CULPA AQUILIANA AND CULPA CONTRACTUAL

A. SOURCE

G.R. No. L-12191 October 14, 1918

JOSE CANGCO, plaintiff-appellant,

vs.
MANILA RAILROAD CO., defendant-appellee.

FISHER, J.:

At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the employment of Manila
Railroad Company in the capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San Mateo, in the
province of Rizal, which is located upon the line of the defendant railroad company; and in coming daily by train to the
company's office in the city of Manila where he worked, he used a pass, supplied by the company, which entitled him to
ride upon the company's trains free of charge. Upon the occasion in question, January 20, 1915, the plaintiff arose from
his seat in the second class-car where he was riding and, making, his exit through the door, took his position upon the
steps of the coach, seizing the upright guardrail with his right hand for support.

On the side of the train where passengers alight at the San Mateo station there is a cement platform which begins to rise
with a moderate gradient some distance away from the company's office and extends along in front of said office for a
distance sufficient to cover the length of several coaches. As the train slowed down another passenger, named Emilio
Zuñiga, also an employee of the railroad company, got off the same car, alighting safely at the point where the platform
begins to rise from the level of the ground. When the train had proceeded a little farther the plaintiff Jose Cangco stepped
off also, but one or both of his feet came in contact with a sack of watermelons with the result that his feet slipped from
under him and he fell violently on the platform. His body at once rolled from the platform and was drawn under the moving
car, where his right arm was badly crushed and lacerated. It appears that after the plaintiff alighted from the train the car
moved forward possibly six meters before it came to a full stop.

The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was lighted dimly by a single
light located some distance away, objects on the platform where the accident occurred were difficult to discern especially
to a person emerging from a lighted car.

The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is found in the fact that it
was the customary season for harvesting these melons and a large lot had been brought to the station for the shipment to
the market. They were contained in numerous sacks which has been piled on the platform in a row one upon another. The
testimony shows that this row of sacks was so placed of melons and the edge of platform; and it is clear that the fall of the
plaintiff was due to the fact that his foot alighted upon one of these melons at the moment he stepped upon the platform.
His statement that he failed to see these objects in the darkness is readily to be credited.

The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the injuries which he had
received were very serious. He was therefore brought at once to a certain hospital in the city of Manila where an
examination was made and his arm was amputated. The result of this operation was unsatisfactory, and the plaintiff was
then carried to another hospital where a second operation was performed and the member was again amputated higher
up near the shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the form of medical and
surgical fees and for other expenses in connection with the process of his curation.

Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of Manila to recover damages
of the defendant company, founding his action upon the negligence of the servants and employees of the defendant in
placing the sacks of melons upon the platform and leaving them so placed as to be a menace to the security of passenger
alighting from the company's trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found the facts
substantially as above stated, and drew therefrom his conclusion to the effect that, although negligence was attributable to
the defendant by reason of the fact that the sacks of melons were so placed as to obstruct passengers passing to and
from the cars, nevertheless, the plaintiff himself had failed to use due caution in alighting from the coach and was
therefore precluded form recovering. Judgment was accordingly entered in favor of the defendant company, and the
plaintiff appealed.

It can not be doubted that the employees of the railroad company were guilty of negligence in piling these sacks on the
platform in the manner above stated; that their presence caused the plaintiff to fall as he alighted from the train; and that
they therefore constituted an effective legal cause of the injuries sustained by the plaintiff. It necessarily follows that the
defendant company is liable for the damage thereby occasioned unless recovery is barred by the plaintiff's own
contributory negligence. In resolving this problem it is necessary that each of these conceptions of liability, to-wit, the
primary responsibility of the defendant company and the contributory negligence of the plaintiff should be separately
examined.

It is important to note that the foundation of the legal liability of the defendant is the contract of carriage, and that the
obligation to respond for the damage which plaintiff has suffered arises, if at all, from the breach of that contract by reason
of the failure of defendant to exercise due care in its performance. That is to say, its liability is direct and immediate,
differing essentially, in legal viewpoint from that presumptive responsibility for the negligence of its servants, imposed by
article 1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in their selection and
supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu, but only to extra-contractual
obligations — or to use the technical form of expression, that article relates only to culpa aquiliana and not to culpa
contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly points out this
distinction, which was also recognized by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and Pacific Co.
(7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly points out the difference between "culpa, substantive
and independent, which of itself constitutes the source of an obligation between persons not formerly connected by any
legal tie" and culpa considered as an accident in the performance of an obligation already existing . . . ."

In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition that article 1903 of the
Civil Code is not applicable to acts of negligence which constitute the breach of a contract.

Upon this point the Court said:

The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are understood to be those not growing
out of pre-existing duties of the parties to one another. But where relations already formed give rise to duties, whether
springing from contract or quasi-contract, then breaches of those duties are subject to article 1101, 1103, and 1104 of the
same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)

This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain cases imposed upon
employers with respect to damages occasioned by the negligence of their employees to persons to whom they are not
bound by contract, is not based, as in the English Common Law, upon the principle of respondeat superior — if it were,
the master would be liable in every case and unconditionally — but upon the principle announced in article 1902 of the
Civil Code, which imposes upon all persons who by their fault or negligence, do injury to another, the obligation of making
good the damage caused. One who places a powerful automobile in the hands of a servant whom he knows to be
ignorant of the method of managing such a vehicle, is himself guilty of an act of negligence which makes him liable for all
the consequences of his imprudence. The obligation to make good the damage arises at the very instant that the unskillful
servant, while acting within the scope of his employment causes the injury. The liability of the master is personal and
direct. But, if the master has not been guilty of any negligence whatever in the selection and direction of the servant, he is
not liable for the acts of the latter, whatever done within the scope of his employment or not, if the damage done by the
servant does not amount to a breach of the contract between the master and the person injured.

It is not accurate to say that proof of diligence and care in the selection and control of the servant relieves the master from
liability for the latter's acts — on the contrary, that proof shows that the responsibility has never existed. As Manresa says
(vol. 8, p. 68) the liability arising from extra-contractual culpa is always based upon a voluntary act or omission which,
without willful intent, but by mere negligence or inattention, has caused damage to another. A master who exercises all
possible care in the selection of his servant, taking into consideration the qualifications they should possess for the
discharge of the duties which it is his purpose to confide to them, and directs them with equal diligence, thereby performs
his duty to third persons to whom he is bound by no contractual ties, and he incurs no liability whatever if, by reason of the
negligence of his servants, even within the scope of their employment, such third person suffer damage. True it is that
under article 1903 of the Civil Code the law creates a presumption that he has been negligent in the selection or direction
of his servant, but the presumption is rebuttable and yield to proof of due care and diligence in this respect.

The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico Code, has held that these
articles are applicable to cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto Rico Reports, 215.)

This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua and Leynes, (30 Phil.
rep., 624), which was an action brought upon the theory of the extra-contractual liability of the defendant to respond for
the damage caused by the carelessness of his employee while acting within the scope of his employment. The Court,
after citing the last paragraph of article 1903 of the Civil Code, said:

From this article two things are apparent: (1) That when an injury is caused by the negligence of a servant or employee
there instantly arises a presumption of law that there was negligence on the part of the master or employer either in
selection of the servant or employee, or in supervision over him after the selection, or both; and (2) that that presumption
is juris tantum and not juris et de jure, and consequently, may be rebutted. It follows necessarily that if the employer
shows to the satisfaction of the court that in selection and supervision he has exercised the care and diligence of a good
father of a family, the presumption is overcome and he is relieved from liability.

This theory bases the responsibility of the master ultimately on his own negligence and not on that of his servant. This is
the notable peculiarity of the Spanish law of negligence. It is, of course, in striking contrast to the American doctrine that,
in relations with strangers, the negligence of the servant in conclusively the negligence of the master.

The opinion there expressed by this Court, to the effect that in case of extra-contractual culpa based upon negligence, it is
necessary that there shall have been some fault attributable to the defendant personally, and that the last paragraph of
article 1903 merely establishes a rebuttable presumption, is in complete accord with the authoritative opinion of Manresa,
who says (vol. 12, p. 611) that the liability created by article 1903 is imposed by reason of the breach of the duties
inherent in the special relations of authority or superiority existing between the person called upon to repair the damage
and the one who, by his act or omission, was the cause of it.

On the other hand, the liability of masters and employers for the negligent acts or omissions of their servants or agents,
when such acts or omissions cause damages which amount to the breach of a contact, is not based upon a mere
presumption of the master's negligence in their selection or control, and proof of exercise of the utmost diligence and care
in this regard does not relieve the master of his liability for the breach of his contract.
Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual obligation has its source in
the breach or omission of those mutual duties which civilized society imposes upon it members, or which arise from these
relations, other than contractual, of certain members of society to others, generally embraced in the concept of status. The
legal rights of each member of society constitute the measure of the corresponding legal duties, mainly negative in
character, which the existence of those rights imposes upon all other members of society. The breach of these general
duties whether due to willful intent or to mere inattention, if productive of injury, give rise to an obligation to indemnify the
injured party. The fundamental distinction between obligations of this character and those which arise from contract, rests
upon the fact that in cases of non-contractual obligation it is the wrongful or negligent act or omission itself which creates
the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach of the voluntary duty
assumed by the parties when entering into the contractual relation.

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 — 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 person who acts or mission 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 the selection and control of one's agents or servants, or in the control of persons who, by reason of their
status, occupy a position of dependency with respect to the person made liable for their conduct.

The position of a natural or juridical person who has undertaken by contract to render service to another, is wholly
different from that to which article 1903 relates. When the sources of the obligation upon which plaintiff's cause of action
depends is a negligent act or omission, the burden of proof rests upon plaintiff to prove the negligence — if he does not
his action fails. But when the facts averred show a contractual undertaking by defendant for the benefit of plaintiff, and it is
alleged that plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to specify in his pleadings
whether the breach of the contract is due to willful fault or to negligence on the part of the defendant, or of his servants or
agents. Proof of the contract and of its nonperformance is sufficient prima facie to warrant a recovery.

As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor should assume the burden of
proof of its existence, as the only fact upon which his action is based; while on the contrary, in a case of negligence which
presupposes the existence of a contractual obligation, if the creditor shows that it exists and that it has been broken, it is
not necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).

As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach was due to the
negligent conduct of defendant or of his servants, even though such be in fact the actual cause of the breach, it is obvious
that proof on the part of defendant that the negligence or omission of his servants or agents caused the breach of the
contract would not constitute a defense to the action. If the negligence of servants or agents could be invoked as a means
of discharging the liability arising from contract, the anomalous result would be that person acting through the medium of
agents or servants in the performance of their contracts, would be in a better position than those acting in person. If one
delivers a valuable watch to watchmaker who contract to repair it, and the bailee, by a personal negligent act causes its
destruction, he is unquestionably liable. Would it be logical to free him from his liability for the breach of his contract,
which involves the duty to exercise due care in the preservation of the watch, if he shows that it was his servant whose
negligence caused the injury? If such a theory could be accepted, juridical persons would enjoy practically complete
immunity from damages arising from the breach of their contracts if caused by negligent acts as such juridical persons
can of necessity only act through agents or servants, and it would no doubt be true in most instances that reasonable care
had been taken in selection and direction of such servants. If one delivers securities to a banking corporation as collateral,
and they are lost by reason of the negligence of some clerk employed by the bank, would it be just and reasonable to
permit the bank to relieve itself of liability for the breach of its contract to return the collateral upon the payment of the debt
by proving that due care had been exercised in the selection and direction of the clerk?

This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual as a mere incident to the
performance of a contract has frequently been recognized by the supreme court of Spain. (Sentencias of June 27, 1894;
November 20, 1896; and December 13, 1896.) In the decisions of November 20, 1896, it appeared that plaintiff's action
arose ex contractu, but that defendant sought to avail himself of the provisions of article 1902 of the Civil Code as a
defense. The Spanish Supreme Court rejected defendant's contention, saying:

These are not cases of injury caused, without any pre-existing obligation, by fault or negligence, such as those to which
article 1902 of the Civil Code relates, but of damages caused by the defendant's failure to carry out the undertakings
imposed by the contracts . . . .

A brief review of the earlier decision of this court involving the liability of employers for damage done by the negligent acts
of their servants will show that in no case has the court ever decided that the negligence of the defendant's servants has
been held to constitute a defense to an action for damages for breach of contract.

In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was not liable for the
damages caused by the negligence of his driver. In that case the court commented on the fact that no evidence had been
adduced in the trial court that the defendant had been negligent in the employment of the driver, or that he had any
knowledge of his lack of skill or carefulness.

In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff sued the defendant
for damages caused by the loss of a barge belonging to plaintiff which was allowed to get adrift by the negligence of
defendant's servants in the course of the performance of a contract of towage. The court held, citing Manresa (vol. 8, pp.
29, 69) that if the "obligation of the defendant grew out of a contract made between it and the plaintiff . . . we do not think
that the provisions of articles 1902 and 1903 are applicable to the case."

In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover damages for the
personal injuries caused by the negligence of defendant's chauffeur while driving defendant's automobile in which
defendant was riding at the time. The court found that the damages were caused by the negligence of the driver of the
automobile, but held that the master was not liable, although he was present at the time, saying:

. . . unless the negligent acts of the driver are continued for a length of time as to give the owner a reasonable opportunity
to observe them and to direct the driver to desist therefrom. . . . The act complained of must be continued in the presence
of the owner for such length of time that the owner by his acquiescence, makes the driver's acts his own.

In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep., 8), it is true that the
court rested its conclusion as to the liability of the defendant upon article 1903, although the facts disclosed that the injury
complaint of by plaintiff constituted a breach of the duty to him arising out of the contract of transportation. The express
ground of the decision in this case was that article 1903, in dealing with the liability of a master for the negligent acts of his
servants "makes the distinction between private individuals and public enterprise;" that as to the latter the law creates a
rebuttable presumption of negligence in the selection or direction of servants; and that in the particular case the
presumption of negligence had not been overcome.

It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as though founded in tort rather
than as based upon the breach of the contract of carriage, and an examination of the pleadings and of the briefs shows
that the questions of law were in fact discussed upon this theory. Viewed from the standpoint of the defendant the
practical result must have been the same in any event. The proof disclosed beyond doubt that the defendant's servant
was grossly negligent and that his negligence was the proximate cause of plaintiff's injury. It also affirmatively appeared
that defendant had been guilty of negligence in its failure to exercise proper discretion in the direction of the servant.
Defendant was, therefore, liable for the injury suffered by plaintiff, whether the breach of the duty were to be regarded as
constituting culpa aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29 and 69) whether negligence occurs
an incident in the course of the performance of a contractual undertaking or its itself the source of an extra-contractual
undertaking obligation, its essential characteristics are identical. There is always an act or omission productive of damage
due to carelessness or inattention on the part of the defendant. Consequently, when the court holds that a defendant is
liable in damages for having failed to exercise due care, either directly, or in failing to exercise proper care in the selection
and direction of his servants, the practical result is identical in either case. Therefore, it follows that it is not to be inferred,
because the court held in the Yamada case that defendant was liable for the damages negligently caused by its servants
to a person to whom it was bound by contract, and made reference to the fact that the defendant was negligent in the
selection and control of its servants, that in such a case the court would have held that it would have been a good defense
to the action, if presented squarely upon the theory of the breach of the contract, for defendant to have proved that it did in
fact exercise care in the selection and control of the servant.

