
In Soliman, Jr. v. Tuazon,[30] we held that where the security agency recruits,
hires and assigns the works of its watchmen or security guards to a client, the
employer of such guards or watchmen is such agency, and not the client, since the
latter has no hand in selecting the security guards. Thus, the duty to observe the
diligence of a good father of a family cannot be demanded from the said client:
[I]t is settled in our jurisdiction that where the security agency,
as here, recruits, hires and assigns the work of its watchmen
or security guards, the agency is the employer of such guards or
watchmen. Liability for illegal or harmful acts committed by
the security guards attaches to the employer agency, and not to the
clients or customers of such agency. As a general rule, a client or
customer of a security agency has no hand in selecting who among
the pool of security guards or watchmen employed by the agency shall
be assigned to it; the duty to observe the diligence of a good father of
a family in the selection of the guards cannot, in the ordinary course of
events, be demanded from the client whose premises or property are
protected by the security guards.
xxxx
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 or
omissions.[31]
We now come to respondents Third Party Claim against Galaxy. In Firestone Tire and
Rubber Company of the Philippines v. Tempengko,[32] we held that:
The third-party complaint is, therefore, a procedural device whereby a third
party who is neither a party nor privy to the act or deed complained of by the plaintiff,
may be brought into the case with leave of court, by the defendant, who acts as thirdparty plaintiff to enforce against such third-party defendant a right for contribution,
indemnity, subrogation or any other relief, in respect of the plaintiffs claim. The thirdparty complaint is actually independent of and separate and distinct from the plaintiffs
complaint. Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant against
the third-party. But the Rules permit defendant to bring in a third-party defendant or
so to speak, to litigate his separate cause of action in respect of plaintiffs claim
against a third-party in the original and principal case with the object of avoiding
circuitry of action and unnecessary proliferation of law suits and of disposing
expeditiously in one litigation the entire subject matter arising from one particular set
of facts.[33]
Respondents and Galaxy were able to litigate their respective claims and defenses in the
course of the trial of petitioners complaint. Evidence duly supports the findings of the trial court that
Galaxy is negligent not only in the selection of its employees but also in their supervision. Indeed,
no administrative sanction was imposed against Rosete despite the shooting incident; moreover, he
was even allowed to go on leave of absence which led eventually to his disappearance. [34] Galaxy

also failed to monitor petitioners condition or extend the necessary assistance, other than the
P5,000.00 initially given to petitioner. Galaxy and Imperial failed to make good their pledge to
reimburse petitioners medical expenses.
For these acts of negligence and for having supplied respondent FEU with an unqualified
security guard, which resulted to the latters breach of obligation to petitioner, it is proper to hold
Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned amounts
awarded to petitioner.
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being
grossly negligent in directing the affairs of the security agency. It was Imperial who assured
petitioner that his medical expenses will be shouldered by Galaxy but said representations were not
fulfilled because they presumed that petitioner and his family were no longer interested in filing a
formal complaint against them.[35]
WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of
Appeals in CA-G.R. CV No. 87050 nullifying the Decision of the trial court and dismissing the
complaint as well as the August 23, 2007 Resolution denying the Motion for Reconsideration
are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2, in
Civil Case No. 98-89483 finding respondent FEU liable for damages for breach of its obligation to
provide students with a safe and secure learning atmosphere, is AFFIRMED with the
following MODIFICATIONS:
a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual
damages in the amount of P35,298.25, plus 6% interest per annum from the
filing of the complaint until the finality of this Decision. After this decision
becomes final and executory, the applicable rate shall be twelve percent
(12%) per annum until its satisfaction;
b. respondent FEU is also ORDERED to pay petitioner temperate damages in the
amount of P20,000.00; moral damages in the amount of P100,000.00;
andattorneys fees and litigation expenses in the amount of P50,000.00;
c. the award of exemplary damages is DELETED.
The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims
of respondents are likewise DISMISSED.
Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D.
Imperial are ORDERED to jointly and severally pay respondent FEU damages equivalent to the
above-mentioned amounts awarded to petitioner.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION
SPOUSES FERNANDO
and LOURDES VILORIA,
Petitioners,

G.R. No. 188288

Present:

CARPIO, J.,
Chairperson,
PEREZ,
SERENO,
REYES, and
BERNABE, JJ.

- versus -

Promulgated:

CONTINENTAL AIRLINES, INC.,

Respondent.