The true explanation of such cases is to be found by directing the attention to the relative spheres of contractual and
extra-contractual obligations. The field of non- contractual obligation is much more broader than that of contractual
obligations, comprising, as it does, the whole extent of juridical human relations. These two fields, figuratively speaking,
concentric; that is to say, the mere fact that a person is bound to another by contract does not relieve him from extra-
contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes the source of an extra-contractual obligation had no contract existed
between the parties.

The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in safety and to provide
safe means of entering and leaving its trains (civil code, article 1258). That duty, being contractual, was direct and
immediate, and its non-performance could not be excused by proof that the fault was morally imputable to defendant's
servants.

The railroad company's defense involves the assumption that even granting that the negligent conduct of its servants in
placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching
and leaving its trains, the direct and proximate cause of the injury suffered by plaintiff was his own contributory negligence
in failing to wait until the train had come to a complete stop before alighting. Under the doctrine of comparative negligence
announced in the Rakes case (supra), if the accident was caused by plaintiff's own negligence, no liability is imposed
upon defendant's negligence and plaintiff's negligence merely contributed to his injury, the damages should be
apportioned. It is, therefore, important to ascertain if defendant was in fact guilty of negligence.

It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the particular injury
suffered by him could not have occurred. Defendant contends, and cites many authorities in support of the contention,
that it is negligence per se for a passenger to alight from a moving train. We are not disposed to subscribe to this doctrine
in its absolute form. We are of the opinion that this proposition is too badly stated and is at variance with the experience of
every-day life. In this particular instance, that the train was barely moving when plaintiff alighted is shown conclusively by
the fact that it came to stop within six meters from the place where he stepped from it. Thousands of person alight from
trains under these conditions every day of the year, and sustain no injury where the company has kept its platform free
from dangerous obstructions. There is no reason to believe that plaintiff would have suffered any injury whatever in
alighting as he did had it not been for defendant's negligent failure to perform its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that expressed in Thompson's work on Negligence
(vol. 3, sec. 3010) as follows:

The test by which to determine whether the passenger has been guilty of negligence in attempting to alight from a moving
railway train, is that of ordinary or reasonable care. It is to be considered whether an ordinarily prudent person, of the age,
sex and condition of the passenger, would have acted as the passenger acted under the circumstances disclosed by the
evidence. This care has been defined to be, not the care which may or should be used by the prudent man generally, but
the care which a man of ordinary prudence would use under similar circumstances, to avoid injury." (Thompson,
Commentaries on Negligence, vol. 3, sec. 3010.)

Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil. rep., 809), we may say that
the test is this; Was there anything in the circumstances surrounding the plaintiff at the time he alighted from the train
which would have admonished a person of average prudence that to get off the train under the conditions then existing
was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory
negligence.1awph!l.net

As the case now before us presents itself, the only fact from which a conclusion can be drawn to the effect that plaintiff
was guilty of contributory negligence is that he stepped off the car without being able to discern clearly the condition of the
platform and while the train was yet slowly moving. In considering the situation thus presented, it should not be
overlooked that the plaintiff was, as we find, ignorant of the fact that the obstruction which was caused by the sacks of
melons piled on the platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford to
its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the absence of some
circumstance to warn him to the contrary, that the platform was clear. The place, as we have already stated, was dark, or
dimly lighted, and this also is proof of a failure upon the part of the defendant in the performance of a duty owing by it to
the plaintiff; for if it were by any possibility concede that it had right to pile these sacks in the path of alighting passengers,
the placing of them adequately so that their presence would be revealed.

As pertinent to the question of contributory negligence on the part of the plaintiff in this case the following circumstances
are to be noted: The company's platform was constructed upon a level higher than that of the roadbed and the
surrounding ground. The distance from the steps of the car to the spot where the alighting passenger would place his feet
on the platform was thus reduced, thereby decreasing the risk incident to stepping off. The nature of the platform,
constructed as it was of cement material, also assured to the passenger a stable and even surface on which to alight.
Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no means so risky for
him to get off while the train was yet moving as the same act would have been in an aged or feeble person. In determining
the question of contributory negligence in performing such act — that is to say, whether the passenger acted prudently or
recklessly — the age, sex, and physical condition of the passenger are circumstances necessarily affecting the safety of
the passenger, and should be considered. Women, it has been observed, as a general rule are less capable than men of
alighting with safety under such conditions, as the nature of their wearing apparel obstructs the free movement of the
limbs. Again, it may be noted that the place was perfectly familiar to the plaintiff as it was his daily custom to get on and of
the train at this station. There could, therefore, be no uncertainty in his mind with regard either to the length of the step
which he was required to take or the character of the platform where he was alighting. Our conclusion is that the conduct
of the plaintiff in undertaking to alight while the train was yet slightly under way was not characterized by imprudence and
that therefore he was not guilty of contributory negligence.

The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a copyist clerk, and that the
injuries he has suffered have permanently disabled him from continuing that employment. Defendant has not shown that
any other gainful occupation is open to plaintiff. His expectancy of life, according to the standard mortality tables, is
approximately thirty-three years. We are of the opinion that a fair compensation for the damage suffered by him for his
permanent disability is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum of
P790.25 for medical attention, hospital services, and other incidental expenditures connected with the treatment of his
injuries.

The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of P3,290.25, and for the
costs of both instances. So ordered.

B. BURDEN OF PROOF

[G.R. No. 141910. August 6, 2002]

FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO TRUCKING CORPORATION and LAMBERT M.
EROLES, respondents.

DECISION

VITUG, J.:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white
refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc.,
along South Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck
was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an
unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.

FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the
covered cargoes in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion
Industries, Inc., sought reimbursement of the amount it had paid to the latter from GPS. Since the trucking company failed
to heed the claim, FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver
Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS
was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a
common carrier. Respondents further claimed that the cause of damage was purely accidental.

The issues having thus been joined, FGU presented its evidence, establishing the extent of damage to the cargoes and
the amount it had paid to the assured. GPS, instead of submitting its evidence, filed with leave of court a motion to
dismiss the complaint by way of demurrer to evidence on the ground that petitioner had failed to prove that it was a
common carrier.

The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss, explaining thusly:

Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove his own affirmative allegation,
xxx.

In the instant case, plaintiff did not present any single evidence that would prove that defendant is a common carrier.

xxxxxxxxx

Accordingly, the application of the law on common carriers is not warranted and the presumption of fault or negligence on
the part of a common carrier in case of loss, damage or deterioration of goods during transport under 1735 of the Civil
Code is not availing.

Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and the
owner of the vehicle which transports the cargo are the laws on obligation and contract of the Civil Code as well as the
law on quasi delicts.

Under the law on obligation and contract, negligence or fault is not presumed. The law on quasi delict provides for some
presumption of negligence but only upon the attendance of some circumstances. Thus, Article 2185 provides:

Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if
at the time of the mishap, he was violating any traffic regulation.

Evidence for the plaintiff shows no proof that defendant was violating any traffic regulation. Hence, the presumption of
negligence is not obtaining.

Considering that plaintiff failed to adduce evidence that defendant is a common carrier and defendants driver was the one
negligent, defendant cannot be made liable for the damages of the subject cargoes. [2]

The subsequent motion for reconsideration having been denied,[3] plaintiff interposed an appeal to the Court of Appeals,
contending that the trial court had erred (a) in holding that the appellee corporation was not a common carrier defined
under the law and existing jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence.

The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its decision of 10
June 1999, [4]discoursed, among other things, that -

"x x x in order for the presumption of negligence provided for under the law governing common carrier (Article 1735, Civil
Code) to arise, the appellant must first prove that the appellee is a common carrier. Should the appellant fail to prove that
the appellee is a common carrier, the presumption would not arise; consequently, the appellant would have to prove that
the carrier was negligent.

"x x x x x x x x x

"Because it is the appellant who insists that the appellees can still be considered as a common carrier, despite its `limited
clientele, (assuming it was really a common carrier), it follows that it (appellant) has the burden of proving the same. It
(plaintiff-appellant) `must establish his case by a preponderance of evidence, which means that the evidence as a whole
adduced by one side is superior to that of the other. (Summa Insurance Corporation vs. Court of Appeals, 243 SCRA
175). This, unfortunately, the appellant failed to do -- hence, the dismissal of the plaintiffs complaint by the trial court is
justified.

"x x x x x x x x x

"Based on the foregoing disquisitions and considering the circumstances that the appellee trucking corporation has been
`its exclusive contractor, hauler since 1970, defendant has no choice but to comply with the directive of its principal, the
inevitable conclusion is that the appellee is a private carrier.

"x x x x x x x x x

"x x x the lower court correctly ruled that 'the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss, damage or deterioration of good[s]
during transport under [article] 1735 of the Civil Code is not availing.' x x x.

"Finally, We advert to the long established rule that conclusions and findings of fact of a trial court are entitled to great
weight on appeal and should not be disturbed unless for strong and valid reasons." [5]

Petitioner's motion for reconsideration was likewise denied;[6] hence, the instant petition,[7] raising the following issues:
I

WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED UNDER THE LAW
AND EXISTING JURISPRUDENCE.

II

WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE PRESUMED
TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY WERE
SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.

III

WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.

On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals to be amply justified. GPS,
being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other
individual or entity, cannot be considered a common carrier. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
hire or compensation, offering their services to the public,[8] whether to the public in general or to a limited clientele in
particular, but never on an exclusive basis.[9] The true test of a common carrier is the carriage of passengers or goods,
providing space for those who opt to avail themselves of its transportation service for a fee. [10] Given accepted standards,
GPS scarcely falls within the term common carrier.

The above conclusion nothwithstanding, GPS cannot escape from liability.

In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the
mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of
relief.[11] The law, recognizing the obligatory force of contracts,[12] will not permit a party to be set free from liability for any
kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. [13] A breach upon the
contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The
remedy serves to preserve the interests of the promisee that may include his expectation interest, which is his interest in
having the benefit of his bargain by being put in as good a position as he would have been in had the contract been
performed, or his reliance interest, which is his interest in being reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been in had the contract not been made; or his restitution interest, which
is his interest in having restored to him any benefit that he has conferred on the other party. [14] Indeed, agreements can
accomplish little, either for their makers or for society, unless they are made the basis for action. [15] The effect of every
infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to
observe his contractual obligation[16] unless he can show extenuating circumstances, like proof of his exercise of due
diligence (normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his
ensuing liability.

Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioners assured,
and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation,
a default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody to the place
of destination - gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor
the burden being on him to establish otherwise. GPS has failed to do so.

Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay
petitioner.The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be
held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who
have assumed their personality or their juridical position.[17] Consonantly with the axiom res inter alios acta aliis neque
nocet prodest, such contract can neither favor nor prejudice a third person. Petitioners civil action against the driver can
only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove
negligence or fault on the part of the defendant.[18]

A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where the thing
which caused the injury complained of is shown to be under the latters management and the accident is such that, in the
ordinary course of things, cannot be expected to happen if those who have its management or control use proper care. It
affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of
care.[19] It is not a rule of substantive law and, as such, it does not create an independent ground of liability. Instead, it is
regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff
of, the burden of producing specific proof of negligence. The maxim simply places on the defendant the burden of going
forward with the proof.[20] Resort to the doctrine, however, may be allowed only when (a) the event is of a kind which does
not ordinarily occur in the absence of negligence; (b) other responsible causes, including the conduct of the plaintiff and
third persons, are sufficiently eliminated by the evidence; and (c) the indicated negligence is within the scope of the
defendant's duty to the plaintiff.[21]Thus, it is not applicable when an unexplained accident may be attributable to one of
several causes, for some of which the defendant could not be responsible. [22]

Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the
defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the
nature of the relation of the parties.[23] Nevertheless, the requirement that responsible causes other than those due to
defendants conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to
cases of pure (non-contractual) tort since obviously the presumption of negligence in culpa contractual, as previously so
pointed out, immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose liability in
a civil action is predicated on culpa acquiliana, while he admittedly can be said to have been in control and management
of the vehicle which figured in the accident, it is not equally shown, however, that the accident could have been
exclusively due to his negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him.

If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have
waived the right to present evidence.[24] Thus, respondent corporation may no longer offer proof to establish that it has
exercised due care in transporting the cargoes of the assured so as to still warrant a remand of the case to the trial court.

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the decision,
dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is concerned,
but said assailed order of the trial court and decision of the appellate court are REVERSED as regards G.P. Sarmiento
Trucking Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of the damaged and
lost cargoes in the amount of P204,450.00. No costs.

C. APPLICABILITY OF THE DOCTRINE OF PROXIMATE CAUSE

[G.R. No. 122039. May 31, 2000]

VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA and FRANCISCO
SALVA, respondents.

D E C I S I ON

MENDOZA, J.:

This is a petition for review on certiorari of the decision[1] of the Court of Appeals, dated March 31, 1991, reversing the
contrary decision of the Regional Trial Court, Branch 36, Dumaguete City, and awarding damages instead to private
respondent Eliza Jujeurche Sunga as plaintiff in an action for breach of contract of carriage.

The facts, as found by the Court of Appeals, are as follows:

At 10 oclock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college freshman
majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated by petitioner
Vicente Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an
"extension seat," a wooden stool at the back of the door at the rear end of the vehicle. Sclaw

On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at
the rear of the vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by
Iglecerio Verena and owned by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was
injured. She sustained a fracture of the "distal third of the left tibia-fibula with severe necrosis of the underlying skin."
Closed reduction of the fracture, long leg circular casting, and case wedging were done under sedation. Her confinement
in the hospital lasted from August 23 to September 7, 1989. Her attending physician, Dr. Danilo V. Oligario, an orthopedic
surgeon, certified she would remain on a cast for a period of three months and would have to ambulate in crutches during
said period.

On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by
the former in failing to exercise the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-
party complaint against Francisco Salva, the owner of the Isuzu truck. Korte

The lower court rendered judgment against Salva as third-party defendant and absolved Calalas of liability, holding that it
was the driver of the Isuzu truck who was responsible for the accident. It took cognizance of another case (Civil Case No.
3490), filed by Calalas against Salva and Verena, for quasi-delict, in which Branch 37 of the same court held Salva and
his driver Verena jointly liable to Calalas for the damage to his jeepney. Rtcspped

On appeal to the Court of Appeals, the ruling of the lower court was reversed on the ground that Sungas cause of action
was based on a contract of carriage, not quasi-delict, and that the common carrier failed to exercise the diligence required
under the Civil Code. The appellate court dismissed the third-party complaint against Salva and adjudged Calalas liable
for damages to Sunga. The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is entered ordering
defendant-appellee Vicente Calalas to pay plaintiff-appellant:

(1) P50,000.00 as actual and compensatory damages;

(2) P50,000.00 as moral damages;

(3) P10,000.00 as attorneys fees; and

(4) P1,000.00 as expenses of litigation; and

(5) to pay the costs.

SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that the negligence of Verena was the
proximate cause of the accident negates his liability and that to rule otherwise would be to make the common carrier an
insurer of the safety of its passengers. He contends that the bumping of the jeepney by the truck owned by Salva was
a caso fortuito. Petitioner further assails the award of moral damages to Sunga on the ground that it is not supported by
evidence. Sdaadsc

The petition has no merit.

The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the driver and the owner of the truck liable
for quasi-delict ignores the fact that she was never a party to that case and, therefore, the principle of res judicata does
not apply. Missdaa

Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue in Civil Case No. 3490 was
whether Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioners jeepney. On the
other hand, the issue in this case is whether petitioner is liable on his contract of carriage. The first, quasi-delict, also
known as culpa aquiliana or culpa extra contractual, has as its source the negligence of the tortfeasor. The second,
breach of contract or culpa contractual, is premised upon the negligence in the performance of a contractual obligation.

Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action,
whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact
that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination. [2] In case of
death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have been at
fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733
and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. Slxmis

There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable
for the damage to petitioners jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the
collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is
applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing
liability to a person where there is no relation between him and another party. In such a case, the obligation is created by
law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who
create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of
carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common
carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to
passengers. It provides: Slxsc

Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1746, Nos.
5,6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.

Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all the circumstances.

Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as prescribed by articles 1733 and 1755.

In the case at bar, upon the happening of the accident, the presumption of negligence at once arose, and it became the
duty of petitioner to prove that he had to observe extraordinary diligence in the care of his passengers. Scslx

Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances" as required by Art. 1755? We do not think
so. Several factors militate against petitioners contention. Slx

First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being exposed about two
meters from the broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. This is a
violation of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code, which provides:

Sec. 54. Obstruction of Traffic. - No person shall drive his motor vehicle in such a manner as to obstruct or impede the
passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free
passage of other vehicles on the highway.

Second, it is undisputed that petitioners driver took in more passengers than the allowed seating capacity of the jeepney,
a violation of 32(a) of the same law. It provides: Mesm

Exceeding registered capacity. - No person operating any motor vehicle shall allow more passengers or more freight or
cargo in his vehicle than its registered capacity.

The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other
passengers were exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence imposed
on him for the injury sustained by Sunga, but also, the evidence shows he was actually negligent in transporting
passengers. Calrky
We find it hard to give serious thought to petitioners contention that Sungas taking an "extension seat" amounted to an
implied assumption of risk. It is akin to arguing that the injuries to the many victims of the tragedies in our seas should not
be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry.
This is also true of petitioners contention that the jeepney being bumped while it was improperly parked constitutes caso
fortuito. A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable.[3] This requires
that the following requirements be present: (a) the cause of the breach is independent of the debtors will; (b) the event is
unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a
normal manner, and (d) the debtor did not take part in causing the injury to the creditor. [4] Petitioner should have foreseen
the danger of parking his jeepney with its body protruding two meters into the highway. Kycalr

Finally, petitioner challenges the award of moral damages alleging that it is excessive and without basis in law. We find
this contention well taken.

In awarding moral damages, the Court of Appeals stated: Kyle

Plaintiff-appellant at the time of the accident was a first-year college student in that school year 1989-1990 at the Silliman
University, majoring in Physical Education. Because of the injury, she was not able to enroll in the second semester of
that school year. She testified that she had no more intention of continuing with her schooling, because she could not walk
and decided not to pursue her degree, major in Physical Education "because of my leg which has a defect already."

Plaintiff-appellant likewise testified that even while she was under confinement, she cried in pain because of her injured
left foot. As a result of her injury, the Orthopedic Surgeon also certified that she has "residual bowing of the fracture side."
She likewise decided not to further pursue Physical Education as her major subject, because "my left leg x x x has a
defect already."

Those are her physical pains and moral sufferings, the inevitable bedfellows of the injuries that she suffered. Under Article
2219 of the Civil Code, she is entitled to recover moral damages in the sum of P50,000.00, which is fair, just and
reasonable.

As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is
not one of the items enumerated under Art. 2219 of the Civil Code.[5] As an exception, such damages are recoverable: (1)
in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the
Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.[6]

In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court
that petitioner acted in bad faith in the performance of the contract of carriage. Sungas contention that petitioners
admission in open court that the driver of the jeepney failed to assist her in going to a nearby hospital cannot be construed
as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to the hospital does not imply
that petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition by
Verena that he was the one at fault for the accident. Exsm

WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its resolution, dated September 11, 1995,
are AFFIRMED, with the MODIFICATION that the award of moral damages is DELETED.

IS THERE AN INTERSECTION?

G.R. No. L-12163 March 4, 1959

PAZ FORES, petitioner,

vs.
IRENEO MIRANDA, respondent.

REYES, J.B.L., J.:

Defendant-petitioner Paz Fores brings this petition for review of the decision of the Court of Appeals (C.A. Case No. 1437-
R) awarding to the plaintiff-respondent Ireneo Miranda the sums of P5,000 by way of actual damages and counsel fees,
and P10,000 as moral damages, with costs.

Respondent was one of the passengers on a jeepney driven by Eugenio Luga. While the vehicle was descending the Sta.
Mesa bridge at an excessive rate of speed, the driver lost control thereof, causing it to swerve and to his the bridge wall.
The accident occurred on the morning of March 22, 1953. Five of the passengers were injured, including the respondent
who suffered a fracture of the upper right humerus. He was taken to the National Orthopedic Hospital for treatment, and
later was subjected to a series of operations; the first on May 23, 1953, when wire loops were wound around the broken
bones and screwed into place; a second, effected to insert a metal splint, and a third one to remove such splint. At the
time of the trial, it appears that respondent had not yet recovered the use of his right arm.

The driver was charged with serious physical injuries through reckless imprudence, and upon interposing a plea of guilty
was sentenced accordingly.

The contention that the evidence did not sufficiently establish the identity of the vehicle as the belonging to the petitioner
was rejected by the appellate court which found, among other things, that is carried plate No. TPU-1163, SERIES OF
1952, Quezon City, registered in the name of Paz Fores, (appellant herein) and that the vehicle even had the name of
"Doña Paz" painted below its wind shield. No evidence to the contrary was introduced by the petitioner, who relied on an
attack upon the credibility of the two policemen who went to the scene of the incident.
A point to be further remarked is petitioner's contention that on March 21, 1953, or one day before the accident happened,
she allegedly sold the passenger jeep that was involved therein to a certain Carmen Sackerman.

The initial problem raised by the petitioner in this appeal may be formulated thus — "Is the approval of the Public Service
Commission necessary for the sale of a public service vehicle even without conveying therewith the authority to operate
the same?" Assuming the dubious sale to be a fact, the court of Appeals answered the query in the affirmative. The ruling
should be upheld.

Section 20 of the Public Service Act (Commonwealth Act No. 146) provides:

Sec. 20. Subject to established limitations and exceptions and saving provisions to the contrary, it shall be unlawful for
any public service or for the owner, lessee or operator thereof, without the previous approval and authority of the
Commission previously had —

xxx xxx xxx

(g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates, privileges, or rights, or any part
thereof; or merge or consolidate its property, franchises, privileges or rights, or any part thereof, with those of any other
public service. The approval herein required shall be given, after notice to the public and after hearing the persons
interested at a public hearing, if it be shown that there are just and reasonable grounds for making the mortgage or
encumbrance, for liabilities of more than one year maturity, or the sale, alienation, lease, merger, or consolidation to be
approved and that the same are not detrimental to the public interest, and in case of a sale, the date on which the same is
to be consummated shall be fixed in the order of approval: Provided, however, That nothing herein contained shall be
construed to prevent the transaction from being negotiated or completed before its approval or to prevent the sale,
alienation, or lease by any public service of any of its property in the ordinary course of its business.

Interpreting the effects of this particular provision of law, we have held in the recent cases of Montoya vs. Ignacio, *50 Off.
Gaz. No. 1, p. 108; Timbol vs. Osias, et al., G. R. No. L-7547, April 30, 1955, and Medina vs. Cresencia, 99 Phil., 506; 52
Off. Gaz. No. 10, p. 4606, that a transfer contemplated by the law, if made without the requisite approval of the Public
Service Commission, is not effective and binding in so far as the responsibility of the grantee under the franchise in
relation to the public is concerned. Petitioner assails, however, the applicability of these rulings to the instant case,
contending that in those cases, the operator did not convey, by lease or by sale, the vehicle independently of his rights
under the franchise. This line of reasoning does not find support in the law. The provisions of the statute are clear and
prohibit the sale, alienation, lease, or encumbrance of the property, franchise, certificate, privileges or rights, or any part
thereof of the owner or operator of the public service Commission. The law was designed primarily for the protection of
the public interest; and until the approval of the public Service Commission is obtained the vehicle is, in contemplation of
law, still under the service of the owner or operator standing in the records of the Commission which the public has a right
to rely upon.

The proviso contained in the aforequoted law, to the effect that nothing therein shall be construed "to prevent the
transaction from being negotiated or complete before its approval", means only that the sale without the required approval
is still valid and binding between the parties (Montoya vs. Ignacio, supra). The phrase "in the ordinary course of its
business" found in the other proviso" or to prevent the sale, alienation, or lease by any public service of any of its
property". As correctly observed by the lower court, could not have been intended to include the sale of the vehicle itself,
but at most may refer only to such property that may be conceivably disposed or by the carrier in the ordinary course of its
business, like junked equipment or spare parts.

The case of Indalecio de Torres vs. Vicente Ona (63 Phil., 594, 597) is enlightening; and there, it was held:

Under the law, the Public Service Commission has not only general supervision and regulation of, but also full jurisdiction
and control over all public utilities including the property, equipment and facilities used, and the property rights and
franchise enjoyed by every individual and company engaged i the performance of a public service in the sense this phrase
is used in the Public Service Act or Act No. 3108). By virtue of the provisions of said Act, motor vehicles used in the
performance of a service, as the transportation of freight from one point to another, have to this date been considered —
and they cannot but be so considered-public service property; and, by reason of its own nature, a TH truck, which means
that the operator thereof places it at the disposal of anybody who is willing to pay a rental of its use, when he desires to
transfer or carry his effects, merchandise or any other cargo from one place to another, is necessarily a public service
property. (Emphasis supplied)

Of course, this court has held in the case of Bachrach Motor co. vs. Zamboanga Transportation Co., 52 Phil., 244, that
there may be a nunc pro tunc authorization which has the effect of having the approval retroact to the date of the transfer;
but such outcome cannot prejudice rights intervening in the meantime. It appears that no such approval was given by the
Commission before the accident occurred.

The P10,000 actual damages awarded by the Court of First Instance of Manila were reduced by the Court of Appeals to
only P2,000, on the ground that a review of the records failed to disclose a sufficient basis for the trial court's appraisal,
since the only evidence presented on this point consisted of respondent's bare statement that his expenses and loss of
income amounted to P20,000. On the other hand, "it cannot be denied," the lower court said, "that appellee (respondent)
did incur expenses"' It is well to note further that respondent was a painter by profession and a professor of Fine Arts, so
that the amount of P2,000 awarded cannot be said to be excessive (see Arts. 2224 and 2225, Civil Code of the
Philippines). The attorney's fees in the sum of P3,000 also awarded to the respondent are assailed on the ground that the
Court of First Instance did not provided for the same, and since no appeal was interposed by said respondent, it was
allegedly error for the Court of Appeals to award them motu proprio. Petitioner fails to note that attorney's fees are
included in the concept of actual damages under the Civil Code and may be awarded whenever the court deems it is just
and equitable (Art. 2208, Civil Code of the Philippines). We see no reason to alter these awards.

Anent the moral damages ordered to be paid to the respondent, the same must be discarded. We have repeatedly ruled
(Cachero vs. Manila Yellow Taxicab Co. Inc., 101 Phil., 523; 54 Off. Gaz., [26], 6599; Necesito, et al vs. Paras, 104 Phil.,
75; 56 Off. Gaz., [23] 4023, that moral damages are not recoverable in damage actions predicted on a breach of the
contract of transportation, in view of Articles 2219 and 2220 of the new Civil Code, which provide as follows:

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

xxx xxx xxx

Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under
circumstances, such damages are justify due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.

By contrasting the provisions of these two article it immediately becomes apparent that:

(a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or
deliberately injurious conduct, is essential to justify an award of moral damages; and

(b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219;
not only because Art. 2220 specifically provides for the damages that are caused by contractual breach, but because the
definition of quasi-delict in Art. 2176 of the Code expressly excludes the cases where there is a "preexisting contractual
relation between the parties."

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage dome. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.

The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in
which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the deceased
passenger to "demand moral damages for mental anguish by reason of the death of the deceased" (Necesito vs. Paras,
104 Phil., 84, Resolution on motion to reconsider, September 11, 1958). But the exceptional rule of Art. 1764 makes it all
the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved
that the carrier was guilty of malice or bad faith. We think it is clear that the mere carelessness of the carrier's driver does
not per se constitute of justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is
no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral
damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by
Art. 220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.

The Court of Appeals has invoked our rulings in Castro vs. Acro Taxicab Co., G.R. No. 49155, December 14, 1948
and Layda vs. Court of Appeals, 90 Phil., 724; but these doctrines were predicated upon our former law of damages,
before judicial discretion in fixing them became limited by the express provisions of the new Civil Code (previously
quoted). Hence, the aforesaid rulings are now inapplicable.

Upon the other hand, the advantageous position of a party suing a carrier for breach of the contract of transportations
explains, to some extent, the limitations imposed by the new Code on the amount of the recovery. The action for breach of
contract imposes on the defendant carrier a presumption of liability upon mere proof of injury to the passenger; that latter
is relieved from the duty to established the fault of the carrier, or of his employees, and the burden is placed on the carrier
to prove that it was due to an unforseen event or to force majeure (Cangco vs. Manila Railroad Co., 38 Phil., 768, 777).
Moreover, the carrier, unlike in suits for quasi-delict, may not escape liability by proving that it has exercised due diligence
in the selection and supervision of its employees (Art. 1759, new civil code; Cangco vs. Manila Railroad Co., supra; Prado
vs. Manila Electric Co., 51 Phil., 900).