January 16, 2012

x------------------------------------------------------------------------------------x
DECISION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of Court from the January 30, 2009
Decision1 of the Special Thirteenth Division of the Court of Appeals (CA) in CA-G.R. CV No. 88586
entitled Spouses Fernando and Lourdes Viloria v. Continental Airlines, Inc., the dispositive portion of
which states:
WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03 April
2006, awarding US$800.00 or its peso equivalent at the time of payment, plus legal rate of
interest from 21 July 1997 until fully paid, [P]100,000.00 as moral damages, [P]50,000.00 as
exemplary damages, [P]40,000.00 as attorneys fees and costs of suit to plaintiffs-appellees is
herebyREVERSED and SET ASIDE.
Defendant-appellants counterclaim is DENIED.
Costs against plaintiffs-appellees.
SO ORDERED.2
On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC) rendered a Decision,
giving due course to the complaint for sum of money and damages filed by petitioners Fernando Viloria
(Fernando) and Lourdes Viloria (Lourdes), collectively called Spouses Viloria, against respondent Continental
Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to such complaint.
On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his
wife, Lourdes, two (2) round trip airline tickets from San Diego, California to Newark, New Jersey on board
Continental Airlines. Fernando purchased the tickets at US$400.00 each from a travel agency called Holiday
Travel and was attended to by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando
agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak, an
intercity passenger train service provider in the United States. Per the tickets, Spouses Viloria were scheduled
to leave for Newark on August 13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or
August 6, 1997. Mager informed him that flights to Newark via Continental Airlines were already fully
booked and offered the alternative of a round trip flight via Frontier Air. Since flying with Frontier Air called
for a higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request
for a refund. Mager, however, denied his request as the subject tickets are non-refundable and the only option

that Continental Airlines can offer is the re-issuance of new tickets within one (1) year from the date the
subject tickets were issued. Fernando decided to reserve two (2) seats with Frontier Air.
As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound
Station where he saw an Amtrak station nearby. Fernando made inquiries and was told that there are seats
available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased two (2)
tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling
her that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was
already fully booked. Fernando reiterated his demand for a refund but Mager was firm in her position that the
subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a
refund and alleging that Mager had deluded them into purchasing the subject tickets. 3
In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his complaint had
been referred to the Customer Refund Services of Continental Airlines at Houston, Texas. 4
In a letter dated March 24, 1998, Continental Micronesia denied Fernandos request for a refund and
advised him that he may take the subject tickets to any Continental ticketing location for the re-issuance of
new tickets within two (2) years from the date they were issued. Continental Micronesia informed Fernando
that the subject tickets may be used as a form of payment for the purchase of another Continental ticket, albeit
with a re-issuance fee.5
On June 17, 1999, Fernando went to Continentals ticketing office at Ayala Avenue, Makati City to
have the subject tickets replaced by a single round trip ticket to Los Angeles, California under his name.
Therein, Fernando was informed that Lourdes ticket was non-transferable, thus, cannot be used for the
purchase of a ticket in his favor. He was also informed that a round trip ticket to Los Angeles was
US$1,867.40 so he would have to pay what will not be covered by the value of his San Diego to Newark
round trip ticket.
In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no
longer wished to have them replaced. In addition to the dubious circumstances under which the subject tickets
were issued, Fernando claimed that CAIs act of charging him with US$1,867.40 for a round trip ticket to Los
Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes ticket, breached
its undertaking under its March 24, 1998 letter.6
On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to
refund the money they used in the purchase of the subject tickets with legal interest from July 21, 1997 and to
pay P1,000,000.00 as moral damages, P500,000.00 as exemplary damages and P250,000.00 as attorneys
fees.7
CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the
subject tickets are non-refundable; (b) Fernando cannot insist on using the ticket in Lourdes name for the
purchase of a round trip ticket to Los Angeles since the same is non-transferable; (c) as Mager is not a CAI
employee, CAI is not liable for any of her acts; (d) CAI, its employees and agents did not act in bad faith as to
entitle Spouses Viloria to moral and exemplary damages and attorneys fees. CAI also invoked the following
clause printed on the subject tickets:
3. To the extent not in conflict with the foregoing carriage and other services performed by
each carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii)
carriers conditions of carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier), except in transportation between a place in

the United States or Canada and any place outside thereof to which tariffs in force in those
countries apply.8
According to CAI, one of the conditions attached to their contract of carriage is the non-transferability
and non-refundability of the subject tickets.
The RTCs Ruling
Following a full-blown trial, the RTC rendered its April 3, 2006 Decision, holding that Spouses
Viloria are entitled to a refund in view of Magers misrepresentation in obtaining their consent in the purchase
of the subject tickets.9 The relevant portion of the April 3, 2006 Decision states:
Continental Airlines agent Ms. Mager was in bad faith when she was less candid and
diligent in presenting to plaintiffs spouses their booking options. Plaintiff Fernando clearly
wanted to travel via AMTRAK, but defendants agent misled him into purchasing Continental
Airlines tickets instead on the fraudulent misrepresentation that Amtrak was fully booked. In
fact, defendant Airline did not specifically denied (sic) this allegation.
Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into buying
Continental Airline tickets on Ms. Magers misleading misrepresentations. Continental
Airlines agent Ms. Mager further relied on and exploited plaintiff Fernandos need and told
him that they must book a flight immediately or risk not being able to travel at all on the
couples preferred date. Unfortunately, plaintiffs spouses fell prey to the airlines and its
agents unethical tactics for baiting trusting customers. 10
Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is CAIs agent, hence,
bound by her bad faith and misrepresentation. As far as the RTC is concerned, there is no issue as to whether
Mager was CAIs agent in view of CAIs implied recognition of her status as such in its March 24, 1998 letter.
The act of a travel agent or agency being involved here, the following are the
pertinent New Civil Code provisions on agency:
Art. 1868. By the contract of agency a person binds himself to render
some service or to do something in representation or on behalf of another,
with the consent or authority of the latter.
Art. 1869. Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the
agency, knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
As its very name implies, a travel agency binds itself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.
This court takes judicial notice of the common services rendered by travel agencies that
represent themselves as such, specifically the reservation and booking of local and foreign
tours as well as the issuance of airline tickets for a commission or fee.
The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff spouses
on July 21, 1997 were no different from those offered in any other travel agency. Defendant
airline impliedly if not expressly acknowledged its principal-agent relationship with Ms.
Mager by its offer in the letter dated March 24, 1998 an obvious attempt to assuage
plaintiffs spouses hurt feelings.11

Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the
subject tickets within two (2) years from their date of issue when it charged Fernando with the amount of
US$1,867.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use Lourdes
ticket. Specifically:
Tickets may be reissued for up to two years from the original date of issue. When defendant
airline still charged plaintiffs spouses US$1,867.40 or more than double the then going rate of
US$856.00 for the unused tickets when the same were presented within two (2) years from
date of issue, defendant airline exhibited callous treatment of passengers. 12
The Appellate Courts Ruling
On appeal, the CA reversed the RTCs April 3, 2006 Decision, holding that CAI cannot be held liable
for Magers act in the absence of any proof that a principal-agent relationship existed between CAI and
Holiday Travel. According to the CA, Spouses Viloria, who have the burden of proof to establish the fact of
agency, failed to present evidence demonstrating that Holiday Travel is CAIs agent. Furthermore, contrary to
Spouses Vilorias claim, the contractual relationship between Holiday Travel and CAI is not an agency but
that of a sale.
Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was in
turn a ticketing agent of Holiday Travel who was in turn a ticketing agent of Continental
Airlines. Proceeding from this premise, they contend that Continental Airlines should be held
liable for the acts of Mager. The trial court held the same view.
We do not agree. By the contract of agency, a person binds him/herself to render
some service or to do something in representation or on behalf of another, with the consent or
authority of the latter. The elements of agency are: (1) consent, express or implied, of the
parties to establish the relationship; (2) the object is the execution of a juridical act in relation
to a third person; (3) the agent acts as a representative and not for him/herself; and (4) the
agent acts within the scope of his/her authority. As the basis of agency is representation, there
must be, on the part of the principal, an actual intention to appoint, an intention naturally
inferable from the principals words or actions. In the same manner, there must be an
intention on the part of the agent to accept the appointment and act upon it. Absent such
mutual intent, there is generally no agency. It is likewise a settled rule that persons dealing
with an assumed agent are bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in case
either is controverted, the burden of proof is upon them to establish it. Agency is never
presumed, neither is it created by the mere use of the word in a trade or business name. We
have perused the evidence and documents so far presented. We find nothing except bare
allegations of plaintiffs-appellees that Mager/Holiday Travel was acting in behalf of
Continental Airlines. From all sides of legal prism, the transaction in issue was simply a
contract of sale, wherein Holiday Travel buys airline tickets from Continental Airlines and
then, through its employees, Mager included, sells it at a premium to clients. 13
The CA also ruled that refund is not available to Spouses Viloria as the word non-refundable was
clearly printed on the face of the subject tickets, which constitute their contract with CAI. Therefore, the grant
of their prayer for a refund would violate the proscription against impairment of contracts.
Finally, the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the
higher amount of US$1,867.40 for a round trip ticket to Los Angeles. According to the CA, there is no
compulsion for CAI to charge the lower amount of US$856.00, which Spouses Viloria claim to be the fee

charged by other airlines. The matter of fixing the prices for its services is CAIs prerogative, which Spouses
Viloria cannot intervene. In particular:
It is within the respective rights of persons owning and/or operating business entities to peg
the premium of the services and items which they provide at a price which they deem fit, no
matter how expensive or exhorbitant said price may seem vis--vis those of the competing
companies. The Spouses Viloria may not intervene with the business judgment of Continental
Airlines.14
The Petitioners Case
In this Petition, this Court is being asked to review the findings and conclusions of the CA, as the
latters reversal of the RTCs April 3, 2006 Decision allegedly lacks factual and legal bases. Spouses Viloria
claim that CAI acted in bad faith when it required them to pay a higher amount for a round trip ticket to Los
Angeles considering CAIs undertaking to re-issue new tickets to them within the period stated in their March
24, 1998 letter. CAI likewise acted in bad faith when it disallowed Fernando to use Lourdes ticket to purchase
a round trip to Los Angeles given that there is nothing in Lourdes ticket indicating that it is non-transferable.
As a common carrier, it is CAIs duty to inform its passengers of the terms and conditions of their contract and
passengers cannot be bound by such terms and conditions which they are not made aware of. Also, the subject
contract of carriage is a contract of adhesion; therefore, any ambiguities should be construed against CAI.
Notably, the petitioners are no longer questioning the validity of the subject contracts and limited its claim for
a refund on CAIs alleged breach of its undertaking in its March 24, 1998 letter.
The Respondents Case
In its Comment, CAI claimed that Spouses Vilorias allegation of bad faith is negated by its
willingness to issue new tickets to them and to credit the value of the subject tickets against the value of the
new ticket Fernando requested. CAI argued that Spouses Vilorias sole basis to claim that the price at which
CAI was willing to issue the new tickets is unconscionable is a piece of hearsay evidence an advertisement
appearing on a newspaper stating that airfares from Manila to Los Angeles or San Francisco cost
US$818.00.15 Also, the advertisement pertains to airfares in September 2000 and not to airfares prevailing in
June 1999, the time when Fernando asked CAI to apply the value of the subject tickets for the purchase of a
new one.16 CAI likewise argued that it did not undertake to protect Spouses Viloria from any changes or
fluctuations in the prices of airline tickets and its only obligation was to apply the value of the subject tickets
to the purchase of the newly issued tickets.
With respect to Spouses Vilorias claim that they are not aware of CAIs restrictions on the subject
tickets and that the terms and conditions that are printed on them are ambiguous, CAI denies any ambiguity
and alleged that its representative informed Fernando that the subject tickets are non-transferable when he
applied for the issuance of a new ticket. On the other hand, the word non-refundable clearly appears on the
face of the subject tickets.
CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency
relationship exists between them. As an independent contractor, Holiday Travel was without capacity to bind
CAI.
Issues
To determine the propriety of disturbing the CAs January 30, 2009 Decision and whether Spouses
Viloria have the right to the reliefs they prayed for, this Court deems it necessary to resolve the following
issues:
a. Does a principal-agent relationship exist between CAI and Holiday Travel?

b. Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI
bound by the acts of Holiday Travels agents and employees such as Mager?
c. Assuming that CAI is bound by the acts of Holiday Travels agents and employees, can the
representation of Mager as to unavailability of seats at Amtrak be considered
fraudulent as to vitiate the consent of Spouse Viloria in the purchase of the subject
tickets?
d. Is CAI justified in insisting that the subject tickets are non-transferable and nonrefundable?
e. Is CAI justified in pegging a different price for the round trip ticket to Los Angeles
requested by Fernando?
f. Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to apply
the value of the subject tickets in the purchase of new ones when it refused to allow
Fernando to use Lourdes ticket and in charging a higher price for a round trip ticket
to Los Angeles?
This Courts Ruling
I. A principal-agent relationship exists between CAI and
Holiday Travel.
With respect to the first issue, which is a question of fact that would require this Court to review and
re-examine the evidence presented by the parties below, this Court takes exception to the general rule that the
CAs findings of fact are conclusive upon Us and our jurisdiction is limited to the review of questions of law.
It is well-settled to the point of being axiomatic that this Court is authorized to resolve questions of fact if
confronted with contrasting factual findings of the trial court and appellate court and if the findings of the CA
are contradicted by the evidence on record. 17
According to the CA, agency is never presumed and that he who alleges that it exists has the burden
of proof. Spouses Viloria, on whose shoulders such burden rests, presented evidence that fell short of
indubitably demonstrating the existence of such agency.
We disagree. The CA failed to consider undisputed facts, discrediting CAIs denial that Holiday
Travel is one of its agents. Furthermore, in erroneously characterizing the contractual relationship between
CAI and Holiday Travel as a contract of sale, the CA failed to apply the fundamental civil law principles
governing agency and differentiating it from sale.
In Rallos v. Felix Go Chan & Sons Realty Corporation,18 this Court explained the nature of an agency
and spelled out the essential elements thereof:
Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, called the principal (mandante), authorizes
another, called the agent (mandatario), to act for and in his behalf in transactions with third
persons. The essential elements of agency are: (1) there is consent, express or implied of the
parties to establish the relationship; (2) the object is the execution of a juridical act in relation
to a third person; (3) the agent acts as a representative and not for himself, and (4) the agent
acts within the scope of his authority.
Agency is basically personal, representative, and derivative in nature. The authority
of the agent to act emanates from the powers granted to him by his principal; his act is the act
of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who
acts through another acts himself."19

Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and
second elements are present as CAI does not deny that it concluded an agreement with Holiday Travel,
whereby Holiday Travel would enter into contracts of carriage with third persons on CAIs behalf. The third
element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it
is CAI and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its
behalf. The fourth element is also present considering that CAI has not made any allegation that Holiday
Travel exceeded the authority that was granted to it. In fact, CAI consistently maintains the validity of the
contracts of carriage that Holiday Travel executed with Spouses Viloria and that Mager was not guilty of any
fraudulent misrepresentation. That CAI admits the authority of Holiday Travel to enter into contracts of
carriage on its behalf is easily discernible from its February 24, 1998 and March 24, 1998 letters, where it
impliedly recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. When
Fernando informed CAI that it was Holiday Travel who issued to them the subject tickets, CAI did not deny
that Holiday Travel is its authorized agent.
Prior to Spouses Vilorias filing of a complaint against it, CAI never refuted that it gave Holiday
Travel the power and authority to conclude contracts of carriage on its behalf. As clearly extant from the
records, CAI recognized the validity of the contracts of carriage that Holiday Travel entered into with Spouses
Viloria and considered itself bound with Spouses Viloria by the terms and conditions thereof; and this
constitutes an unequivocal testament to Holiday Travels authority to act as its agent. This Court cannot
therefore allow CAI to take an altogether different position and deny that Holiday Travel is its agent without
condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or
retraction to Spouses Viloria, who relied on good faith on CAIs acts in recognition of Holiday Travels
authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall
an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty
of justice.20 Estoppel bars CAI from making such denial.
As categorically provided under Article 1869 of the Civil Code, [a]gency may be express, or implied
from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.
Considering that the fundamental hallmarks of an agency are present, this Court finds it rather
peculiar that the CA had branded the contractual relationship between CAI and Holiday Travel as one of sale.
The distinctions between a sale and an agency are not difficult to discern and this Court, as early as 1970, had
already formulated the guidelines that would aid in differentiating the two (2) contracts. In Commissioner of
Internal Revenue v. Constantino,21 this Court extrapolated that the primordial differentiating consideration
between the two (2) contracts is the transfer of ownership or title over the property subject of the contract. In
an agency, the principal retains ownership and control over the property and the agent merely acts on the
principals behalf and under his instructions in furtherance of the objectives for which the agency was
established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the
property will effect a relinquishment of title, control and ownership in such a way that the recipient may do
with the property as he pleases.
Since the company retained ownership of the goods, even as it delivered possession
unto the dealer for resale to customers, the price and terms of which were subject to the
company's control, the relationship between the company and the dealer is one of agency,
tested under the following criterion:
The difficulty in distinguishing between contracts of sale and the creation of
an agency to sell has led to the establishment of rules by the application of which this
difficulty may be solved. The decisions say the transfer of title or agreement to
transfer it for a price paid or promised is the essence of sale. If such transfer puts the
transferee in the attitude or position of an owner and makes him liable to the
transferor as a debtor for the agreed price, and not merely as an agent who must
account for the proceeds of a resale, the transaction is a sale; while the essence of an
agency to sell is the delivery to an agent, not as his property, but as the property of the

principal, who remains the owner and has the right to control sales, fix the price, and
terms, demand and receive the proceeds less the agent's commission upon sales made.
1 Mechem on Sales, Sec. 43; 1 Mechem on Agency, Sec. 48; Williston on Sales, 1;
Tiedeman on Sales, 1. (Salisbury v. Brooks, 94 SE 117, 118-119)22
As to how the CA have arrived at the conclusion that the contract between CAI and Holiday Travel is
a sale is certainly confounding, considering that CAI is the one bound by the contracts of carriage embodied
by the tickets being sold by Holiday Travel on its behalf. It is undisputed that CAI and not Holiday Travel
who is the party to the contracts of carriage executed by Holiday Travel with third persons who desire to
travel via Continental Airlines, and this conclusively indicates the existence of a principal-agent relationship.
That the principal is bound by all the obligations contracted by the agent within the scope of the authority
granted to him is clearly provided under Article 1910 of the Civil Code and this constitutes the very notion of
agency.
II. In actions based on quasi-delict, a principal can only
be held liable for the tort committed by its agents
employees if it has been established by preponderance of
evidence that the principal was also at fault or negligent
or that the principal exercise control and supervision over
them.
Considering that Holiday Travel is CAIs agent, does it necessarily follow that CAI is liable for the
fault or negligence of Holiday Travels employees? Citing China Air Lines, Ltd. v. Court of Appeals, et
al.,23 CAI argues that it cannot be held liable for the actions of the employee of its ticketing agent in the
absence of an employer-employee relationship.
An examination of this Courts pronouncements in China Air Lines will reveal that an airline
company is not completely exonerated from any liability for the tort committed by its agents employees. A
prior determination of the nature of the passengers cause of action is necessary. If the passengers cause of
action against the airline company is premised onculpa aquiliana or quasi-delict for a tort committed by the
employee of the airline companys agent, there must be an independent showing that the airline company was
at fault or negligent or has contributed to the negligence or tortuous conduct committed by the employee of its
agent. The mere fact that the employee of the airline companys agent has committed a tort is not sufficient to
hold the airline company liable. There is no vinculum juris between the airline company and its agents
employees and the contractual relationship between the airline company and its agent does not operate to
create a juridical tie between the airline company and its agents employees. Article 2180 of the Civil Code
does not make the principal vicariously liable for the tort committed by its agents employees and the
principal-agency relationship per se does not make the principal a party to such tort; hence, the need to prove
the principals own fault or negligence.
On the other hand, if the passengers cause of action for damages against the airline company is based
on contractual breach or culpa contractual, it is not necessary that there be evidence of the airline companys
fault or negligence. As this Court previously stated in China Air Lines and reiterated in Air France vs.
Gillego,24 in an action based on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract
and the fact of its non-performance by the carrier.
Spouses Vilorias cause of action on the basis of Magers alleged fraudulent misrepresentation is
clearly one of tort or quasi-delict, there being no pre-existing contractual relationship between them.
Therefore, it was incumbent upon Spouses Viloria to prove that CAI was equally at fault.
However, the records are devoid of any evidence by which CAIs alleged liability can be
substantiated. Apart from their claim that CAI must be held liable for Magers supposed fraud because