The difference in conditions, defenses and proof, as well as the codal concept of quasi-delict as
essentially extracontractual negligence, compel us to differentiate between action ex contractu, and actions quasi ex
delicto, and prevent us from viewing the action for breach of contract as simultaneously embodying an action on tort.
Neither can this action be taken as one to enforce on employee's liability under Art. 103 of the Revised Penal Code, since
the responsibility is not alleged to be subsidiary, nor is there on record any averment or proof that the driver of appellant
was insolvent. In fact, he is not even made a party to the suit.

It is also suggested that a carrier's violation of its engagement to safety transport the passenger involves a breach of the
passenger's confidence, and therefore should be regarded as a breach of contract in bad faith, justifying recovery of moral
damages under Art. 2220. This theory is untenable, for under it the carrier would always be deemed in bad faith, in every
case its obligation to the passenger is infringed, and it would be never accountable for simple negligence; while under the
law (Art. 1756). the presumption is that common carriers acted negligently (and not maliciously), and Art. 1762 speaks
of negligence of the common carrier.

ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as prescribed in article 1733 and 1755.
ART. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced.

The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as
mere carelessness) is too fundamental in our law to be ignored (Arts. 1170-1172); their consequences being clearly
differentiated by the Code.

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.

It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the
lawmakers when in Art. 2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that
negligence may be occasionally so gross as to amount to malice; but that fact must be shown in evidence, and a carrier's
bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carrier's
employees.

In view of the foregoing considerations, the decision of the Court of Appeals is modified by eliminating the award of
P5,000.00 by way of moral damages. (Court of Appeals Resolution of May 5, 1957). In all other respects, the judgment is
affirmed. No costs in this instance. So ordered.

[G.R. No. 138569. September 11, 2003]

THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs. COURT OF APPEALS and L.C. DIAZ and
COMPANY, CPAs, respondents.

CARPIO, J.:

The Case

Before us is a petition for review of the Decision[1] of the Court of Appeals dated 27 October 1998 and its Resolution dated
11 May 1999.The assailed decision reversed the Decision[2] of the Regional Trial Court of Manila, Branch 8, absolving
petitioner Consolidated Bank and Trust Corporation, now known as Solidbank Corporation (Solidbank), of any
liability. The questioned resolution of the appellate court denied the motion for reconsideration of Solidbank but modified
the decision by deleting the award of exemplary damages, attorneys fees, expenses of litigation and cost of suit.

The Facts

Solidbank is a domestic banking corporation organized and existing under Philippine laws. Private respondent L.C. Diaz
and Company, CPAs (L.C. Diaz), is a professional partnership engaged in the practice of accounting.

Sometime in March 1976, L.C. Diaz opened a savings account with Solidbank, designated as Savings Account No. S/A
200-16872-6.

On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya (Macaraya), filled up a savings (cash) deposit slip
for P990 and a savings (checks) deposit slip for P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre
(Calapre), to deposit the money with Solidbank. Macaraya also gave Calapre the Solidbank passbook.

Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged
receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6 stamped the
deposit slips with the words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE. Since the transaction
took time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with
Solidbank. Calapre then went to Allied Bank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6
informed him that somebody got the passbook.[3] Calapre went back to L.C. Diaz and reported the incident to Macaraya.

Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000. Macaraya, together with
Calapre, went to Solidbank and presented to Teller No. 6 the deposit slip and check. The teller stamped the words
DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE on the duplicate copy of the deposit slip. When
Macaraya asked for the passbook, Teller No. 6 told Macaraya that someone got the passbook but she could not
remember to whom she gave the passbook. When Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6
answered that someone shorter than Calapre got the passbook. Calapre was then standing beside Macaraya.

Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the deposit of a check for P90,000 drawn on
Philippine Banking Corporation (PBC). This PBC check of L.C. Diaz was a check that it had long closed. [4] PBC
subsequently dishonored the check because of insufficient funds and because the signature in the check differed from
PBCs specimen signature. Failing to get back the passbook, Macaraya went back to her office and reported the matter to
the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.

The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz (Diaz), called up Solidbank
to stop any transaction using the same passbook until L.C. Diaz could open a new account. [5] On the same day, Diaz
formally wrote Solidbank to make the same request. It was also on the same day that L.C. Diaz learned of the
unauthorized withdrawal the day before, 14 August 1991, of P300,000 from its savings account. The withdrawal slip for
the P300,000 bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The
signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo received the P300,000.

In an Information[6] dated 5 September 1991, L.C. Diaz charged its messenger, Emerano Ilagan (Ilagan) and one Roscon
Verdazola with Estafa through Falsification of Commercial Document. The Regional Trial Court of Manila dismissed the
criminal case after the City Prosecutor filed a Motion to Dismiss on 4 August 1992.

On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank the return of its money. Solidbank refused.

On 25 August 1992, L.C. Diaz filed a Complaint[7] for Recovery of a Sum of Money against Solidbank with the Regional
Trial Court of Manila, Branch 8. After trial, the trial court rendered on 28 December 1994 a decision absolving Solidbank
and dismissing the complaint.

L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October 1998, the Court of Appeals issued its Decision
reversing the decision of the trial court.

On 11 May 1999, the Court of Appeals issued its Resolution denying the motion for reconsideration of Solidbank. The
appellate court, however, modified its decision by deleting the award of exemplary damages and attorneys fees.

The Ruling of the Trial Court

In absolving Solidbank, the trial court applied the rules on savings account written on the passbook. The rules state that
possession of this book shall raise the presumption of ownership and any payment or payments made by the bank upon
the production of the said book and entry therein of the withdrawal shall have the same effect as if made to the depositor
personally.[9]

At the time of the withdrawal, a certain Noel Tamayo was not only in possession of the passbook, he also presented a
withdrawal slip with the signatures of the authorized signatories of L.C. Diaz. The specimen signatures of these persons
were in the signature cards. The teller stamped the withdrawal slip with the words Saving Teller No. 5. The teller then
passed on the withdrawal slip to Genere Manuel (Manuel) for authentication. Manuel verified the signatures on the
withdrawal slip. The withdrawal slip was then given to another officer who compared the signatures on the withdrawal slip
with the specimen on the signature cards. The trial court concluded that Solidbank acted with care and observed the rules
on savings account when it allowed the withdrawal of P300,000 from the savings account of L.C. Diaz.

The trial court pointed out that the burden of proof now shifted to L.C. Diaz to prove that the signatures on the withdrawal
slip were forged. The trial court admonished L.C. Diaz for not offering in evidence the National Bureau of Investigation
(NBI) report on the authenticity of the signatures on the withdrawal slip for P300,000. The trial court believed that L.C.
Diaz did not offer this evidence because it is derogatory to its action.

Another provision of the rules on savings account states that the depositor must keep the passbook under lock and
key.[10] When another person presents the passbook for withdrawal prior to Solidbanks receipt of the notice of loss of the
passbook, that person is considered as the owner of the passbook. The trial court ruled that the passbook presented
during the questioned transaction was now out of the lock and key and presumptively ready for a business transaction. [11]

Solidbank did not have any participation in the custody and care of the passbook. The trial court believed that Solidbanks
act of allowing the withdrawal of P300,000 was not the direct and proximate cause of the loss. The trial court held that
L.C. Diazs negligence caused the unauthorized withdrawal. Three facts establish L.C. Diazs negligence: (1) the
possession of the passbook by a person other than the depositor L.C. Diaz; (2) the presentation of a signed withdrawal
receipt by an unauthorized person; and (3) the possession by an unauthorized person of a PBC check long closed by L.C.
Diaz, which check was deposited on the day of the fraudulent withdrawal.

The trial court debunked L.C. Diazs contention that Solidbank did not follow the precautionary procedures observed by the
two parties whenever L.C. Diaz withdrew significant amounts from its account. L.C. Diaz claimed that a letter must
accompany withdrawals of more than P20,000. The letter must request Solidbank to allow the withdrawal and convert the
amount to a managers check. The bearer must also have a letter authorizing him to withdraw the same amount. Another
person driving a car must accompany the bearer so that he would not walk from Solidbank to the office in making the
withdrawal. The trial court pointed out that L.C. Diaz disregarded these precautions in its past withdrawal. On 16 July
1991, L.C. Diaz withdrew P82,554 without any separate letter of authorization or any communication with Solidbank that
the money be converted into a managers check.

The trial court further justified the dismissal of the complaint by holding that the case was a last ditch effort of L.C. Diaz to
recover P300,000 after the dismissal of the criminal case against Ilagan.

The dispositive portion of the decision of the trial court reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the complaint.

The Court further renders judgment in favor of defendant bank pursuant to its counterclaim the amount of Thirty Thousand
Pesos (P30,000.00) as attorneys fees.

With costs against plaintiff.

SO ORDERED.[12]

The Ruling of the Court of Appeals

The Court of Appeals ruled that Solidbanks negligence was the proximate cause of the unauthorized withdrawal
of P300,000 from the savings account of L.C. Diaz. The appellate court reached this conclusion after applying the
provision of the Civil Code on quasi-delict, to wit:

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this chapter.

The appellate court held that the three elements of a quasi-delict are present in this case, namely: (a) damages suffered
by the plaintiff; (b) fault or negligence of the defendant, or some other person for whose acts he must respond; and (c) the
connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff.

The Court of Appeals pointed out that the teller of Solidbank who received the withdrawal slip for P300,000 allowed the
withdrawal without making the necessary inquiry. The appellate court stated that the teller, who was not presented by
Solidbank during trial, should have called up the depositor because the money to be withdrawn was a significant
amount. Had the teller called up L.C. Diaz, Solidbank would have known that the withdrawal was unauthorized. The teller
did not even verify the identity of the impostor who made the withdrawal.Thus, the appellate court found Solidbank liable
for its negligence in the selection and supervision of its employees.

The appellate court ruled that while L.C. Diaz was also negligent in entrusting its deposits to its messenger and its
messenger in leaving the passbook with the teller, Solidbank could not escape liability because of the doctrine of last clear
chance. Solidbank could have averted the injury suffered by L.C. Diaz had it called up L.C. Diaz to verify the withdrawal.

The appellate court ruled that the degree of diligence required from Solidbank is more than that of a good father of a
family. The business and functions of banks are affected with public interest. Banks are obligated to treat the accounts of
their depositors with meticulous care, always having in mind the fiduciary nature of their relationship with their clients. The
Court of Appeals found Solidbank remiss in its duty, violating its fiduciary relationship with L.C. Diaz.

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and a new one entered.

1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to pay plaintiff-appellant the sum of Three
Hundred Thousand Pesos (P300,000.00), with interest thereon at the rate of 12% per annum from the date of filing of the
complaint until paid, the sum of P20,000.00 as exemplary damages, and P20,000.00 as attorneys fees and expenses of
litigation as well as the cost of suit; and

2. Ordering the dismissal of defendant-appellees counterclaim in the amount of P30,000.00 as attorneys fees.

SO ORDERED.[13]

Acting on the motion for reconsideration of Solidbank, the appellate court affirmed its decision but modified the award of
damages. The appellate court deleted the award of exemplary damages and attorneys fees. Invoking Article 2231 [14] of
the Civil Code, the appellate court ruled that exemplary damages could be granted if the defendant acted with gross
negligence. Since Solidbank was guilty of simple negligence only, the award of exemplary damages was not justified.
Consequently, the award of attorneys fees was also disallowed pursuant to Article 2208 of the Civil Code. The expenses
of litigation and cost of suit were also not imposed on Solidbank.

The dispositive portion of the Resolution reads as follows:

WHEREFORE, foregoing considered, our decision dated October 27, 1998 is affirmed with modification by deleting the
award of exemplary damages and attorneys fees, expenses of litigation and cost of suit.

SO ORDERED.[15]

Hence, this petition.

The Issues

Solidbank seeks the review of the decision and resolution of the Court of Appeals on these grounds:

I. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER BANK SHOULD SUFFER THE LOSS
BECAUSE ITS TELLER SHOULD HAVE FIRST CALLED PRIVATE RESPONDENT BY TELEPHONE BEFORE IT
ALLOWED THE WITHDRAWAL OF P300,000.00 TO RESPONDENTS MESSENGER EMERANO ILAGAN, SINCE
THERE IS NO AGREEMENT BETWEEN THE PARTIES IN THE OPERATION OF THE SAVINGS ACCOUNT, NOR IS
THERE ANY BANKING LAW, WHICH MANDATES THAT A BANK TELLER SHOULD FIRST CALL UP THE
DEPOSITOR BEFORE ALLOWING A WITHDRAWAL OF A BIG AMOUNT IN A SAVINGS ACCOUNT.

II. THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF LAST CLEAR CHANCE AND IN HOLDING
THAT PETITIONER BANKS TELLER HAD THE LAST OPPORTUNITY TO WITHHOLD THE WITHDRAWAL WHEN IT IS
UNDISPUTED THAT THE TWO SIGNATURES OF RESPONDENT ON THE WITHDRAWAL SLIP ARE GENUINE AND
PRIVATE RESPONDENTS PASSBOOK WAS DULY PRESENTED, AND CONTRARIWISE RESPONDENT WAS
NEGLIGENT IN THE SELECTION AND SUPERVISION OF ITS MESSENGER EMERANO ILAGAN, AND IN THE
SAFEKEEPING OF ITS CHECKS AND OTHER FINANCIAL DOCUMENTS.
III. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE INSTANT CASE IS A LAST DITCH EFFORT OF
PRIVATE RESPONDENT TO RECOVER ITS P300,000.00 AFTER FAILING IN ITS EFFORTS TO RECOVER THE
SAME FROM ITS EMPLOYEE EMERANO ILAGAN.

IV. THE COURT OF APPEALS ERRED IN NOT MITIGATING THE DAMAGES AWARDED AGAINST PETITIONER
UNDER ARTICLE 2197 OF THE CIVIL CODE, NOTWITHSTANDING ITS FINDING THAT PETITIONER BANKS
NEGLIGENCE WAS ONLY CONTRIBUTORY.[16]

The Ruling of the Court

The petition is partly meritorious.

Solidbanks Fiduciary Duty under the Law

The rulings of the trial court and the Court of Appeals conflict on the application of the law. The trial court pinned the
liability on L.C. Diaz based on the provisions of the rules on savings account, a recognition of the contractual relationship
between Solidbank and L.C. Diaz, the latter being a depositor of the former. On the other hand, the Court of Appeals
applied the law on quasi-delict to determine who between the two parties was ultimately negligent. The law on quasi-delict
or culpa aquiliana is generally applicable when there is no pre-existing contractual relationship between the parties.