Holiday Travel is CAIs agent, Spouses Viloria did not present evidence that CAI was a party or had
contributed to Magers complained act either by instructing or authorizing Holiday Travel and Mager to issue
the said misrepresentation.
It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and
conditions of the subject contracts, which Mager entered into with them on CAIs behalf, in order to deny
Spouses Vilorias request for a refund or Fernandos use of Lourdes ticket for the re-issuance of a new one,
and simultaneously claim that they are not bound by Magers supposed misrepresentation for purposes of
avoiding Spouses Vilorias claim for damages and maintaining the validity of the subject contracts. It may
likewise be argued that CAI cannot deny liability as it benefited from Magers acts, which were performed in
compliance with Holiday Travels obligations as CAIs agent.
However, a persons vicarious liability is anchored on his possession of control, whether absolute or
limited, on the tortfeasor. Without such control, there is nothing which could justify extending the liability to a
person other than the one who committed the tort. As this Court explained in Cangco v. Manila Railroad
Co.:25
With respect to extra-contractual obligation arising from negligence, whether of act or
omission, it is competent for the legislature to elect and our Legislature has so elected
to limit such liability to cases in which the person upon whom such an obligation is imposed
is morally culpable or, on the contrary, for reasons of public policy, to extend that liability,
without regard to the lack of moral culpability, so as to include responsibility for the
negligence of those persons whose acts or omissions are imputable, by a legal fiction, to
others who are in a position to exercise an absolute or limited control over them. The
legislature which adopted our Civil Code has elected to limit extra-contractual liability
with certain well-defined exceptions to cases in which moral culpability can be directly
imputed to the persons to be charged. This moral responsibility may consist in having failed
to exercise due care in one's own acts, or in having failed to exercise due care in the selection
and control of one's agent or servants, or in the control of persons who, by reasons of their
status, occupy a position of dependency with respect to the person made liable for their
conduct.26 (emphasis supplied)
It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager
by preponderant evidence. The existence of control or supervision cannot be presumed and CAI is under no
obligation to prove its denial or nugatory assertion. Citing Belen v. Belen,27 this Court ruled in Jayme v.
Apostol,28 that:
In Belen v. Belen, 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 [rule] 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. 29 (citations omitted)
Therefore, without a modicum of evidence that CAI exercised control over Holiday Travels employees or that
CAI was equally at fault, no liability can be imposed on CAI for Magers supposed misrepresentation.
III.

Even on the assumption that CAI may be held

liable for the acts of Mager, still, Spouses Viloria

are not entitled to a refund. Magers statement

cannot be considered a causal fraud that would
justify the annulment of the subject contracts that
would oblige CAI to indemnify Spouses Viloria
and return the money they paid for the subject
tickets.
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the
contracting parties was obtained through fraud, the contract is considered voidable and may be annulled
within four (4) years from the time of the discovery of the fraud. Once a contract is annulled, the parties are
obliged under Article 1398 of the same Code to restore to each other the things subject matter of the contract,
including their fruits and interest.
On the basis of the foregoing and given the allegation of Spouses Viloria that Fernandos consent to
the subject contracts was supposedly secured by Mager through fraudulent means, it is plainly apparent that
their demand for a refund is tantamount to seeking for an annulment of the subject contracts on the ground of
vitiated consent.
Whether the subject contracts are annullable, this Court is required to determine whether Magers
alleged misrepresentation constitutes causal fraud. Similar to the dispute on the existence of an agency,
whether fraud attended the execution of a contract is factual in nature and this Court, as discussed above, may
scrutinize the records if the findings of the CA are contrary to those of the RTC.
Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of
one of the contracting parties, the other is induced to enter into a contract which, without them, he would not
have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the
incidental (dolo incidente), inducement to the making of the contract.30 In Samson v. Court of Appeals,31 causal
fraud was defined as a deception employed by one party prior to or simultaneous to the contract in order to
secure the consent of the other.32
Also, fraud must be serious and its existence must be established by clear and convincing evidence.
As ruled by this Court in Sierra v. Hon. Court of Appeals, et al.,33 mere preponderance of evidence is not
adequate:
Fraud must also be discounted, for according to the Civil Code:
Art. 1338. There is fraud when, through insidious words or
machinations of one of the contracting parties, the other is induced to enter
into a contract which without them, he would not have agreed to.
Art. 1344. In order that fraud may make a contract voidable, it should
be serious and should not have been employed by both contracting parties.
To quote Tolentino again, the misrepresentation constituting the fraud must be
established by full, clear, and convincing evidence, and not merely by a preponderance
thereof. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to
lead an ordinarily prudent person into error; that which cannot deceive a prudent person
cannot be a ground for nullity. The circumstances of each case should be considered, taking
into account the personal conditions of the victim. 34
After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria
has not been satisfactorily established as causal in nature to warrant the annulment of the subject contracts. In
fact, Spouses Viloria failed to prove by clear and convincing evidence that Magers statement was fraudulent.

Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at Amtrak for a trip to
New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b) Mager knew about
this; and (c) that she purposely informed them otherwise.
This Court finds the only proof of Magers alleged fraud, which is Fernandos testimony that an
Amtrak had assured him of the perennial availability of seats at Amtrak, to be wanting. As CAI correctly
pointed out and as Fernando admitted, it was possible that during the intervening period of three (3) weeks
from the time Fernando purchased the subject tickets to the time he talked to said Amtrak employee, other
passengers may have cancelled their bookings and reservations with Amtrak, making it possible for Amtrak to
accommodate them. Indeed, the existence of fraud cannot be proved by mere speculations and conjectures.
Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed that "a person
is innocent of crime or wrong" and that "private transactions have been fair and regular." 35 Spouses Viloria
failed to overcome this presumption.
IV. Assuming the contrary, Spouses Viloria are
nevertheless deemed to have ratified the subject
contracts.
Even assuming that Magers representation is causal fraud, the subject contracts have been impliedly
ratified when Spouses Viloria decided to exercise their right to use the subject tickets for the purchase of new
ones. Under Article 1392 of the Civil Code, ratification extinguishes the action to annul a voidable contract.
Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows:
Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a
tacit ratification if, with knowledge of the reason which renders the contract voidable and
such reason having ceased, the person who has a right to invoke it should execute an act
which necessarily implies an intention to waive his right.
Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing
approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. 36
Simultaneous with their demand for a refund on the ground of Fernandos vitiated consent, Spouses
Viloria likewise asked for a refund based on CAIs supposed bad faith in reneging on its undertaking to
replace the subject tickets with a round trip ticket from Manila to Los Angeles.
In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on
contractual breach. Resolution, the action referred to in Article 1191, is based on the defendants breach of
faith, a violation of the reciprocity between the parties 37 and in Solar Harvest, Inc. v. Davao Corrugated
Carton Corporation,38 this Court ruled that a claim for a reimbursement in view of the other partys failure to
comply with his obligations under the contract is one for rescission or resolution.
However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two
(2) inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment,
one of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect
is in the consummation stage of the contract when the parties are in the process of performing their respective
obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of
the contract. Accordingly, by pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly
admitted the validity of the subject contracts, forfeiting their right to demand their annulment. A party cannot
rely on the contract and claim rights or obligations under it and at the same time impugn its existence or
validity. Indeed, litigants are enjoined from taking inconsistent positions. 39

V. Contracts cannot be rescinded for a slight or casual

breach.
CAI cannot insist on the non-transferability of the subject
tickets.
Considering that the subject contracts are not annullable on the ground of vitiated consent, the next
question is: Do Spouses Viloria have the right to rescind the contract on the ground of CAIs supposed
breach of its undertaking to issue new tickets upon surrender of the subject tickets?
Article 1191, as presently worded, states:
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfilment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing
of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
According to Spouses Viloria, CAI acted in bad faith and breached the subject contracts when it
refused to apply the value of Lourdes ticket for Fernandos purchase of a round trip ticket to Los Angeles and
in requiring him to pay an amount higher than the price fixed by other airline companies.
In its March 24, 1998 letter, CAI stated that non-refundable tickets may be used as a form of
payment toward the purchase of another Continental ticket for $75.00, per ticket, reissue fee ($50.00, per
ticket, for tickets purchased prior to October 30, 1997).
Clearly, there is nothing in the above-quoted section of CAIs letter from which the restriction on the
non-transferability of the subject tickets can be inferred. In fact, the words used by CAI in its letter supports
the position of Spouses Viloria, that each of them can use the ticket under their name for the purchase of new
tickets whether for themselves or for some other person.
Moreover, as CAI admitted, it was only when Fernando had expressed his interest to use the subject
tickets for the purchase of a round trip ticket between Manila and Los Angeles that he was informed that he
cannot use the ticket in Lourdes name as payment.
Contrary to CAIs claim, that the subject tickets are non-transferable cannot be implied from a plain
reading of the provision printed on the subject tickets stating that [t]o the extent not in conflict with the
foregoing carriage and other services performed by each carrier are subject to: (a) provisions contained in this
ticket, x x x (iii) carriers conditions of carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier) x x x. As a common carrier whose business is imbued with
public interest, the exercise of extraordinary diligence requires CAI to inform Spouses Viloria, or all of its
passengers for that matter, of all the terms and conditions governing their contract of carriage. CAI is
proscribed from taking advantage of any ambiguity in the contract of carriage to impute knowledge on its
passengers of and demand compliance with a certain condition or undertaking that is not clearly stipulated.
Since the prohibition on transferability is not written on the face of the subject tickets and CAI failed to