We hold that Solidbank is liable for breach of contract due to negligence, or culpa contractual.

The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan.[17] Article
1980 of the Civil Code expressly provides that x x x savings x x x deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan. There is a debtor-creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank
agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the
contract that determines the rights and obligations of the parties.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791
(RA 8791),[18]which took effect on 13 June 2000, declares that the State recognizes the fiduciary nature of banking that
requires high standards of integrity and performance.[19] This new provision in the general banking law, introduced in
2000, is a statutory affirmation of Supreme Court decisions, starting with the 1990 case of Simex International v. Court
of Appeals,[20] holding that the bank is under obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship. [21]

This fiduciary relationship means that the banks obligation to observe high standards of integrity and performance is
deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires
banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states
that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then
the diligence of a good father of a family.[22] Section 2 of RA 8791 prescribes the statutory diligence required from banks
that banks must observe high standards of integrity and performance in servicing their depositors. Although RA 8791 took
effect almost nine years after the unauthorized withdrawal of the P300,000 from L.C. Diazs savings account,
jurisprudence[23] at the time of the withdrawal already imposed on banks the same high standard of diligence required
under RA No. 8791.

However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its
depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is
failure to pay a simple loan, and not a breach of trust.[24] The law simply imposes on the bank a higher standard of
integrity and performance in complying with its obligations under the contract of simple loan, beyond those required of
non-bank debtors under a similar contract of simple loan.

The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do not accept
deposits to enrich depositors but to earn money for themselves. The law allows banks to offer the lowest possible interest
rate to depositors while charging the highest possible interest rate on their own borrowers. The interest spread or
differential belongs to the bank and not to the depositors who are not cestui que trust of banks. If depositors are cestui
que trust of banks, then the interest spread or income belongs to the depositors, a situation that Congress certainly did
not intend in enacting Section 2 of RA 8791.

Solidbanks Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that responsibility arising from negligence in the performance of every kind of
obligation is demandable. For breach of the savings deposit agreement due to negligence, or culpa contractual, the bank
is liable to its depositor.

Calapre left the passbook with Solidbank because the transaction took time and he had to go to Allied Bank for another
transaction. The passbook was still in the hands of the employees of Solidbank for the processing of the deposit when
Calapre left Solidbank. Solidbanks rules on savings account require that the deposit book should be carefully guarded by
the depositor and kept under lock and key, if possible. When the passbook is in the possession of Solidbanks tellers
during withdrawals, the law imposes on Solidbank and its tellers an even higher degree of diligence in safeguarding the
passbook.

Likewise, Solidbanks tellers must exercise a high degree of diligence in insuring that they return the passbook only to the
depositor or his authorized representative. The tellers know, or should know, that the rules on savings account provide
that any person in possession of the passbook is presumptively its owner. If the tellers give the passbook to the wrong
person, they would be clothing that person presumptive ownership of the passbook, facilitating unauthorized withdrawals
by that person. For failing to return the passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and
Teller No. 6 presumptively failed to observe such high degree of diligence in safeguarding the passbook, and in insuring
its return to the party authorized to receive the same.

In culpa contractual, once the plaintiff proves a breach of contract, there is a presumption that the defendant was at fault
or negligent.The burden is on the defendant to prove that he was not at fault or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of proving that the defendant was negligent. In the present case, L.C. Diaz has
established that Solidbank breached its contractual obligation to return the passbook only to the authorized representative
of L.C. Diaz. There is thus a presumption that Solidbank was at fault and its teller was negligent in not returning the
passbook to Calapre. The burden was on Solidbank to prove that there was no negligence on its part or its employees.

Solidbank failed to discharge its burden. Solidbank did not present to the trial court Teller No. 6, the teller with whom
Calapre left the passbook and who was supposed to return the passbook to him. The record does not indicate that Teller
No. 6 verified the identity of the person who retrieved the passbook. Solidbank also failed to adduce in evidence its
standard procedure in verifying the identity of the person retrieving the passbook, if there is such a procedure, and that
Teller No. 6 implemented this procedure in the present case.

Solidbank is bound by the negligence of its employees under the principle of respondeat superior or command
responsibility. The defense of exercising the required diligence in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa aquiliana.[25]

The bank must not only exercise high standards of integrity and performance, it must also insure that its employees do
likewise because this is the only way to insure that the bank will comply with its fiduciary duty. Solidbank failed to present
the teller who had the duty to return to Calapre the passbook, and thus failed to prove that this teller exercised the high
standards of integrity and performance required of Solidbanks employees.

Proximate Cause of the Unauthorized Withdrawal

Another point of disagreement between the trial and appellate courts is the proximate cause of the unauthorized
withdrawal. The trial court believed that L.C. Diazs negligence in not securing its passbook under lock and key was the
proximate cause that allowed the impostor to withdraw the P300,000. For the appellate court, the proximate cause was
the tellers negligence in processing the withdrawal without first verifying with L.C. Diaz. We do not agree with either court.

Proximate cause 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.[26] Proximate cause is determined by the facts
of each case upon mixed considerations of logic, common sense, policy and precedent.[27]

L.C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank was in possession of the
passbook while it was processing the deposit. After completion of the transaction, Solidbank had the contractual obligation
to return the passbook only to Calapre, the authorized representative of L.C. Diaz. Solidbank failed to fulfill its contractual
obligation because it gave the passbook to another person.

Solidbanks failure to return the passbook to Calapre made possible the withdrawal of the P300,000 by the impostor who
took possession of the passbook. Under Solidbanks rules on savings account, mere possession of the passbook raises
the presumption of ownership. It was the negligent act of Solidbanks Teller No. 6 that gave the impostor presumptive
ownership of the passbook. Had the passbook not fallen into the hands of the impostor, the loss of P300,000 would not
have happened. Thus, the proximate cause of the unauthorized withdrawal was Solidbanks negligence in not returning
the passbook to Calapre.

We do not subscribe to the appellate courts theory that the proximate cause of the unauthorized withdrawal was the
tellers failure to call up L.C. Diaz to verify the withdrawal. Solidbank did not have the duty to call up L.C. Diaz to confirm
the withdrawal. There is no arrangement between Solidbank and L.C. Diaz to this effect. Even the agreement between
Solidbank and L.C. Diaz pertaining to measures that the parties must observe whenever withdrawals of large amounts are
made does not direct Solidbank to call up L.C. Diaz.

There is no law mandating banks to call up their clients whenever their representatives withdraw significant amounts from
their accounts. L.C. Diaz therefore had the burden to prove that it is the usual practice of Solidbank to call up its clients to
verify a withdrawal of a large amount of money. L.C. Diaz failed to do so.

Teller No. 5 who processed the withdrawal could not have been put on guard to verify the withdrawal. Prior to the
withdrawal of P300,000, the impostor deposited with Teller No. 6 the P90,000 PBC check, which later bounced. The
impostor apparently deposited a large amount of money to deflect suspicion from the withdrawal of a much bigger amount
of money. The appellate court thus erred when it imposed on Solidbank the duty to call up L.C. Diaz to confirm the
withdrawal when no law requires this from banks and when the teller had no reason to be suspicious of the transaction.

Solidbank continues to foist the defense that Ilagan made the withdrawal. Solidbank claims that since Ilagan was also a
messenger of L.C. Diaz, he was familiar with its teller so that there was no more need for the teller to verify the
withdrawal. Solidbank relies on the following statements in the Booking and Information Sheet of Emerano Ilagan:

xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and indicated the amount of P90,000 which
he deposited in favor of L.C. Diaz and Company. After successfully withdrawing this large sum of money, accused Ilagan
gave alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the amount of P1,000 to transport him
(Ilagan) to his home province at Bauan, Batangas. Ilagan extravagantly and lavishly spent his money but a big part of his
loot was wasted in cockfight and horse racing. Ilagan was apprehended and meekly admitted his guilt.[28] (Emphasis
supplied.)

L.C. Diaz refutes Solidbanks contention by pointing out that the person who withdrew the P300,000 was a certain Noel
Tamayo. Both the trial and appellate courts stated that this Noel Tamayo presented the passbook with the withdrawal slip.

We uphold the finding of the trial and appellate courts that a certain Noel Tamayo withdrew the P300,000. The Court is
not a trier of facts. We find no justifiable reason to reverse the factual finding of the trial court and the Court of
Appeals. The tellers who processed the deposit of the P90,000 check and the withdrawal of the P300,000 were not
presented during trial to substantiate Solidbanks claim that Ilagan deposited the check and made the questioned
withdrawal. Moreover, the entry quoted by Solidbank does not categorically state that Ilagan presented the withdrawal slip
and the passbook.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably
later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who
had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss. [29] Stated differently, the
antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the supervening
negligence of the defendant, who had the last fair chance to prevent the impending harm by the exercise of due
diligence.[30]

We do not apply the doctrine of last clear chance to the present case. Solidbank is liable for breach of contract due to
negligence in the performance of its contractual obligation to L.C. Diaz. This is a case of culpa contractual, where neither
the contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from
liability.[31] Such contributory negligence or last clear chance by the plaintiff merely serves to reduce the recovery of
damages by the plaintiff but does not exculpate the defendant from his breach of contract. [32]

Mitigated Damages

Under Article 1172, liability (for culpa contractual) may be regulated by the courts, according to the circumstances. This
means that if the defendant exercised the proper diligence in the selection and supervision of its employee, or if the
plaintiff was guilty of contributory negligence, then the courts may reduce the award of damages. In this case, L.C. Diaz
was guilty of contributory negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands
of an impostor. Thus, the liability of Solidbank should be reduced.

In Philippine Bank of Commerce v. Court of Appeals,[33] where the Court held the depositor guilty of contributory
negligence, we allocated the damages between the depositor and the bank on a 40-60 ratio. Applying the same ruling to
this case, we hold that L.C. Diaz must shoulder 40% of the actual damages awarded by the appellate court. Solidbank
must pay the other 60% of the actual damages.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation
shall pay private respondent L.C. Diaz and Company, CPAs only 60% of the actual damages awarded by the Court of
Appeals. The remaining 40% of the actual damages shall be borne by private respondent L.C. Diaz and Company,
CPAs. Proportionate costs.

G.R. No. L-21438 September 28, 1966

AIR FRANCE, petitioner,

vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.

SANCHEZ, J.:

The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso P25,000.00 by way of
moral damages; P10,000.00 as exemplary damages; P393.20 representing the difference in fare between first class and
tourist class for the portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate, from the date
of the filing of the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.

On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393.20 to
P383.10, and voted to affirm the appealed decision "in all other respects", with costs against petitioner.

The case is now before us for review on certiorari.

The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:

Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc., issued to plaintiff a
"first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok, plaintiff travelled in "first class", but at
Bangkok, the Manager of the defendant airline forced plaintiff to vacate the "first class" seat that he was occupying
because, in the words of the witness Ernesto G. Cuento, there was a "white man", who, the Manager alleged, had a
"better right" to the seat. When asked to vacate his "first class" seat, the plaintiff, as was to be expected, refused, and told
defendant's Manager that his seat would be taken over his dead body; a commotion ensued, and, according to said
Ernesto G. Cuento, "many of the Filipino passengers got nervous in the tourist class; when they found out that Mr.
Carrascoso was having a hot discussion with the white man [manager], they came all across to Mr. Carrascoso and
pacified Mr. Carrascoso to give his seat to the white man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff
reluctantly gave his "first class" seat in the plane.3

1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court of Appeals.
Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid before it.
We are asked to consider facts favorable to petitioner, and then, to overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without
expressing therein clearly and distinctly the facts and the law on which it is based". 5 This is echoed in the statutory
demand that a judgment determining the merits of the case shall state "clearly and distinctly the facts and the law on
which it is based"; 6 and that "Every decision of the Court of Appeals shall contain complete findings of fact on all issues
properly raised before it". 7

A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law, however, solely insists that
a decision state the "essential ultimate facts" upon which the court's conclusion is drawn. 9 A court of justice is not
hidebound to write in its decision every bit and piece of evidence 10 presented by one party and the other upon the issues
raised. Neither is it to be burdened with the obligation "to specify in the sentence the facts" which a party "considered as
proved". 11 This is but a part of the mental process from which the Court draws the essential ultimate facts. A decision is
not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of
Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom "any
specific finding of facts with respect to the evidence for the defense". Because as this Court well observed, "There is no
law that so requires". 12 Indeed, "the mere failure to specify (in the decision) the contentions of the appellant and the
reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the provisions of law
and the Constitution". It is in this setting that in Manigque, it was held that the mere fact that the findings "were based
entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in the
controversy as shown by his own testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the
testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that the court
has overlooked such testimony or such item of evidence. 14 At any rate, the legal presumptions are that official duty has
been regularly performed, and that all the matters within an issue in a case were laid before the court and passed upon by
it. 15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement of the ultimate
facts as found by the court ... and essential to support the decision and judgment rendered thereon". 16They consist of the
court's "conclusions" with respect to the determinative facts in issue". 17 A question of law, upon the other hand, has been
declared as "one which does not call for an examination of the probative value of the evidence presented by the
parties." 18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of
Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately the business of this Court to alter the facts or
to review the questions of fact. 20

With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals support its
judgment.

3. Was Carrascoso entitled to the first class seat he claims?

It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class ticket. But
petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties; that said
respondent knew that he did not have confirmed reservations for first class on any specific flight, although he had tourist
class protection; that, accordingly, the issuance of a first class ticket was no guarantee that he would have a first class
ride, but that such would depend upon the availability of first class seats.

These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals under
its third assignment of error, which reads: "The trial court erred in finding that plaintiff had confirmed reservations for, and
a right to, first class seats on the "definite" segments of his journey, particularly that from Saigon to Beirut". 21

And, the Court of Appeals disposed of this contention thus:

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the
passenger to whom the same had been issued, would be accommodated in the first-class compartment, for as in the case
of plaintiff he had yet to make arrangements upon arrival at every station for the necessary first-class reservation. We are
not impressed by such a reasoning. We cannot understand how a reputable firm like defendant airplane company could
have the indiscretion to give out tickets it never meant to honor at all. It received the corresponding amount in payment of
first-class tickets and yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with the
ordinary course of business that the company should know whether or riot the tickets it issues are to be honored or not. 22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:

On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question. Apart from his testimony,
see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own witness, Rafael Altonaga,
confirmed plaintiff's testimony and testified as follows:
Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?

A. That the space is confirmed.

Q. Confirmed for first class?

A. Yes, "first class". (Transcript, p. 169)

xxx xxx xxx

Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although plaintiff paid
for, and was issued a "first class" airplane ticket, the ticket was subject to confirmation in Hongkong. The court cannot
give credit to the testimony of said witnesses. Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits
"A", "A-l", "B", "B-l", "C" and "C-1" belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and
paid for, a first class ticket without any reservation whatever.

Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation for a "first
class" accommodation for the plaintiff was confirmed. The court cannot believe that after such confirmation defendant had
a verbal understanding with plaintiff that the "first class" ticket issued to him by defendant would be subject to confirmation
in Hongkong. 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on
Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects.
We hold the view that such a judgment of affirmance has merged the judgment of the lower court. 24Implicit in that
affirmance is a determination by the Court of Appeals that the proceeding in the Court of First Instance was free from
prejudicial error and "all questions raised by the assignments of error and all questions that might have been raised are to
be regarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be regarded as free from
all error". 25 We reached this policy construction because nothing in the decision of the Court of Appeals on this point
would suggest that its findings of fact are in any way at war with those of the trial court. Nor was said affirmance by the
Court of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial
court. 26

If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that seat
availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of an airline.
What security then can a passenger have? It will always be an easy matter for an airline aided by its employees, to strike
out the very stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the passenger
had a schedule to fulfill? We have long learned that, as a rule, a written document speaks a uniform language; that
spoken word could be notoriously unreliable. If only to achieve stability in the relations between passenger and air carrier,
adherence to the ticket so issued is desirable. Such is the case here. The lower courts refused to believe the oral
evidence intended to defeat the covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of Appeals
predicated the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat at Bangkok,
which is a stopover in the Saigon to Beirut leg of the flight. 27 We perceive no "welter of distortions by the Court of Appeals
of petitioner's statement of its position", as charged by petitioner. 28 Nor do we subscribe to petitioner's accusation that
respondent Carrascoso "surreptitiously took a first class seat to provoke an issue". 29And this because, as petitioner
states, Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat and because from Saigon I was
told again to see the Manager". 30 Why, then, was he allowed to take a first class seat in the plane at Bangkok, if he had
no seat? Or, if another had a better right to the seat?

4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that Carrascoso's action is
planted upon breach of contract; that to authorize an award for moral damages there must be an averment of fraud or bad
faith;31 and that the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal allegations in the
complaint bearing on this issue are:

3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable consideration, the latter
acting as general agents for and in behalf of the defendant, under which said contract, plaintiff was entitled to, as
defendant agreed to furnish plaintiff, First Class passage on defendant's plane during the entire duration of plaintiff's tour
of Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, ... .

4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok, defendant furnished to
the plaintiff First Class accommodation but only after protestations, arguments and/or insistence were made by the
plaintiff with defendant's employees.

5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff only Tourist Class
accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has been compelled by defendant's
employees to leave the First Class accommodation berths at Bangkok after he was already seated.

6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought by
defendant's breach of contract was forced to take a Pan American World Airways plane on his return trip from Madrid to
Manila.32

xxx xxx xxx

2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff suffered
inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious anxiety, wounded
feelings, social humiliation, and the like injury, resulting in moral damages in the amount of P30,000.00. 33

xxx xxx xxx

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first class passage
covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was breached when petitioner failed to
furnish first class transportation at Bangkok; and Third, that there was bad faith when petitioner's employee compelled
Carrascoso to leave his first class accommodation berth "after he was already, seated" and to take a seat in the tourist
class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him mental
anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no
specific mention of the term bad faith in the complaint. But, the inference of bad faith is there, it may be drawn from the
facts and circumstances set forth therein. 34 The contract was averred to establish the relation between the parties. But
the stress of the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed petitioner on guard on
what Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso was ousted by petitioner's
manager who gave his seat to a white man; 35 and (b) evidence of bad faith in the fulfillment of the contract was presented
without objection on the part of the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is sufficient
averment in the complaint to justify an award for moral damages. Deficiency in the complaint, if any, was cured by the
evidence. An amendment thereof to conform to the evidence is not even required. 36 On the question of bad faith, the
Court of Appeals declared:

That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant Air
France while at Bangkok, and was transferred to the tourist class not only without his consent but against his will, has
been sufficiently established by plaintiff in his testimony before the court, corroborated by the corresponding entry made
by the purser of the plane in his notebook which notation reads as follows:

"First-class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene",

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the plane who was
asked by the manager of defendant company at Bangkok to intervene even refused to do so. It is noteworthy that no one
on behalf of defendant ever contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to
present its manager at Bangkok to testify at the trial of the case, or yet to secure his disposition; but defendant did
neither. 37

The Court of appeals further stated —

Neither is there evidence as to whether or not a prior reservation was made by the white man. Hence, if the employees of
the defendant at Bangkok sold a first-class ticket to him when all the seats had already been taken, surely the plaintiff
should not have been picked out as the one to suffer the consequences and to be subjected to the humiliation and
indignity of being ejected from his seat in the presence of others. Instead of explaining to the white man the improvidence
committed by defendant's employees, the manager adopted the more drastic step of ousting the plaintiff who was then
safely ensconsced in his rightful seat. We are strengthened in our belief that this probably was what happened there, by
the testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning of the letters "O.K."
appearing on the tickets of plaintiff, said "that the space is confirmed for first class. Likewise, Zenaida Faustino, another
witness for defendant, who was the chief of the Reservation Office of defendant, testified as follows:

"Q How does the person in the ticket-issuing office know what reservation the passenger has arranged with you?

A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)

In this connection, we quote with approval what the trial Judge has said on this point:

Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to the seat occupied by Mr.
Carrascoso? The record is silent. The defendant airline did not prove "any better", nay, any right on the part of the "white
man" to the "First class" seat that the plaintiff was occupying and for which he paid and was issued a corresponding "first
class" ticket.

If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant could have easily
proven it by having taken the testimony of the said Manager by deposition, but defendant did not do so; the presumption
is that evidence willfully suppressed would be adverse if produced [Sec. 69, par (e), Rules of Court]; and, under the
circumstances, the Court is constrained to find, as it does find, that the Manager of the defendant airline in Bangkok not
merely asked but threatened the plaintiff to throw him out of the plane if he did not give up his "first class" seat because
the said Manager wanted to accommodate, using the words of the witness Ernesto G. Cuento, the "white man". 38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad faith".
But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from
enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him
suffer the humiliation of having to go to the tourist class compartment - just to give way to another passenger whose right
thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different
from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design or
with some motive of self-interest or will or for ulterior purpose." 39
And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of the Court of First
Instance, thus:

The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith, with the aggravating
circumstances that defendant's Manager in Bangkok went to the extent of threatening the plaintiff in the presence of many
passengers to have him thrown out of the airplane to give the "first class" seat that he was occupying to, again using the
words of the witness Ernesto G. Cuento, a "white man" whom he (defendant's Manager) wished to accommodate, and the
defendant has not proven that this "white man" had any "better right" to occupy the "first class" seat that the plaintiff was
occupying, duly paid for, and for which the corresponding "first class" ticket was issued by the defendant to him. 40

5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in
law. 41 For the willful malevolent act of petitioner's manager, petitioner, his employer, must answer. Article 21 of the Civil
Code says:

ART. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage.

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of Article 2219
(10), Civil Code, moral damages are recoverable. 42

6. A contract to transport passengers is quite different in kind and degree from any other contractual relation. 43 And this,
because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It
invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation
attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action
for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the part
of employees towards a passenger gives the latter an action for damages against the carrier. 44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a tort, giving a
right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand
payment under threat of ejection, though the language used was not insulting and she was not ejected." 46 And this,
because, although the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that
breaks the contract may be also a tort". 47 And in another case, "Where a passenger on a railroad train, when the
conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop, and
told him that as soon as the train reached such point he would pay the cash fare from that point to destination, there was
nothing in the conduct of the passenger which justified the conductor in using insulting language to him, as by calling him
a lunatic," 48 and the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said
passenger.1awphîl.nèt

Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as we have said,
is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner air carrier — a case of quasi-
delict. Damages are proper.

7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —

Q You mentioned about an attendant. Who is that attendant and purser?

A When we left already — that was already in the trip — I could not help it. So one of the flight attendants approached me
and requested from me my ticket and I said, What for? and she said, "We will note that you transferred to the tourist
class". I said, "Nothing of that kind. That is tantamount to accepting my transfer." And I also said, "You are not going to
note anything there because I am protesting to this transfer".

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I stood up and I
went to the pantry that was next to me and the purser was there. He told me, "I have recorded the incident in my
notebook." He read it and translated it to me — because it was recorded in French — "First class passenger was forced to
go to the tourist class against his will, and that the captain refused to intervene."

Mr. VALTE —

I move to strike out the last part of the testimony of the witness because the best evidence would be the notes. Your
Honor.

COURT —

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading "First
class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene" is
predicated upon evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject of
inquiry is not the entry, but the ouster incident. Testimony on the entry does not come within the proscription of the best
evidence rule. Such testimony is admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the startling occurrence
was still fresh and continued to be felt. The excitement had not as yet died down. Statements then, in this environment,
are admissible as part of the res gestae. 50 For, they grow "out of the nervous excitement and mental and physical
condition of the declarant". 51 The utterance of the purser regarding his entry in the notebook was spontaneous, and
related to the circumstances of the ouster incident. Its trustworthiness has been guaranteed. 52 It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.

At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an easy
matter for petitioner to have contradicted Carrascoso's testimony. If it were really true that no such entry was made, the
deposition of the purser could have cleared up the matter.

We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.

8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant exemplary damages — in
contracts and quasi- contracts. The only condition is that defendant should have "acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner." 53 The manner of ejectment of respondent Carrascoso from his first class seat fits into
this legal precept. And this, in addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar judgment for
attorneys' fees. The least that can be said is that the courts below felt that it is but just and equitable that attorneys' fees
be given. 55 We do not intend to break faith with the tradition that discretion well exercised — as it was here — should not
be disturbed.

10. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus: P25,000.00
as moral damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorneys' fees. The task of fixing these
amounts is primarily with the trial court. 56 The Court of Appeals did not interfere with the same. The dictates of good
sense suggest that we give our imprimatur thereto. Because, the facts and circumstances point to the reasonableness
thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly vote
to affirm the same. Costs against petitioner. So ordered.

G.R. No. 108164 February 23, 1995

FAR EAST BANK AND TRUST COMPANY, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, LUIS A. LUNA and CLARITA S. LUNA, respondents.

VITUG, J.:

Some time in October 1986, private respondent Luis A. Luna applied for, and was accorded, a FAREASTCARD issued by
petitioner Far East Bank and Trust Company ("FEBTC") at its Pasig Branch. Upon his request, the bank also issued a
supplemental card to private respondent Clarita S. Luna.

In August 1988, Clarita lost her credit card. FEBTC was forthwith informed. In order to replace the lost card, Clarita
submitted an affidavit of loss. In cases of this nature, the bank's internal security procedures and policy would appear to
be to meanwhile so record the lost card, along with the principal card, as a "Hot Card" or "Cancelled Card" in its master
file.

On 06 October 1988, Luis tendered a despedida lunch for a close friend, a Filipino-American, and another guest at the
Bahia Rooftop Restaurant of the Hotel Intercontinental Manila. To pay for the lunch, Luis presented his FAREASTCARD
to the attending waiter who promptly had it verified through a telephone call to the bank's Credit Card Department. Since
the card was not honored, Luis was forced to pay in cash the bill amounting to P588.13. Naturally, Luis felt embarrassed
by this incident.

In a letter, dated 11 October 1988, private respondent Luis Luna, through counsel, demanded from FEBTC the payment
of damages. Adrian V. Festejo, a vice-president of the bank, expressed the bank's apologies to Luis. In his letter, dated 03
November 1988, Festejo, in part, said:

In cases when a card is reported to our office as lost, FAREASTCARD undertakes the necessary action to avert its
unauthorized use (such as tagging the card as hotlisted), as it is always our intention to protect our cardholders.

An investigation of your case however, revealed that FAREASTCARD failed to inform you about its security policy.
Furthermore, an overzealous employee of the Bank's Credit Card Department did not consider the possibility that it may
have been you who was presenting the card at that time (for which reason, the unfortunate incident occurred). 1

Festejo also sent a letter to the Manager of the Bahia Rooftop Restaurant to assure the latter that private respondents
were "very valued clients" of FEBTC. William Anthony King, Food and Beverage Manager of the Intercontinental Hotel,
wrote back to say that the credibility of private respondent had never been "in question." A copy of this reply was sent to
Luis by Festejo.

Still evidently feeling aggrieved, private respondents, on 05 December 1988, filed a complaint for damages with the
Regional Trial Court ("RTC") of Pasig against FEBTC.

On 30 March 1990, the RTC of Pasig, given the foregoing factual settings, rendered a decision ordering FEBTC to pay
private respondents (a) P300,000.00 moral damages; (b) P50,000.00 exemplary damages; and (c) P20,000.00 attorney's
fees.

On appeal to the Court of Appeals, the appellate court affirmed the decision of the trial court.

Its motion for reconsideration having been denied by the appellate court, FEBTC has come to this Court with this petition
for review.

There is merit in this appeal.

In culpa contractual, moral damages may be recovered where the defendant is shown to have acted in bad faith or with
malice in the breach of the contract. 2 The Civil Code provides:

Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith. (Emphasis supplied)

Bad faith, in this context, includes gross, but not simple, negligence.3 Exceptionally, in a contract of carriage, moral
damages are also allowed in case of death of a passenger attributable to the fault (which is presumed 4 ) of the common
carrier.5

Concededly, the bank was remiss in indeed neglecting to personally inform Luis of his own card's cancellation. Nothing in
the findings of the trial court and the appellate court, however, can sufficiently indicate any deliberate intent on the part of
FEBTC to cause harm to private respondents. Neither could FEBTC's negligence in failing to give personal notice to Luis
be considered so gross as to amount to malice or bad faith.

Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral
obliquity; it is different from the negative idea of negligence in that malice or bad faith contemplates a state of mind
affirmatively operating with furtive design or ill will.6

We are not unaware of the previous rulings of this Court, such as in American Express International, Inc., vs. Intermediate
Appellate Court (167 SCRA 209) and Bank of Philippine Islands vs. Intermediate Appellate Court (206 SCRA 408),
sanctioning the application of Article 21, in relation to Article 2217 and Article 22197 of the Civil Code to a contractual
breach similar to the case at bench. Article 21 states:

Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage.

Article 21 of the Code, it should be observed, contemplates a conscious act to cause harm. Thus, even if we are to
assume that the provision could properly relate to a breach of contract, its application can be warranted only when the
defendant's disregard of his contractual obligation is so deliberate as to approximate a degree of misconduct certainly no
less worse than fraud or bad faith. Most importantly, Article 21 is a mere declaration of a general principle in human
relations that clearly must, in any case, give way to the specific provision of Article 2220 of the Civil Code authorizing the
grant of moral damages in culpa contractual solely when the breach is due to fraud or bad faith.