inform Spouses Viloria thereof, CAI cannot refuse to apply the value of Lourdes ticket as payment for
Fernandos purchase of a new ticket.
CAIs refusal to accept Lourdes ticket for the purchase
of a new ticket for Fernando is only a casual breach.
Nonetheless, the right to rescind a contract for non-performance of its stipulations is not absolute. The
general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such
substantial and fundamental violations as would defeat the very object of the parties in making the
agreement.40 Whether a breach is substantial is largely determined by the attendant circumstances. 41
While CAIs refusal to allow Fernando to use the value of Lourdes ticket as payment for the purchase
of a new ticket is unjustified as the non-transferability of the subject tickets was not clearly stipulated, it
cannot, however be considered substantial. The endorsability of the subject tickets is not an essential part of
the underlying contracts and CAIs failure to comply is not essential to its fulfillment of its undertaking to
issue new tickets upon Spouses Vilorias surrender of the subject tickets. This Court takes note of CAIs
willingness to perform its principal obligation and this is to apply the price of the ticket in Fernandos name to
the price of the round trip ticket between Manila and Los Angeles. CAI was likewise willing to accept the
ticket in Lourdes name as full or partial payment as the case may be for the purchase of any ticket, albeit
under her name and for her exclusive use. In other words, CAIs willingness to comply with its undertaking
under its March 24, 1998 cannot be doubted, albeit tainted with its erroneous insistence that Lourdes ticket is
non-transferable.
Moreover, Spouses Vilorias demand for rescission cannot prosper as CAI cannot be solely faulted for
the fact that their agreement failed to consummate and no new ticket was issued to Fernando. Spouses Viloria
have no right to insist that a single round trip ticket between Manila and Los Angeles should be priced at
around $856.00 and refuse to pay the difference between the price of the subject tickets and the amount fixed
by CAI. The petitioners failed to allege, much less prove, that CAI had obliged itself to issue to them tickets
for any flight anywhere in the world upon their surrender of the subject tickets. In its March 24, 1998 letter, it
was clearly stated that [n]on-refundable tickets may be used as a form of payment toward the purchase of
another Continental ticket42 and there is nothing in it suggesting that CAI had obliged itself to protect
Spouses Viloria from any fluctuation in the prices of tickets or that the surrender of the subject tickets will be
considered as full payment for any ticket that the petitioners intend to buy regardless of actual price and
destination. The CA was correct in holding that it is CAIs right and exclusive prerogative to fix the prices for
its services and it may not be compelled to observe and maintain the prices of other airline companies. 43
The conflict as to the endorsability of the subject tickets is an altogether different matter, which does
not preclude CAI from fixing the price of a round trip ticket between Manila and Los Angeles in an amount it
deems proper and which does not provide Spouses Viloria an excuse not to pay such price, albeit subject to a
reduction coming from the value of the subject tickets. It cannot be denied that Spouses Viloria had the
concomitant obligation to pay whatever is not covered by the value of the subject tickets whether or not the
subject tickets are transferable or not.
There is also no showing that Spouses Viloria were discriminated against in bad faith by being
charged with a higher rate. The only evidence the petitioners presented to prove that the price of a round trip
ticket between Manila and Los Angeles at that time was only $856.00 is a newspaper advertisement for
another airline company, which is inadmissible for being hearsay evidence, twice removed. Newspaper
clippings are hearsay if they were offered for the purpose of proving the truth of the matter alleged. As ruled
in Feria v. Court of Appeals,:44
[N]ewspaper articles amount to hearsay evidence, twice removed and are therefore not only
inadmissible but without any probative value at all whether objected to or not, unless offered
for a purpose other than proving the truth of the matter asserted. In this case, the news article

is admissible only as evidence that such publication does exist with the tenor of the news
therein stated.45(citations omitted)
The records of this case demonstrate that both parties were equally in default; hence, none of them
can seek judicial redress for the cancellation or resolution of the subject contracts and they are therefore
bound to their respective obligations thereunder. As the 1st sentence of Article 1192 provides:
Art. 1192. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it cannot be
determined which of the parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (emphasis supplied)
Therefore, CAIs liability for damages for its refusal to accept Lourdes ticket for the purchase of
Fernandos round trip ticket is offset by Spouses Vilorias liability for their refusal to pay the amount, which is
not covered by the subject tickets. Moreover, the contract between them remains, hence, CAI is duty bound to
issue new tickets for a destination chosen by Spouses Viloria upon their surrender of the subject tickets and
Spouses Viloria are obliged to pay whatever amount is not covered by the value of the subject tickets.
This Court made a similar ruling in Central Bank of the Philippines v. Court of Appeals.46 Thus:
Since both parties were in default in the performance of their respective reciprocal
obligations, that is, Island Savings Bank failed to comply with its obligation to furnish the
entire loan and Sulpicio M. Tolentino failed to comply with his obligation to pay
his P17,000.00 debt within 3 years as stipulated, they are both liable for damages.
Article 1192 of the Civil Code provides that in case both parties have committed a
breach of their reciprocal obligations, the liability of the first infractor shall be equitably
tempered by the courts. WE rule that the liability of Island Savings Bank for damages in not
furnishing the entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the
form of penalties and surcharges, for not paying his overdue P17,000.00 debt. x x x.47
Another consideration that militates against the propriety of holding CAI liable for moral damages is
the absence of a showing that the latter acted fraudulently and in bad faith. Article 2220 of the Civil Code
requires evidence of bad faith and fraud and moral damages are generally not recoverable in culpa
contractual except when bad faith had been proven.48The award of exemplary damages is likewise not
warranted. Apart from the requirement that the defendant acted in a wanton, oppressive and malevolent
manner, the claimant must prove his entitlement to moral damages. 49
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.