Mr. Justice Jose B.L. Reyes, in his ponencia in Fores vs. Miranda8 explained with great clarity the predominance that we
should give to Article 2220 in contractual relations; we quote:

Anent the moral damages ordered to be paid to the respondent, the same must be discarded. We have repeatedly ruled
(Cachero vs. Manila Yellow Taxicab Co. Inc., 101 Phil. 523; 54 Off. Gaz., [26], 6599; Necesito, et al. vs. Paras, 104 Phil.,
75; 56 Off. Gaz., [23] 4023), that moral damages are not recoverable in damage actions predicated on a breach of the
contract of transportation, in view of Articles 2219 and 2220 of the new Civil Code, which provide as follows:

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

xxx xxx xxx

Art. 2220. Wilful injury to property may be a legal ground for awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith.

By contrasting the provisions of these two articles it immediately becomes apparent that:

(a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or
deliberately injurious conduct, is essential to justify an award of moral damages; and
(b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219;
not only because Art. 2220 specifically provides for the damages that are caused contractual breach, but because the
definition of quasi-delict in Art. 2176 of the Code expressly excludes the cases where there is a "preexisitng contractual
relations between the parties."

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.

The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in
which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the spouse,
descendants and ascendants of the deceased passenger to "demand moral damages for mental anguish by reason of the
death of the deceased" (Necesito vs. Paras, 104 Phil. 84, Resolution on motion to reconsider, September 11, 1958). But
the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral
damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. We think it is clear that
the mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad faith on the
part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages
by the Court of Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on
the part of the defendant, as required by Art. 2220, would be to violate the clear provisions of the law, and constitute
unwarranted judicial legislation.

xxx xxx xxx

The distinction between fraud, bad faith or malice in the sense of deliberate or wanton wrong doing and negligence (as
mere carelessness) is too fundamental in our law to be ignored (Arts. 1170-1172); their consequences being clearly
differentiated by the Code.

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.

It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the
lawmakers when in Art. 2220 they limited recovery of moral damages to breaches of contract in bad faith. It is true that
negligence may be occasionally so gross as to amount to malice; but the fact must be shown in evidence, and a carrier's
bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carrier's
employees.

The Court has not in the process overlooked another rule that a quasi-delict can be the cause for breaching a contract
that might thereby permit the application of applicable principles on tort 9 even where there is a pre-existing contract
between the plaintiff and the defendant (Phil. Airlines vs. Court of Appeals, 106 SCRA 143; Singson vs. Bank of Phil.
Islands, 23 SCRA 1117; and Air France vs. Carrascoso, 18 SCRA 155). This doctrine, unfortunately, cannot improve
private respondents' case for it can aptly govern only where the act or omission complained of would constitute an
actionable tort independently of the contract. The test (whether a quasi-delict can be deemed to underlie the breach of a
contract) can be stated thusly: Where, without a pre-existing contract between two parties, an act or omission can
nonetheless amount to an actionable tort by itself, the fact that the parties are contractually bound is no bar to the
application of quasi-delict provisions to the case. Here, private respondents' damage claim is predicated solely on their
contractual relationship; without such agreement, the act or omission complained of cannot by itself be held to stand as a
separate cause of action or as an independent actionable tort.

The Court finds, therefore, the award of moral damages made by the court a quo, affirmed by the appellate court, to be
inordinate and substantially devoid of legal basis.

Exemplary or corrective damages, in turn, are intended to serve as an example or as correction for the public good in
addition to moral, temperate, liquidated or compensatory damages (Art. 2229, Civil Code; see Prudenciado vs. Alliance
Transport System, 148 SCRA 440; Lopez vs. Pan American World Airways, 16 SCRA 431). In criminal offenses,
exemplary damages are imposed when the crime is committed with one or more aggravating circumstances (Art. 2230,
Civil Code). In quasi-delicts, such damages are granted if the defendant is shown to have been so guilty of gross
negligence as to approximate malice (See Art. 2231, Civil Code; CLLC E.G. Gochangco Workers Union vs. NLRC, 161
SCRA 655; Globe Mackay Cable and Radio Corp. vs. CA, 176 SCRA 778). In contracts and quasi-contracts, the court
may award exemplary damages if the defendant is found to have acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner (Art. 2232, Civil Code; PNB vs. Gen. Acceptance and Finance Corp., 161 SCRA 449).

Given the above premises and the factual circumstances here obtaining, it would also be just as arduous to sustain the
exemplary damages granted by the courts below (see De Leon vs. Court of Appeals, 165 SCRA 166).

Nevertheless, the bank's failure, even perhaps inadvertent, to honor its credit card issued to private respondent Luis
should entitle him to recover a measure of damages sanctioned under Article 2221 of the Civil Code providing thusly:

Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by
him.
Reasonable attorney's fees may be recovered where the court deems such recovery to be just and equitable (Art. 2208,
Civil Code). We see no issue of sound discretion on the part of the appellate court in allowing the award thereof by the
trial court.

WHEREFORE, the petition for review is given due course. The appealed decision is MODIFIED by deleting the award of
moral and exemplary damages to private respondents; in its stead, petitioner is ordered to pay private respondent Luis A.
Luna an amount of P5,000.00 by way of nominal damages. In all other respects, the appealed decision is AFFIRMED. No
costs.

G.R. No. 84698 February 4, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM, BENJAMIN P. PAULINO, ANTONIO M.

MAGTALAS, COL. PEDRO SACRO and LT. M. SORIANO, petitioners,
vs.
COURT OF APPEALS, HON. REGINA ORDOÑEZ-BENITEZ, in her capacity as Presiding Judge of Branch 47,
Regional Trial Court, Manila, SEGUNDA R. BAUTISTA and ARSENIA D. BAUTISTA, respondents.

PADILLA, J.:

A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while on the second-floor premises of
the Philippine School of Business Administration (PSBA) prompted the parents of the deceased to file suit in the Regional
Trial Court of Manila (Branch 47) presided over by Judge (now Court of Appeals justice) Regina Ordoñez-Benitez, for
damages against the said PSBA and its corporate officers. At the time of his death, Carlitos was enrolled in the third year
commerce course at the PSBA. It was established that his assailants were not members of the school's academic
community but were elements from outside the school.

Specifically, the suit impleaded the PSBA and the following school authorities: Juan D. Lim (President), Benjamin P.
Paulino (Vice-President), Antonio M. Magtalas (Treasurer/Cashier), Col. Pedro Sacro (Chief of Security) and a Lt. M.
Soriano (Assistant Chief of Security). Substantially, the plaintiffs (now private respondents) sought to adjudge them liable
for the victim's untimely demise due to their alleged negligence, recklessness and lack of security precautions, means and
methods before, during and after the attack on the victim. During the proceedings a quo, Lt. M. Soriano terminated his
relationship with the other petitioners by resigning from his position in the school.

Defendants a quo (now petitioners) sought to have the suit dismissed, alleging that since they are presumably sued under
Article 2180 of the Civil Code, the complaint states no cause of action against them, as jurisprudence on the subject is to
the effect that academic institutions, such as the PSBA, are beyond the ambit of the rule in the afore-stated article.

The respondent trial court, however, overruled petitioners' contention and thru an order dated 8 December 1987, denied
their motion to dismiss. A subsequent motion for reconsideration was similarly dealt with by an order dated 25 January
1988. Petitioners then assailed the trial court's disposition before the respondent appellate court which, in a
decision * promulgated on 10 June 1988, affirmed the trial court's orders. On 22 August 1988, the respondent appellate
court resolved to deny the petitioners' motion for reconsideration. Hence, this petition.

At the outset, it is to be observed that the respondent appellate court primarily anchored its decision on the law of quasi-
delicts, as enunciated in Articles 2176 and 2180 of the Civil Code. 1 Pertinent portions of the appellate court's now
assailed ruling state:

Article 2180 (formerly Article 1903) of the Civil Code is an adoption from the old Spanish Civil Code. The comments of
Manresa and learned authorities on its meaning should give way to present day changes. The law is not fixed and flexible
(sic); it must be dynamic. In fact, the greatest value and significance of law as a rule of conduct in (sic) its flexibility to
adopt to changing social conditions and its capacity to meet the new challenges of progress.

Construed in the light of modern day educational system, Article 2180 cannot be construed in its narrow concept as held
in the old case of Exconde vs. Capuno 2 and Mercado vs. Court of Appeals; 3hence, the ruling in the Palisoc 4 case that it
should apply to all kinds of educational institutions, academic or vocational.

At any rate, the law holds the teachers and heads of the school staff liable unless they relieve themselves of such liability
pursuant to the last paragraph of Article 2180 by "proving that they observed all the diligence to prevent damage." This
can only be done at a trial on the merits of the case. 5

While we agree with the respondent appellate court that the motion to dismiss the complaint was correctly denied and the
complaint should be tried on the merits, we do not however agree with the premises of the appellate court's ruling.

Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule of in loco parentis. This Court
discussed this doctrine in the afore-cited cases of Exconde, Mendoza, Palisoc and, more recently, in Amadora vs.Court of
Appeals. 6 In all such cases, it had been stressed that the law (Article 2180) plainly provides that the damage should have
been caused or inflicted by pupils or students of he educational institution sought to be held liable for the acts of its pupils
or students while in its custody. However, this material situation does not exist in the present case for, as earlier indicated,
the assailants of Carlitos were not students of the PSBA, for whose acts the school could be made liable.

However, does the appellate court's failure to consider such material facts mean the exculpation of the petitioners from
liability? It does not necessarily follow.

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. 7 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.

Because the circumstances of the present case evince a contractual relation between the PSBA and Carlitos Bautista, the
rules on quasi-delict do not really govern. 8 A perusal of Article 2176 shows that obligations arising from quasi-delicts or
tort, also known as extra-contractual obligations, arise only between parties not otherwise bound by contract, whether
express or implied. However, this impression has not prevented this Court from determining the existence of a tort even
when there obtains a contract. In Air France vs. Carrascoso (124 Phil. 722), the private respondent was awarded
damages for his unwarranted expulsion from a first-class seat aboard the petitioner airline. It is noted, however, that the
Court referred to the petitioner-airline's liability as one arising from tort, not one arising from a contract of carriage. In
effect, Air France is authority for the view that liability from tort may exist even if there is a contract, for the act that breaks
the contract may be also a tort. (Austro-America S.S. Co. vs. Thomas, 248 Fed. 231).

This view was not all that revolutionary, for even as early as 1918, this Court was already of a similar mind. In Cangco
vs. Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus:

The field of non-contractual obligation is much broader than that of contractual obligation, comprising, as it does, the
whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact
that a person is bound to another by contract does not relieve him from extra-contractual liability to such person. When
such a contractual relation exists the obligor may break the contract under such conditions that the same act which
constitutes a breach of the contract would have constituted the source of an extra-contractual obligation had no contract
existed between the parties.

Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21, which
provides:

Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good custom or public
policy shall compensate the latter for the damage. (emphasis supplied).

Air France penalized the racist policy of the airline which emboldened the petitioner's employee to forcibly oust the private
respondent to cater to the comfort of a white man who allegedly "had a better right to the seat." In Austro-
American, supra, the public embarrassment caused to the passenger was the justification for the Circuit Court of Appeals,
(Second Circuit), to award damages to the latter. From the foregoing, it can be concluded that should the act which
breaches a contract be done in bad faith and be violative of Article 21, then there is a cause to view the act as constituting
a quasi-delict.

In the circumstances obtaining in the case at bar, however, there is, as yet, no finding that the contract between the
school and Bautista had been breached thru the former's negligence in providing proper security measures. This would be
for the trial court to determine. And, even if there be a finding of negligence, the same could give rise generally to a
breach of contractual obligation only. Using the test of Cangco, supra, the negligence of the school would not be relevant
absent a contract. In fact, that negligence becomes material only because of the contractual relation between PSBA and
Bautista. In other words, a contractual relation is a condition sine qua non to the school's liability. The negligence of the
school cannot exist independently of the contract, unless the negligence occurs under the circumstances set out in Article
21 of the Civil Code.

This Court is not unmindful of the attendant difficulties posed by the obligation of schools, above-mentioned, for
conceptually a school, like a common carrier, cannot be an insurer of its students against all risks. This is specially true in
the populous student communities of the so-called "university belt" in Manila where there have been reported several
incidents ranging from gang wars to other forms of hooliganism. It would not be equitable to expect of schools to
anticipate all types of violent trespass upon their premises, for notwithstanding the security measures installed, the same
may still fail against an individual or group determined to carry out a nefarious deed inside school premises and environs.
Should this be the case, the school may still avoid liability by proving that the breach of its contractual obligation to the
students was not due to its negligence, here statutorily defined to be the omission of that degree of diligence which is
required by the nature of the obligation and corresponding to the circumstances of persons, time and place. 9

As the proceedings a quo have yet to commence on the substance of the private respondents' complaint, the record is
bereft of all the material facts. Obviously, at this stage, only the trial court can make such a determination from the
evidence still to unfold.

WHEREFORE, the foregoing premises considered, the petition is DENIED. The court of origin (RTC, Manila, Br. 47) is
hereby ordered to continue proceedings consistent with this ruling of the Court. Costs against the petitioners.
 G.R. No. 98695 January 27, 1993

JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C. SYQUIA and ANTHONY C.
SYQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL PARK CEMETERY, INC., respondents.

CAMPOS, JR., J.:

Herein petitioners, Juan J. Syquia and Corazon C. Syquia, Carlota C. Syquia, Carlos C. Syquia, and Anthony Syquia,
were the parents and siblings, respectively, of the deceased Vicente Juan Syquia. On March 5, 1979, they filed a
complaint1 in the then Court of First Instance against herein private respondent, Manila Memorial Park Cemetery, Inc. for
recovery of damages arising from breach of contract and/or quasi-delict. The trial court dismissed the complaint.

The antecedent facts, as gathered by the respondent Court, are as follows:

On March 5, 1979, Juan, Corazon, Carlota and Anthony all surnamed Syquia, plaintiff-appellants herein, filed a complaint
for damages against defendant-appellee, Manila Memorial Park Cemetery, Inc.

The complaint alleged among others, that pursuant to a Deed of Sale (Contract No. 6885) dated August 27, 1969 and
Interment Order No. 7106 dated July 21, 1978 executed between plaintiff-appellant Juan J. Syquia and defendant-
appellee, the former, father of deceased Vicente Juan J. Syquia authorized and instructed defendant-appellee to inter the
remains of deceased in the Manila Memorial Park Cemetery in the morning of July 25, 1978 conformably and in
accordance with defendant-appellant's (sic) interment procedures; that on September 4, 1978, preparatory to transferring
the said remains to a newly purchased family plot also at the Manila Memorial Park Cemetery, the concrete vault
encasing the coffin of the deceased was removed from its niche underground with the assistance of certain employees of
defendant-appellant (sic); that as the concrete vault was being raised to the surface, plaintiffs-appellants discovered that
the concrete vault had a hole approximately three (3) inches in diameter near the bottom of one of the walls closing out
the width of the vault on one end and that for a certain length of time (one hour, more or less), water drained out of the
hole; that because of the aforesaid discovery, plaintiffs-appellants became agitated and upset with concern that the water
which had collected inside the vault might have risen as it in fact did rise, to the level of the coffin and flooded the same as
well as the remains of the deceased with ill effects thereto; that pursuant to an authority granted by the Municipal Court of
Parañaque, Metro Manila on September 14, 1978, plaintiffs-appellants with the assistance of licensed morticians and
certain personnel of defendant-appellant (sic) caused the opening of the concrete vault on September 15, 1978; that upon
opening the vault, the following became apparent to the plaintiffs-appellants: (a) the interior walls of the concrete vault
showed evidence of total flooding; (b) the coffin was entirely damaged by water, filth and silt causing the wooden parts to
warp and separate and to crack the viewing glass panel located directly above the head and torso of the deceased; (c) the
entire lining of the coffin, the clothing of the deceased, and the exposed parts of the deceased's remains were damaged
and soiled by the action of the water and silt and were also coated with filth.

Due to the alleged unlawful and malicious breach by the defendant-appellee of its obligation to deliver a defect-free
concrete vault designed to protect the remains of the deceased and the coffin against the elements which resulted in the
desecration of deceased's grave and in the alternative, because of defendant-appellee's gross negligence conformably to
Article 2176 of the New Civil Code in failing to seal the concrete vault, the complaint prayed that judgment be rendered
ordering defendant-appellee to pay plaintiffs-appellants P30,000.00 for actual damages, P500,000.00 for moral damages,
exemplary damages in the amount determined by the court, 20% of defendant-appellee's total liability as attorney's fees,
and expenses of litigation and costs of suit.2

In dismissing the complaint, the trial court held that the contract between the parties did not guarantee that the cement
vault would be waterproof; that there could be no quasi-delict because the defendant was not guilty of any fault or
negligence, and because there was a pre-existing contractual relation between the Syquias and defendant Manila
Memorial Park Cemetery, Inc.. The trial court also noted that the father himself, Juan Syquia, chose the gravesite despite
knowing that said area had to be constantly sprinkled with water to keep the grass green and that water would eventually
seep through the vault. The trial court also accepted the explanation given by defendant for boring a hole at the bottom
side of the vault: "The hole had to be bored through the concrete vault because if it has no hole the vault will (sic) float and
the grave would be filled with water and the digging would caved (sic) in the earth, the earth would caved (sic) in the (sic)
fill up the grave."3

From this judgment, the Syquias appealed. They alleged that the trial court erred in holding that the contract allowed the
flooding of the vault; that there was no desecration; that the boring of the hole was justifiable; and in not awarding
damages.

The Court of Appeals in the Decision4 dated December 7, 1990 however, affirmed the judgment of dismissal. Petitioner's
motion for reconsideration was denied in a Resolution dated April 25, 1991. 5

Unsatisfied with the respondent Court's decision, the Syquias filed the instant petition. They allege herein that the Court of
Appeals committed the following errors when it:

1. held that the contract and the Rules and Resolutions of private respondent allowed the flooding of the vault and the
entrance thereto of filth and silt;

2. held that the act of boring a hole was justifiable and corollarily, when it held that no act of desecration was committed;
3. overlooked and refused to consider relevant, undisputed facts, such as those which have been stipulated upon by the
parties, testified to by private respondent's witnesses, and admitted in the answer, which could have justified a different
conclusion;

4. held that there was no tort because of a pre-existing contract and the absence of fault/negligence; and

5. did not award the P25,000.00 actual damages which was agreed upon by the parties, moral and exemplary damages,
and attorney's fees.

At the bottom of the entire proceedings is the act of boring a hole by private respondent on the vault of the deceased kin
of the bereaved petitioners. The latter allege that such act was either a breach of private respondent's contractual
obligation to provide a sealed vault, or, in the alternative, a negligent act which constituted a quasi-delict. Nonetheless,
petitioners claim that whatever kind of negligence private respondent has committed, the latter is liable for desecrating the
grave of petitioners' dead.

In the instant case, We are called upon to determine whether the Manila Memorial Park Cemetery, Inc., breached its
contract with petitioners; or, alternatively, whether private respondent was guilty of a tort.

We understand the feelings of petitioners and empathize with them. Unfortunately, however, We are more inclined to
answer the foregoing questions in the negative. There is not enough ground, both in fact and in law, to justify a reversal of
the decision of the respondent Court and to uphold the pleas of the petitioners.

With respect to herein petitioners' averment that private respondent has committed culpa aquiliana, the Court of Appeals
found no negligent act on the part of private respondent to justify an award of damages against it. Although a pre-existing
contractual relation between the parties does not preclude the existence of a culpa aquiliana, We find no reason to
disregard the respondent's Court finding that there was no negligence.

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict . . . . (Emphasis supplied).

In this case, it has been established that the Syquias and the Manila Memorial Park Cemetery, Inc., entered into a
contract entitled "Deed of Sale and Certificate of Perpetual Care"6 on August 27, 1969. That agreement governed the
relations of the parties and defined their respective rights and obligations. Hence, had there been actual negligence on the
part of the Manila Memorial Park Cemetery, Inc., it would be held liable not for a quasi-delict or culpa aquiliana, but
for culpa contractual as provided by Article 1170 of the Civil Code, to wit:

Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.

The Manila Memorial Park Cemetery, Inc. bound itself to provide the concrete box to be send in the interment. Rule 17 of
the Rules and Regulations of private respondent provides that:

Rule 17. Every earth interment shall be made enclosed in a concrete box, or in an outer wall of stone, brick or concrete,
the actual installment of which shall be made by the employees of the Association. 7

Pursuant to this above-mentioned Rule, a concrete vault was provided on July 27, 1978, the day before the interment, and
was, on the same day, installed by private respondent's employees in the grave which was dug earlier. After the burial,
the vault was covered by a cement lid.

Petitioners however claim that private respondent breached its contract with them as the latter held out in the brochure it
distributed that the . . . lot may hold single or double internment (sic) underground in sealed concrete vault."8 Petitioners
claim that the vault provided by private respondent was not sealed, that is, not waterproof. Consequently, water seeped
through the cement enclosure and damaged everything inside it.

We do not agree. There was no stipulation in the Deed of Sale and Certificate of Perpetual Care and in the Rules and
Regulations of the Manila Memorial Park Cemetery, Inc. that the vault would be waterproof. Private respondent's witness,
Mr. Dexter Heuschkel, explained that the term "sealed" meant "closed."9 On the other hand, the word "seal" is defined as .
. . any of various closures or fastenings . . . that cannot be opened without rupture and that serve as a check against
tampering or unauthorized opening." 10 The meaning that has been given by private respondent to the word conforms with
the cited dictionary definition. Moreover, it is also quite clear that "sealed" cannot be equated with "waterproof". Well
settled is the rule that when the terms of the contract are clear and leave no doubt as to the intention of the contracting
parties, then the literal meaning of the stipulation shall control. 11 Contracts should be interpreted according to their literal
meaning and should not be interpreted beyond their obvious intendment. 12 As ruled by the respondent Court:

When plaintiff-appellant Juan J. Syquia affixed his signature to the Deed of Sale (Exhibit "A") and the attached Rules and
Regulations (Exhibit "1"), it can be assumed that he has accepted defendant-appellee's undertaking to merely provide a
concrete vault. He can not now claim that said concrete vault must in addition, also be waterproofed (sic). It is basic that
the parties are bound by the terms of their contract, which is the law between them (Rizal Commercial Banking
Corporation vs. Court of Appeals, et al. 178 SCRA 739). Where there is nothing in the contract which is contrary to law,
morals, good customs, public order, or public policy, the validity of the contract must be sustained (Phil. American
Insurance Co. vs. Judge Pineda, 175 SCRA 416). Consonant with this ruling, a contracting party cannot incur a liability
more than what is expressly specified in his undertaking. It cannot be extended by implication, beyond the terms of the
contract (Rizal Commercial Banking Corporation vs. Court of Appeals, supra). And as a rule of evidence, where the terms
of an agreement are reduced to writing, the document itself, being constituted by the parties as the expositor of their
intentions, is the only instrument of evidence in respect of that agreement which the law will recognize, so long as its (sic)
exists for the purpose of evidence (Starkie, Ev., pp. 648, 655, Kasheenath vs. Chundy, 5 W.R. 68 cited in Francisco,
Revised Rules of Court in the Phil. p. 153, 1973 Ed.). And if the terms of the contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulations shall control (Santos vs. CA, et al., G. R. No.
83664, Nov. 13, 1989; Prudential Bank & Trust Co. vs. Community Builders Co., Inc., 165 SCRA 285; Balatero vs. IAC,
154 SCRA 530). 13

We hold, therefore, that private respondent did not breach the tenor of its obligation to the Syquias. While this may be so,
can private respondent be liable for culpa aquiliana for boring the hole on the vault? It cannot be denied that the hole
made possible the entry of more water and soil than was natural had there been no hole.

The law defines negligence as the "omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the place." 14 In the absence of stipulation or legal
provision providing the contrary, the diligence to be observed in the performance of the obligation is that which is
expected of a good father of a family.

The circumstances surrounding the commission of the assailed act — boring of the hole — negate the allegation of
negligence. The reason for the act was explained by Henry Flores, Interment Foreman, who said that:

Q It has been established in this particular case that a certain Vicente Juan Syquia was interred on July 25, 1978 at the
Parañaque Cemetery of the Manila Memorial Park Cemetery, Inc., will you please tell the Hon. Court what or whether you
have participation in connection with said internment (sic)?

A A day before Juan (sic) Syquia was buried our personnel dug a grave. After digging the next morning a vault was taken
and placed in the grave and when the vault was placed on the grave a hole was placed on the vault so that water could
come into the vault because it was raining heavily then because the vault has no hole the vault will float and the grave
would be filled with water and the digging would caved (sic) in and the earth, the earth would (sic) caved in and fill up the
grave. 15 (Emphasis ours)

Except for the foreman's opinion that the concrete vault may float should there be a heavy rainfall, from the above-
mentioned explanation, private respondent has exercised the diligence of a good father of a family in preventing the
accumulation of water inside the vault which would have resulted in the caving in of earth around the grave filling the
same with earth.

Thus, finding no evidence of negligence on the part of private respondent, We find no reason to award damages in favor
of petitioners.

In the light of the foregoing facts, and construed in the language of the applicable laws and jurisprudence, We are
constrained to AFFIRM in toto the decision of the respondent Court of Appeals dated December 7, 1990. No costs.

G.R. No. 145804 February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,

vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents.

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April
2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs of the Late
Nicanor Navidad vs. Rodolfo Roman, et. al.," which has modified the decision of 11 August 1998 of the Regional Trial
Court, Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit
Authority (LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad.

On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then drunk, entered the
EDSA LRT station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the
platform near the LRT tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A
misunderstanding or an altercation between the two apparently ensued that led to a fist fight. No evidence, however, was
adduced to indicate how the fight started or who, between the two, delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in.
Navidad was struck by the moving train, and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a
complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro
Transit), and Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-
claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence
in the selection and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a
demurrer contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August
1998, the trial court rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and
Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the following:

"a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

"d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision
exonerating Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly
and severally liable thusly:

"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the death
of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for
his death and are hereby directed to pay jointly and severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorney’s fees."2

The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of
carriage theretofore had already existed when the victim entered the place where passengers were supposed to be after
paying the fare and getting the corresponding token therefor. In exempting Prudent from liability, the court stressed that
there was nothing to link the security agency to the death of Navidad. It said that Navidad failed to show that Escartin
inflicted fist blows upon the victim and the evidence merely established the fact of death of Navidad by reason of his
having been hit by the train owned and managed by the LRTA and operated at the time by Roman. The appellate court
faulted petitioners for their failure to present expert evidence to establish the fact that the application of emergency brakes
could not have stopped the train.

The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October 2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

"I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE
TRIAL COURT

"II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE
DEATH OF NICANOR NAVIDAD, JR.

"III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN
EMPLOYEE OF LRTA."3

Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by
holding them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a common
carrier was not overcome. Petitioners would insist that Escartin’s assault upon Navidad, which caused the latter to fall on
the tracks, was an act of a stranger that could not have been foreseen or prevented. The LRTA would add that the
appellate court’s conclusion on the existence of an employer-employee relationship between Roman and LRTA lacked
basis because Roman himself had testified being an employee of Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created
from the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all
the rights and protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman
liable for the death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy,
is burdened with the duty of exercising utmost diligence in ensuring the safety of passengers.4 The Civil Code, governing
the liability of a common carrier for death of or injury to its passengers, provides:

"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and
1755."

"Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of
the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.

"This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a
family in the selection and supervision of their employees."

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the common carrier’s employees through the exercise of the diligence of
a good father of a family could have prevented or stopped the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with
due regard for all circumstances.5 Such duty of a common carrier to provide safety to its passengers so obligates it not
only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in
pursuance to the contract of carriage.6 The statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other
passengers or of strangers if the common carrier’s employees through the exercise of due diligence could have prevented
or stopped the act or omission.7 In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and8 by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the
carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or
to force majeure.9 In the absence of satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault, 10 an
exception from the general rule that negligence must be proved. 11

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from the
breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the
discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail
itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not
relieved of its responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article
217612 and related provisions, in conjunction with Article 2180,13 of the Civil Code. The premise, however, for the
employer’s liability is negligence or fault on the part of the employee. Once such fault is established, the employer can
then be made liable on the basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris
families in the selection and supervision of its employees. The liability is primary and can only be negated by showing due
diligence in the selection and supervision of the employee, a factual matter that has not been shown. Absent such a
showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an independent
contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and
when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana,
Article 219414 of the Civil Code can well apply.15 In fine, a liability for tort may arise even under a contract, where tort is
that which breaches the contract.16 Stated differently, when an act which constitutes a breach of contract would have itself
constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to
have been breached by tort, thereby allowing the rules on tort to apply. 17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is
concluded by the factual finding of the Court of Appeals that "there is nothing to link (Prudent) to the death of Nicanor
(Navidad), for the reason that the negligence of its employee, Escartin, has not been duly proven x x x." This finding of the
appellate court is not without substantial justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must
also be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical
relation between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not
for the purpose of indemnifying the plaintiff for any loss suffered by him. 18 It is an established rule that nominal damages
cannot co-exist with compensatory damages.19

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the
award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs.