G.R. No.

L-20392

December 18, 1968

MARCIAL T. CAEDO, JUANA SANGALANG CAEDO, and the Minors, EPHRAIM CAEDO, EILEEN CAEDO, ROSE ELAINE CAEDO, suing through their father, MARCIAL T. CAEDO, as guardian ad litem, plaintiffs-appellants, vs. YU KHE THAI and RAFAEL BERNARDO, defendants-appellants. Norberto J. Quisumbing for plaintiffs-appellants. De Joya, Lopez, Dimaguila, Hermoso and Divino for defendants-appellants MAKALINTAL, J.: As a result of a vehicular accident in which plaintiff Marcial Caedo and several members of his family were injured they filed this suit for recovery of damages from the defendants. The judgment, rendered by the Court of First Instance of Rizal on February 26, 1960 (Q-2952), contains the following disposition: IN VIEW OF THE FOREGOING, the court renders a judgment, one in favor of the plaintiffs and against the defendants, Yu Khe Thai and Rafael Bernardo, jointly and severally, to pay to plaintiffs Marcial Caedo, et al., the sum of P1,929.70 for actual damages; P48,000.00 for moral damages; P10,000.00 for exemplary damages; and P5,000.00 for attorney's fees, with costs against the defendants. The counterclaim of the defendants against the plaintiffs is hereby ordered dismissed, for lack of merits. On March 12, 1960 the judgment was amended so as to include an additional award of P3,705.11 in favor of the plaintiffs for the damage sustained by their car in the accident. Both parties appealed to the Court of Appeals, which certified the case to us in view of the total amount of the plaintiffs' claim. There are two principal questions posed for resolution: (1) who was responsible for the accident? and (2) if it was defendant Rafael Bernardo, was his employer, defendant Yu Khe Thai, solidarily liable with him? On the first question the trial court found Rafael Bernardo negligent; and on the second, held his employer solidarily liable with him. The mishap occurred at about 5:30 in the morning of March 24, 1958 on Highway 54 (now E. de los Santos Avenue) in the vicinity of San Lorenzo Village. Marcial was driving his Mercury car on his way from his home in Quezon City to the airport, where his son Ephraim was scheduled to take a plane for Mindoro. With them in the car were Mrs. Caedo and three daughters. Coming from the opposite direction was the Cadillac of Yu Khe Thai, with his driver Rafael Bernardo at the wheel, taking the owner from his Paraaque home to Wack Wack for his regular round of golf. The two cars were traveling at fairly moderate speeds, considering the condition of the road and the absence of traffic the Mercury at 40 to 50 kilometers per hour, and the Cadillac at approximately 30 to 35 miles (48 to 56 kilometers). Their headlights were mutually noticeable from a distance. Ahead of the Cadillac, going in the same direction, was a caretella owned by a certain Pedro Bautista. The carretela was towing another horse by means of a short rope coiled around the rig's vertical post on the right side and held at the other end by Pedro's son, Julian Bautista. Rafael Bernardo testified that he was almost upon the rig when he saw it in front of him, only eight meters away. This is the first clear indication of his negligence. The carretela was provided with two lights, one on each side, and they should have given him sufficient warning to take the necessary precautions. And even if he did not notice the lights, as he claimed later on at the trial, the carretela should anyway have been visible to him from afar if he had been careful, as it must have been in the beam of his headlights for a considerable while.

In the meantime the Mercury was coming on its own lane from the opposite direction. Bernardo, instead of slowing down or stopping altogether behind the carretela until that lane was clear, veered to the left in order to pass. As he did so the curved end of his car's right rear bumper caught the forward rim of the rig's left wheel, wrenching it off and carrying it along as the car skidded obliquely to the other lane, where it collided with the oncoming vehicle. On his part Caedo had seen the Cadillac on its own lane; he slackened his speed, judged the distances in relation to the carretela and concluded that the Cadillac would wait behind. Bernardo, however, decided to take a gamble beat the Mercury to the point where it would be in line with the carretela, or else squeeze in between them in any case. It was a risky maneuver either way, and the risk should have been quite obvious. Or, since the car was moving at from 30 to 35 miles per hour (or 25 miles according to Yu Khe Thai) it was already too late to apply the brakes when Bernardo saw the carretela only eight meters in front of him, and so he had to swerve to the left in spite of the presence of the oncoming car on the opposite lane. As it was, the clearance Bernardo gave for his car's right side was insufficient. Its rear bumper, as already stated, caught the wheel of the carretela and wrenched it loose. Caedo, confronted with the unexpected situation, tried to avoid the collision at the last moment by going farther to the right, but was unsuccessful. The photographs taken at the scene show that the right wheels of his car were on the unpaved shoulder of the road at the moment of impact. There is no doubt at all that the collision was directly traceable to Rafael Bernardo's negligence and that he must be held liable for the damages suffered by the plaintiffs. The next question is whether or not Yu Khe Thai, as owner of the Cadillac, is solidarily liable with the driver. The applicable law is Article 2184 of the Civil Code, which reads: ART. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have, by the use of due diligence, prevented the misfortune. It is disputably presumed that a driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice within the next preceding two months. Under the foregoing provision, if the causative factor was the driver's negligence, the owner of the vehicle who was present is likewise held liable if he could have prevented the mishap by the exercise of due diligence. The rule is not new, although formulated as law for the first time in the new Civil Code. It was expressed in Chapman vs. Underwood (1914), 27 Phil. 374, where this Court held: ... The same rule applies where the owner is present, unless the negligent acts of the driver are continued for such a length of time as to give the owner a reasonable opportunity to observe them and to direct his driver to desist therefrom. An owner who sits in his automobile, or other vehicle, and permits his driver to continue in a violation of the law by the performance of negligent acts, after he has had a reasonable opportunity to observe them and to direct that the driver cease therefrom, becomes himself responsible for such acts. The owner of an automobile who permits his chauffeur to drive up the Escolta, for example, at a speed of 60 miles an hour, without any effort to stop him, although he has had a reasonable opportunity to do so, becomes himself responsible, both criminally and civilly, for the results produced by the acts of the chauffeur. On the other hand, if the driver, by a sudden act of negligence, and without the owner having a reasonable opportunity to prevent the act or its continuance, injures a person or violates the criminal law, the owner of the automobile, although present therein at the time the act was committed, is not responsible, either civilly or criminally, therefor. The act complained of must be continued in the presence of the owner for such a length of time that the owner, by his acquiescence, makes his driver act his own. The basis of the master's liability in civil law is not respondent superior but rather the relationship of paterfamilias. The theory is that ultimately the negligence of the servant, if known to the master and susceptible of timely correction by him, reflects his own negligence if he fails to correct it in order to prevent injury or damage. In the present case the defendants' evidence is that Rafael Bernardo had been Yu Khe Thai's driver since 1937, and before that had been employed by Yutivo Sons Hardware Co. in the same capacity for over ten

years. During that time he had no record of violation of traffic laws and regulations. No negligence for having employed him at all may be imputed to his master. Negligence on the part of the latter, if any, must be sought in the immediate setting and circumstances of the accident, that is, in his failure to detain the driver from pursuing a course which not only gave him clear notice of the danger but also sufficient time to act upon it. We do not see that such negligence may be imputed. The car, as has been stated, was not running at an unreasonable speed. The road was wide and open, and devoid of traffic that early morning. There was no reason for the car owner to be in any special state of alert. He had reason to rely on the skill and experience of his driver. He became aware of the presence of the carretela when his car was only twelve meters behind it, but then his failure to see it earlier did not constitute negligence, for he was not himself at the wheel. And even when he did see it at that distance, he could not have anticipated his driver's sudden decision to pass the carretela on its left side in spite of the fact that another car was approaching from the opposite direction. The time element was such that there was no reasonable opportunity for Yu Khe Thai to assess the risks involved and warn the driver accordingly. The thought that entered his mind, he said, was that if he sounded a sudden warning it might only make the other man nervous and make the situation worse. It was a thought that, wise or not, connotes no absence of that due diligence required by law to prevent the misfortune. The test of imputed negligence under Article 2184 of the Civil Code is, to a great degree, necessarily subjective. Car owners are not held to a uniform and inflexible standard of diligence as are professional drivers. In many cases they refrain from driving their own cars and instead hire other persons to drive for them precisely because they are not trained or endowed with sufficient discernment to know the rules of traffic or to appreciate the relative dangers posed by the different situations that are continually encountered on the road. What would be a negligent omission under aforesaid Article on the part of a car owner who is in the prime of age and knows how to handle a motor vehicle is not necessarily so on the part, say, of an old and infirm person who is not similarly equipped. The law does not require that a person must possess a certain measure of skill or proficiency either in the mechanics of driving or in the observance of traffic rules before he may own a motor vehicle. The test of his intelligence, within the meaning of Article 2184, is his omission to do that which the evidence of his own senses tells him he should do in order to avoid the accident. And as far as perception is concerned, absent a minimum level imposed by law, a maneuver that appears to be fraught with danger to one passenger may appear to be entirely safe and commonplace to another. Were the law to require a uniform standard of perceptiveness, employment of professional drivers by car owners who, by their very inadequacies, have real need of drivers' services, would be effectively proscribed. We hold that the imputation of liability to Yu Khe Thai, solidarily with Rafael Bernardo, is an error. The next question refers to the sums adjudged by the trial court as damages. The award of P48,000 by way of moral damages is itemized as follows: 1. Marcial Caedo 2. Juana S. Caedo 3. Ephraim Caedo 4. Eileen Caedo 5. Rose Elaine Caedo 6. Merilyn Caedo P 20,000.00 15,000.00 3,000.00 4,000.00 3,000.00 3,000.00

Plaintiffs appealed from the award, claiming that the Court should have granted them also actual or compensatory damages, aggregating P225,000, for the injuries they sustained. Defendants, on the other hand maintain that the amounts awarded as moral damages are excessive and should be reduced. We

find no justification for either side. The amount of actual damages suffered by the individual plaintiffs by reason of their injuries, other than expenses for medical treatment, has not been shown by the evidence. Actual damages, to be compensable, must be proven. Pain and suffering are not capable of pecuniary estimation, and constitute a proper ground for granting moral, not actual, damages, as provided in Article 2217 of the Civil Code. The injuries sustained by plaintiffs are the following: MARCIAL T. CAEDO: A. Contusion, with hematoma, scalp, frontal left; abrasions, chest wall, anterior; B. Multiple fractures, ribs, right, lst to 5th inclusive. Third rib has a double fracture; Subparieto-plaural hematoma; Basal disc atelectasis, lung, right lower lobe, secondary; C. Pseudotosis, left, secondary to probable basal fracture, skull. JUANA SANGALANG CAEDO: A. Abrasions, multiple: (1)frontal region, left; (2) apex of nose; (3) upper eyelid, left; (4) knees. B. Wound, lacerated, irregular, deep, frontal; C. Fracture, simple, 2nd rib posterior, left with displacement. D. Fracture, simple, base, proximal phalanx right, big toe. E. Fracture, simple, base, metatarsals III and V right. F. Concussion, cerebral. EPHRAIM CAEDO: A. Abrasions, multiple: (1) left temporal area; (2) left frontal; (3) left supraorbital EILEEN CAEDO: A. Lacerated wound (V-shaped), base, 5th finger, right, lateral aspect. B. Abrasions, multiple: (1) dorsum, proximal phalanx middle finger; (2) Knee, anterior, bilateral; (3) shin, lower 1/3. ROSE ELAINE CAEDO: A. Abrasions, multiple: (1) upper and lower lids; (2) left temporal; (3) nasolabial region; (4) leg, lower third, anterior. MARILYN CAEDO: A. Abrasions, multiple: (1)shin, lower 1/3 right; (2) arm, lower third C. Contusion with hematoma, shin, lower 1/3, anterior aspect, right. (See Exhibits D, D-1, D-2, D-3, D-4, and D- 5) It is our opinion that, considering the nature and extent of the above-mentioned injuries, the amounts of moral damages granted by the trial court are not excessive.

WHEREFORE, the judgment appealed from is modified in the sense of declaring defendant-appellant Yu Khe Thai free from liability, and is otherwise affirmed with respect to defendant Rafael Bernardo, with costs against the latter. G.R. No. 193861 March 14, 2012
1

PAULITA "EDITH" SERRA, Petitioner, vs. NELFA T. MUMAR, Respondent. DECISION CARPIO, J.: Before the Court is a petition for review under Rule 45 of the Revised Rules of Court, assailing the 31 July 2 3 2009 Decision and 27 July 2010 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 00023MIN. The Facts At around 6:30 in the evening of 3 April 2000, there was a vehicular accident along the National Highway in Barangay Apopong, General Santos City, which resulted in the death of Armando Mumar (Mumar), husband of respondent Nelfa T. Mumar (respondent). Based on the evidence presented before the Regional Trial Court (RTC) of General Santos City, one Armando Tenerife (Tenerife) was driving his Toyota Corolla sedan on the National Highway heading in the direction of Polomolok, South Cotabato. Tenerife noticed the van owned by petitioner Paulita "Edith" Serra (petitioner) coming from the opposite direction, which was trying to overtake a passenger jeep, and in the process encroached on his lane. The left side of the sedan was hit by the van, causing the sedan to swerve to the left and end up on the other side of the road. The van collided head on with the motorcycle, which was about 12 meters behind the sedan on the outer lane, causing injuries to Mumar, which eventually led to his death. On the other hand, petitioner denied that her van was overtaking the jeepney at the time of the incident. She claimed that the left tire of Tenerifes sedan burst, causing it to sideswipe her van. Consequently, the left front tire of the van also burst and the vans driver, Marciano de Castro (de Castro), lost control of the vehicle. The van swerved to the left towards Mumars motorcycle. The impact resulted in the death of Mumar. Subsequently, respondent filed a complaint against petitioner for Damages by Reason of Reckless Imprudence resulting to Homicide and Attachment before the General Santos City RTC. Ruling of the Regional Trial Court On 20 November 2003, the General Santos City RTC promulgated a judgment, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered against defendant Paulita Sierra, her co-defendant not having been served with summons because he could no longer be found, finding her liable for damages by reason of reckless imprudence, and she is hereby ordered to pay plaintiff the sum of: 1. P65,000.00 for burial damages;
4

2. P300,000.00 for loss of income; 3. P50,000.00 as moral damages; and 4. P50,000.00 as exemplary damages. SO ORDERED.
5

The RTC found that, based on the evidence presented at the trial, at the time of impact "the van was overtaking another vehicle without due regard for the safety of others, bumped the Toyota Car (sic) and the motorcycle traveling in the right lane going to Polomolok, South Cotabato." The RTC noted that the damage to the van was located at the bumper, evincing a frontal collision, while the damage to the sedan was on the left side door and window, evincing that the van sideswiped the sedan. Likewise, the RTC found that the van encroached on the sedan and motorcycles lane, in the process hitting the motorcycle, 6 causing the injuries and subsequent death of Mumar. As to the claim for damages, the RTC said that Nelfa testified that her husband was earning about P6,000.00 a month without presenting any documentary evidence to prove her claim, but nonetheless awarded herP300,000.00 for damages due to loss of income. Petitioner appealed the RTC ruling to the CA. Ruling of the Court of Appeals In its 31 July 2009 Decision, the CA denied the appeal and affirmed with modification the RTCs ruling: FOR REASONS STATED, the appeal is DENIED. The assailed Decision of the Regional Trial Court of General Santos City, 11th Judicial Region, Branch 23, in Civil Case No. 6764 is AFFIRMED with MODIFICATION in that the appellant is ordered to pay appellee the following: 1. Civil indemnity in the amount of P50,000.00; 2. Indemnity for loss of earning capacity in the amount of P1,224,000.00; 3. Temperate damages amounting to P25,000.00 in lieu of the award for burial expenses; 4. Moral damages in the amount of P50,000.00. 5. The total amount of damages shall bear an interest of 12% per annum from the finality of this Decision until fully paid. The awards for burial expenses and exemplary damages are deleted. SO ORDERED.
7

The CA adopted the factual findings of the RTC. It also ruled that the RTC erred in awarding burial expenses and actual damages for loss of earning capacity despite lack of proof. Based on the wifes claim that the victim earned not less than P6,000.00 a month and his age at the time of death, based on his birth certificate (29), the CA applied the formula: Net earning capacity = 2/3 x (80 less the age of the victim at time of death) x [Gross Annual Income less the Reasonable and Necessary Living Expenses (50% of gross income)]

Using the foregoing formula, the CA awarded damages due to loss of earning capacity in the amount 8 ofP1,224,000.00. Likewise, the CA said that the RTC erred in not awarding civil indemnity in the amount of P50,000.00. The CA also awarded temperate damages of P25,000.00 finding that respondent spent for her husbands burial although the exact amount could not be proven. Petitioners Arguments Petitioner raises the following issues: I. Whether or not the (sic) both the lower court and the Court of Appeals committed reversible error in finding that the incident which killed Armando Mumar was not purely accidental for which defendants may not be held liable[;] II. Whether or not both the lower court and the Court of Appeals committed reversible error in holding Editha Serra as liable for damages and in not appreciating that she was not negligent in the selection and supervision of the driver of the van, Marciano de Castro[;] III. Whether or not the Court of Appeals erred in awarding to herein respondent "loss of earning capacity" despite complete absence of documentary evidence that the deceased Mumar was self-employed and earning less than the minimum wage under current labor laws in force at the 9 time of his death, following the ruling in People v. Mallari, G.R. No. 145993, June 17, 2003 [.] Petitioner maintains that it was Tenerifes sedan that encroached on the lane of the van after the sedans left front tire blew out. Petitioner points out that Tenerife himself admitted that what happened was merely 10 a "sliding collision." She points out that the sedan not only cut across two lanes headed in the opposite direction, it also made a half-circle such that it stopped on the shoulder of the left side of the road (opposite its original lane), and then faced towards its origin, General Santos City. This could be for no other reason than that Tenerife completely lost control of his vehicle because the tire burst. Then, the sedan rammed into the van causing the latters front tire to tear; thus, the vans driver also lost control of the vehicle and headed towards the opposite lane and hit Mumar. Yet, the van was still facing its destination General Santos City. The greater damage to the van was from hitting the signboard on the side of the road and not from hitting the sedan. Petitioner argues that the foregoing description of the events proves that it is purely accidental and without negligence on her drivers part. Petitioner also insists that she was not negligent in the selection and supervision of the driver of the van. Respondent had the burden to prove that petitioner was negligent but failed to do so, petitioner claims. As to the CAs award of damages due to loss of earning capacity, petitioner argues that the same has no basis. She points out that there was no documentary evidence presented or formally offered at the trial to substantiate the claim for damages due to loss of earning capacity. Likewise, petitioner further argues that, based on Nelfas testimony that her husband was earning "not less than P6,000 a month," the conclusion was that he was earning not less than the minimum wage at the time of the accident. Petitioner counters that in 2005 the minimum wage in Region XII, where the accident occurred, was P200.00 per day plus a cost of living allowance of P13.50, or P5,558.00 per month. Petitioner posits that it was safe to assume that at the time of the accident on 3 April 2000, the minimum wage was lower than the rate in 2005.

Petitioner also argues that in Mumars line of work contracting and manufacturing steel grills, fences and gates some form of documentary evidence would be available to support his widows claim. That these were not presented in evidence would remove the claim from the exceptions to the requirement that 11 the amount of actual damages must be duly proved. Thus, petitioner prays that the assailed CA decision and resolution be reversed and set aside. In the alternative, petitioner prays that, should the Court sustain the finding of negligence, that the award of damages for loss of earning capacity in the sum of P1,224,000.00 be completely deleted for lack of 12 evidentiary basis. Respondents Argument In her Comment, respondent counters that petitioner raises no new matter, and the arguments are merely 13 a rehash of those raised before the lower courts, which had already ruled on these. The Courts Ruling The petition is partly granted. The Court affirms the decision of the CA, but modifies the award for damages. Uniform Findings of Fact by the RTC and CA A petition for review on certiorari should raise only questions of law. In resolving a petition for review, the Court "does not sit as an arbiter of facts for it is not the function of the Supreme Court to analyze or weigh 14 all over again the evidence already considered in the proceedings below." When supported by substantial evidence, the factual findings of the CA affirming those of the trial 15 16 court are final and conclusive on this Court and may not be reviewed on appeal, unless petitioner can 17 show compelling or exceptional reasons for this Court to disregard, overturn or modify such findings. In the present case, the Court notes the uniform factual findings by the RTC and CA, and petitioner has not shown compelling or exceptional reasons warranting deviation from these findings. Both the trial court and the CA found that it was petitioners van, then being driven by de Castro, that encroached on the sedans lane, then hit the latter and, eventually, Mumars motorcycle. The Court has previously held that evidence to be worthy of credit, must not only proceed from a credible source but must, in addition, be credible in itself. The evidence must be natural, reasonable and probable as to make it easy to believe. No better test has yet been found to determine the value of the testimony of 18 a witness than its conformity to the knowledge and common experience of mankind. Petitioners testimony is not credible considering that she admitted that she did not see the actual 19 bumping of the van with the sedan because "it was dark and showering." When she came out of the van, she said she did not notice the sedan. She then left the scene to ask help from her brother, without 20 even coming to the aid of her driver. Moreover, the traffic investigators findings are more consistent with human experience. As found by the investigator, the van ended up on the other side of the road, opposite the lane it was originally traversing. The vans forward momentum was going towards the opposite side. If indeed the van stayed on its proper lane when the sedans tire blew out and los t control, the sedan would have bumped into the van on the latters lane and the van would have ended up on the side of the road with the sedan. Likewise, if the van had stayed on its lane, and the impact of the sedan propelled it forward, the van

would have hit the jeepney in front of it, not Mumars motorcycle, which was on the opposite lane to the right of the sedan. The only plausible explanation is it was the van, while trying to overtake the jeepney in front of it at a fast speed, that bumped into the sedan and subsequently, Mumars motorcycle. Petitioner insists that the traffic investigator SPO3 Haron Abdullatips report should be disregarded because he was not at the scene when the accident happened. Rarely does it happen that the investigating officer personally witnesses an accident that he investigates, yet this does not mean that his observations are not valid. A traffic investigators training and experience allow him to determine how an accident occurred even without witnessing the accident himself. In this case, Abdullatip had been a traffic investigator for nine years. Even if he arrived at the scene after the accident, he saw the vehicles in their relative positions as a result of the accident. His experience, as well as his evaluation of the statements from various witnesses, guided him in assessing who was at fault. In any case, the presumption of regularity in the exercise of functions is in his favor and therefore his report must be given credence. Liability for Damages of Petitioner Under Article 2180 of the Civil Code, employers are liable for the damages caused by their employees acting within the scope of their assigned tasks. Whenever an employees negligence causes damage or injury to another, there instantly arises a presumption that the employer failed to exercise the due 22 diligence of a good father of the family in the selection or supervision of its employees. The liability of the employer is direct or immediate. It is not conditioned upon prior recourse against the negligent 23 employee and a prior showing of insolvency of such employee. Moreover, under Article 2184 of the Civil Code, if the causative factor was the drivers negligence, the owner of the vehicle who was present is likewise held liable if he could have prevented the mishap by the exercise of due diligence. Petitioner failed to show that she exercised the level of diligence required in supervising her driver in order to prevent the accident. She admitted that de Castro had only been her driver for one year and she had no knowledge of his driving experience or record of previous accidents. She also admitted that it was 25 de Castro who maintained the vehicle and would even remind her "to pay the installment of the car." Petitioner also admitted that, at the time of the accident, she did not know what was happening and only knew they bumped into another vehicle when the driver shouted. She then closed her eyes and a moment later felt something heavy fall on the roof of the car. When the vehicle stopped, petitioner left the scene purportedly to ask help from her brother, leaving the other passengers to come to the aid of her injured driver. Damages for Loss of Earning Capacity Next, the Court holds that the CA erred in awarding damages for loss of earning capacity in the absence of documentary evidence to support the claim. Damages for loss of earning capacity is in the nature of actual damages, which as a rule must be 27 duly proven by documentary evidence, not merely by the self-serving testimony of the widow. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceaseds line of work
26 24 21

no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning 28 less than the minimum wage under current labor laws. Based solely on Nelfas testimony, the CA determined that the deceased falls within one of these exceptions. Nelfa testified that her husband was in the business of contracting and manufacturing grills, 29 30 fences and gates, and his earnings "exceed P6,000.00" per month prior to his death. She presented no documentary proof of her claims. It was error for the CA to have awarded dam ages for loss of earning capacity based on Nelfas testimony alone. First, while it is conceded that the deceased was self-employed, the Court cannot accept that in his line of work there was no documentary proof available to prove his income from such occupation. There would have been receipts, job orders, or some form of written contract or agreement between the deceased and his clients when he is contracted for a job. Second, and more importantly, decedent was not earning "less than the minimum wage" at the time of his death. Wage Order No. RTWPB-XI-07, issued by the Regional Tripartite Wages and Productivity Board-XI of the National Wages and Productivity Commission, under the Department of Labor and Employment, took effect on 1 November 1999 and mandated the minimum wage rate in Region XI, including General Santos City, at the time of the accident. Section 1 provides: SECTION 1. NEW MINIMUM WAGE RATES. Effective November 1, 1999, the new minimum wage rates in Region XI shall be as follows: SECTOR/INDUSTRY Davao City General Santos City Island Garden City of Samal Tagum City 148.00 138.00 Provinces of: Davao del Norte Davao del Sur Davao Oriental Compostela Valley South Cotabato 146.00 136.00
31

NON-AGRICULTURE AGRICULTURE - Plantation (i.e. more than 24 Hectares or employing at least 20 workers) - Non-Plantation RETAIL/SERVICE - Employing more than 10 workers - Employing not more than 10 workers

117.00 148.00 117.00

115.00 146.00 115.00

Respondent testified that her husband was earning not less than P6,000.00 per month.1wphi1 On the other hand, the highest minimum wage rate at the time of the accident, based on Wage Order No. 32 RTWPB-XI-07, was P148.00. At that rate, the monthly minimum wage would be P3,256.00, clearly an amount less than what respondent testified to as her husbands monthly earnings. The deceased would not fall within the recognized exceptions. There is therefore no basis for the CAs computation for Mumars supposed net earning capacity and the subsequent award of damages due to loss of earning capacity.

WHEREFORE, we GRANT IN PART the petition. We AFFIRM WITH MODIFICATION the Decision of the Court of Appeals dated 31 July 2009 and Resolution dated 27 July 2010 in CA-G.R. CV No. 00023-MIN. We ORDERpetitioner to pay respondent the following: 1. Civil indemnity of P50,000.00; 2. Temperate damages of P25,000.00, in lieu of the award for burial expenses; 3. Moral damages of P50,000.00; and 4. Interest on the total monetary award at the rate of 12% per annum from the finality of this decision until the award is fully satisfied. SO ORDERED. G.R. No. 125078 May 30, 2011

BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A. ABISON, FELIPE ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE ALCANTARA, NUMERIANO S. ALCARIA, FERNANDO C. ALEJADO, LEOPOLDO N. ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR AMOLATA, RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E. ANTECRISTO, ISAGANI D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO, HERMINIGILDO AQUINO, MARCELO S. AQUINO, JR., FELIPE P. ARANIA, ULYSES M. ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL, EDGARADO P. ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON M. BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI, HERMOGENES T. BARBECHO, ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO BASAS, ALEJANDRO G. BATULAN, DOMINGO A. BAUTISTA, VICTOR BAYANI, BENIGNO BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B. BUBUNGAN, FERNANDO B. BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M. BURDEOS, VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C. CACHUELA, BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A. CALISO, NORBERTO F. CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO, VICTORIANO CANETE, DOMINADOR P. CANTILLO, FRUCTUSO P. CARBAJOSA, VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S. CASTAARES, FLAVIANO C. CASTAARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B. CAUSING, ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE V. CONCHA, ALBERT CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO, CORNELIO A. CRESENCIO, ALEX CRUZ, ROGER CRUZ, RANSAM CRUZ, CANUTO M. DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO DAPROZA, VIRGILIO P. DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG, DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA CRUZ, ELIEZER R. DELA TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE P. DENOLAN, RUBENCIO P. DENOY, RODRIGO M. DERMIL, ROLANDO B. DIAZ, LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO DIONG, AMADO R. DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO, NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M. EMBRADORA, MIGUEL EMNACE, RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA, DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO C. ENTERO, FORTUNATA ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA, LAZARO A. ESPAOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D. FERNANDO, GREGORIO S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR, ANTONIO M. FLORES, REDENTOR T. FLOREZA, NORBERTO J. FUENTES, RICARDO C. GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V. GARCESA, BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V. GIMENA, EARLWIN L. GINGOYO, ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE GONZALES, AMADO

J. GUMERE, LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO HIPOLITO, TORIBIO S ILLUSORIO, TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO B. JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T. JUCAR, NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C. LABAY, AVELINO L. LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO J. LAS PEAS, ISMAEL LASDOCE, RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ, ARISTON LOS BAEZ, CONCISO L. LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO LUNTAO, JR., EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D. MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B. MAMARADLO, PANFILO A. MANADA, SR., RICARDO S. MANDANI, CONCHITA MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO T. MANSANES, EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R. MASIGLAT, DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA, ROSITA MENDOZA, GREGORIO R. MESA, RENATO N. MILLADO, ANTONIO L. MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P. MONDIA, JUANITO P. MONDIA, RICARDO MONTAO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUEZ, CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS, NEMESIO G. NICOLAS, ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR., TEODORO B. OCRETO, BIBIANO C. ODI, ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO M. PABIONA, NARCISO J. PADILLA, NELSON G. PADIOS, SR., FRNACISCO G. PAGUNTALAN, RENE B. PALENCIA, MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO PARAGUAS, NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEARANDA, ILUMINIDO B. PERACULLO, ANTONIO C. PEREZ, DOMINGO PEREZ, OSCAR C. PLEOS, ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA PROVIDO, FERNANDO Y. PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F. REYES, EDDIE M. RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C. ROMANCA, JACINTO ROMOC, ROMEO S. ROMUALDO, ALBERTO ROSARIO, ROMEO L. SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN G. SALIGONAN, VICTORINO SALOMON, GENEROSO J. SALONGKONG, RODOLFO E. SALVANI, JIMMY A. SAMELIN, EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A. SARAOSOS, RUDIGELIO S. SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO SERDONCILLO, RODOLFO C. SERRANO, NESTOR G. SEVILLA, SIMEON F. SIMBA, CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO A. SOLA, VICTORINO M. SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT, ALFREDO L. SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY, MANUEL T. SUPAS, WILFREDO A. TABAQUE, CONSTANCIO L. TACULAD, EUFROCINO A. TAGOTO, JR., SERAPIO TAHITIT, PANTALEON T. TAMASE, ERNESTO TARRE, MAGNO E. TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO, APOLINARIO B. TICO, ORLANDO TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA, ISABELO TORRES, JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M. URBANO, ERNESTO G. VAFLOR, FILOMENO E. VALENZUELA, SALORIANO VELASCO, RODOLFO VIDAL, WALTER VILLAFAE, DANTE VILLALVA, PERIGRINO P. VILLARAN, JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY T. VILLAVA, HENRY C. VILLEGAS, DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M. YBERA, EDUARDO G. YUMANG, HENRY R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA, FELIX N. ZABALA and GRACIANO ZAMORA, Petitioners, vs. HON. TEODORO A. DIZON, JR., Presiding Judge, Regional Trial Court, Branch 37, General Santos City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL CORP., STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO., DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL MONTE TROPICAL FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS, INC., Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 125598 THE DOW CHEMICAL COMPANY and OCCIDENTAL CHEMICAL CORPORATION, Petitioners, vs. BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A. ABISON, FELIPE ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE ALCANTARA, NUMERIANO S. ALCARIA, FERNANDO C. ALEJADO, LEOPOLDO N. ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR AMOLATA, RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E. ANTECRISTO, ISAGANI D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO, HERMINIGILDO AQUINO, MARCELO S. AQUINO, JR., FELIPE P. ARANIA, ULYSES M. ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL, EDGARADO P. ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON M. BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI, HERMOGENES T. BARBECHO, ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO BASAS, ALEJANDRO G. BATULAN, DOMINGO A. BAUTISTA, VICTOR BAYANI, BENIGNO BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B. BUBUNGAN, FERNANDO B. BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M. BURDEOS, VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C. CACHUELA, BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A. CALISO, NORBERTO F. CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO, VICTORIANO CANETE, DOMINADOR P. CANTILLO, FRUCTUSO P. CARBAJOSA, VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S. CASTAARES, FLAVIANO C. CASTAARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B. CAUSING, ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE V. CONCHA, ALBERT CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO, CORNELIO A. CRESENCIO, ALEX CRUZ, ROGER CRUZ, RANSAM CRUZ, CANUTO M. DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO DAPROZA, VIRGILIO P. DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG, DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA CRUZ, ELIEZER R. DELA TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE P. DENOLAN, RUBENCIO P. DENOY, RODRIGO M. DERMIL, ROLANDO B. DIAZ, LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO DIONG, AMADO R. DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO, NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M. EMBRADORA, MIGUEL EMNACE, RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA, DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO C. ENTERO, FORTUNATA ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA, LAZARO A. ESPAOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D. FERNANDO, GREGORIO S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR, ANTONIO M. FLORES, REDENTOR T. FLOREZA, NORBERTO J. FUENTES, RICARDO C. GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V. GARCESA, BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V. GIMENA, EARLWIN L. GINGOYO, ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE GONZALES, AMADO J. GUMERE, LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO HIPOLITO, TORIBIO S ILLUSORIO, TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO B. JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T. JUCAR, NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C. LABAY, AVELINO L. LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO J. LAS PEAS, ISMAEL LASDOCE, RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ, ARISTON LOS BAEZ, CONCISO L. LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO LUNTAO, JR., EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D. MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B. MAMARADLO, PANFILO A. MANADA, SR., RICARDO S. MANDANI, CONCHITA MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO T. MANSANES, EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R. MASIGLAT, DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA, ROSITA MENDOZA, GREGORIO R. MESA, RENATO N. MILLADO, ANTONIO L. MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P.

MONDIA, JUANITO P. MONDIA, RICARDO MONTAO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUEZ, CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS, NEMESIO G. NICOLAS, ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR., TEODORO B. OCRETO, BIBIANO C. ODI, ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO M. PABIONA, NARCISO J. PADILLA, NELSON G. PADIOS, SR., FRANCISCO G. PAGUNTALAN, RENE B. PALENCIA, MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO PARAGUAS, NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEARANDA, ILUMINIDO B. PERACULLO, ANTONIO C. PEREZ, DOMINGO PEREZ, OSCAR C. PLEOS, ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA PROVIDO, FERNANDO Y. PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F. REYES, EDDIE M. RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C. ROMANCA, JACINTO ROMOC, ROMEO S. ROMUALDO, ALBERTO ROSARIO, ROMEO L. SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN B. SALIGONAN, VICTORINO SALOMON, GENEROSO M. SALONGKONG, RODOLFO E. SALVANI, JIMMY A. SAMELIN, EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A. SARAOSOS, RUDIGELIO S. SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO SERDONCILLO, RODOLFO C. SERRANO, NESTOR G. SEVILLA, SIMEON F. SIMBA, CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO A. SOLA, VICTORINO M. SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT, ALFREDO L. SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY, MANUEL T. SUPAS, WILFREDO A. TABAQUE, CONSTANCIO L. TACULAD, EUFROCINO A. TAGOTO, JR., SERAPIO TAHITIT, PANTALEON T. TAMASE, ERNESTO TARRE, MAGNO E. TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO, APOLINARIO B. TICO, ORLANDO TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA, ISABELO TORRES, JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M. URBANO, ERNESTO G. VAFLOR, FILOMENO E. VALENZUELA, SALORIANO VELASCO, RODOLFO VIDAL, WALTER VILLAFAE, DANTE VILLALVA, PERIGRINO P. VILLARAN, JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY T. VILLAVA, HENRY C. VILLEGAS, DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M. YBERA, EDUARDO G. YUMANG, HENRY R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA, FELIX N. ZABALA, and GRACIANO ZAMORA, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 126654 CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO, HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO

LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Petitioners, vs. THE HON. ROMEO D. MARASIGAN, Presiding Judge of Regional Trial Court, Branch 16, Davao City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL CORP., STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO., DOLE FOOD CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL MONTE TROPICAL FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS, INC., Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 127856 DEL MONTE FRESH PRODUCE N.A. and DEL MONTE TROPICAL FRUIT CO., Petitioners, vs. THE REGIONAL TRIAL COURT OF DAVAO CITY, BRANCHES 16 AND 13, CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO, HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR

MONAPCO, SILVANO MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD, ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 128398 CHIQUITA BRANDS, INC., and CHIQUITA BRANDS INTERNATIONAL, INC., Petitioners, vs. HON. ANITA ALFELOR-ALAGABAN, in her capacity as Presiding Judge of the Regional Trial Court, Davao City, Branch 13, CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ, QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA, ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO, RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G. GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO, HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS, ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE, ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M. LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE, RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP, AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P. PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG, RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO, ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD,

ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E. TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA, ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Respondents. DECISION LEONARDO-DE CASTRO, J.: Before the Court are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, which arose out of two civil cases that were filed in different courts but whose factual background and issues are closely intertwined. The petitions in G.R. Nos. 125078 and 125598 both assail the Order dated May 20, 1996 of the Regional Trial Court (RTC) of General Santos City, Branch 37, in Civil Case No. 5617. The said Order decreed the dismissal of the case in view of the perceived lack of jurisdiction of the RTC over the subject matter of the complaint. The petition in G.R. No. 125598 also challenges the Orders dated June 4, 4 5 1996 and July 9, 1996, which held that the RTC of General Santos City no longer had jurisdiction to proceed with Civil Case No. 5617. On the other hand, the petitions in G.R. Nos. 126654, 127856, and 128398 seek the reversal of the 9 Order dated October 1, 1996 of the RTC of Davao City, Branch 16, in Civil Case No. 24,251-96, which also dismissed the case on the ground of lack of jurisdiction. G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were consolidated in the Resolutions dated 10 11 12 February 10, 1997, April 28, 1997 and March 10, 1999. The factual antecedents of the petitions are as follows: Proceedings before the Texas Courts Beginning 1993, a number of personal injury suits were filed in different Texas state courts by citizens of twelve foreign countries, including the Philippines. The thousands of plaintiffs sought damages for injuries they allegedly sustained from their exposure to dibromochloropropane (DBCP), a chemical used to kill nematodes (worms), while working on farms in 23 foreign countries. The cases were eventually transferred to, and consolidated in, the Federal District Court for the Southern District of Texas, Houston Division. The cases therein that involved plaintiffs from the Philippines were "Jorge Colindres Carcamo, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-94-1359, and "Juan Ramon Valdez, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-95-1356. The defendants in the consolidated cases prayed for the dismissal of all the actions under the doctrine of forum non conveniens. In a Memorandum and Order dated July 11, 1995, the Federal District Court conditionally granted the defendants motion to dismiss. Pertinently, the court ordered that: Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90 days after the entry of this Memorandum and Order provided that defendants and third- and fourth-party defendants have: (1) participated in expedited discovery in the United States xxx; (2) either waived or accepted service of process and waived any other jurisdictional defense within 40 days after the entry of this Memorandum and Order in any action commenced by a plaintiff in these actions in his home country or the country in which his injury occurred. Any
6 7 8 1 2 3

plaintiff desiring to bring such an action will do so within 30 days after the entry of this Memorandum and Order; (3) waived within 40 days after the entry of this Memorandum and Order any limitations-based defense that has matured since the commencement of these actions in the courts of Texas; (4) stipulated within 40 days after the entry of this Memorandum and Order that any discovery conducted during the pendency of these actions may be used in any foreign proceeding to the same extent as if it had been conducted in proceedings initiated there; and (5) submitted within 40 days after the entry of this Memorandum and Order an agreement binding them to satisfy any final judgment rendered in favor of plaintiffs by a foreign court. xxxx Notwithstanding the dismissals that may result from this Memorandum and Order, in the event that the highest court of any foreign country finally affirms the dismissal for lack of jurisdiction of an action commenced by a plaintiff in these actions in his home country or the country in which he was injured, that plaintiff may return to this court and, upon proper motion, the court will resume jurisdiction over the action 13 as if the case had never been dismissed for [forum non conveniens]. Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos. 125078 and 125598 In accordance with the above Memorandum and Order, a total of 336 plaintiffs from General Santos City 14 (the petitioners in G.R. No. 125078, hereinafter referred to as NAVIDA, et al.) filed a Joint Complaint in the RTC of General Santos City on August 10, 1995. The case was docketed as Civil Case No. 5617. Named as defendants therein were: Shell Oil Co. (SHELL); Dow Chemical Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit Co., Standard Fruit Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to as DOLE); Chiquita Brands, Inc. and Chiquita Brands International, Inc. (CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte Tropical Fruit Co. (hereinafter collectively referred to as DEL MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac Chemical Corp. (The aforementioned defendants are hereinafter collectively referred to as defendant companies.) Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to the reproductive systems which they allegedly suffered because of their exposure to DBCP. They claimed, among others, that they were exposed to this chemical during the early 1970s up to the early 1980s when they used the same in the banana plantations where they worked at; and/or when they resided within the agricultural area where such chemical was used. Navida, et al., claimed that their illnesses and injuries were due to the fault or negligence of each of the defendant companies in that they produced, sold and/or otherwise put into the stream of commerce DBCP-containing products. According to NAVIDA, et al., they were allowed to be exposed to the said products, which the defendant companies knew, or ought to have known, were highly injurious to the formers health and well-being. Instead of answering the complaint, most of the defendant companies respectively filed their Motions for 15 Bill of Particulars. During the pendency of the motions, on March 13, 1996, NAVIDA, et al., filed an 16 Amended Joint Complaint, excluding Dead Sea Bromine Co., Ltd., Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical Corp. as party defendants. Again, the remaining defendant companies filed their various Motions for Bill of Particulars. 18 1996, DOW filed an Answer with Counterclaim.
17

On May 15,

On May 20, 1996, without resolving the motions filed by the parties, the RTC of General Santos City issued an Order dismissing the complaint. First, the trial court determined that it did not have jurisdiction to hear the case, to wit: THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL TRIAL COURT SHOULD BE DISMISSED FOR LACK OF JURISDICTION xxxx The substance of the cause of action as stated in the complaint against the defendant foreign companies cites activity on their part which took place abroad and had occurred outside and beyond the territorial domain of the Philippines. These acts of defendants cited in the complaint included the manufacture of pesticides, their packaging in containers, their distribution through sale or other disposition, resulting in their becoming part of the stream of commerce. Accordingly, the subject matter stated in the complaint and which is uniquely particular to the present case, consisted of activity or course of conduct engaged in by foreign defendants outside Philippine territory, hence, outside and beyond the jurisdiction of Philippine Courts, including the present Regional 19 Trial Court. Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in their complaint is a tort category that is not recognized in Philippine laws. Said the trial court: THE TORT ASSERTED IN THE PRESENT COMPLAINT AGAINST DEFENDANT FOREIGN COMPANIES IS NOT WITHIN THE SUBJECT MATTER JURISDICTION OF THE REGIONAL TRIAL COURT, BECAUSE IT IS NOT A TORT CATEGORY WITHIN THE PURVIEW OF THE PHILIPPINE LAW The specific tort asserted against defendant foreign companies in the present complaint is product liability tort. When the averments in the present complaint are examined in terms of the particular categories of tort recognized in the Philippine Civil Code, it becomes stark clear that such averments describe and identify the category of specific tort known as product liability tort. This is necessarily so, because it is the product manufactured by defendant foreign companies, which is asserted to be the proximate cause of the damages sustained by the plaintiff workers, and the liability of the defendant foreign companies, is premised on being the manufacturer of the pesticides. It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case, if and only if the Civil Code of the Philippines, or a suppletory special law prescribes a product liability tort, inclusive of and 20 comprehending the specific tort described in the complaint of the plaintiff workers. Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into submitting their case to the Philippine courts, viz: FILING OF CASES IN THE PHILIPPINES - COERCED AND ANOMALOUS The Court views that the plaintiffs did not freely choose to file the instant action, but rather were coerced to do so, merely to comply with the U.S. District Courts Order dated July 11, 1995, and in order to keep 21 open to the plaintiffs the opportunity to return to the U.S. District Court. Fourth, the trial court ascribed little significance to the voluntary appearance of the defendant companies therein, thus: THE DEFENDANTS SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT IS ILLUSORY

Defendants have appointed their agents authorized to accept service of summons/processes in the Philippines pursuant to the agreement in the U.S. court that defendants will voluntarily submit to the jurisdiction of this court. While it is true that this court acquires jurisdiction over persons of the defendants through their voluntary appearance, it appears that such voluntary appearance of the defendants in this case is conditional. Thus in the "Defendants Amended Agreement Regarding Conditions of Dismissal for Forum Non Conveniens" (Annex to the Complaint) filed with the U.S. District Court, defendants declared that "(t)he authority of each designated representative to accept service of process will become effective upon final dismissal of these actions by the Court". The decision of the U.S. District Court dismissing the case is not yet final and executory since both the plaintiffs and defendants appealed therefrom (par. 3(h), 3(i), Amended Complaint). Consequently, since the authority of the agent of the defendants in the Philippines is conditioned on the final adjudication of the case pending with the U.S. courts, the acquisition of jurisdiction by this court over the persons of the defendants is also conditional. x x x. The appointment of agents by the defendants, being subject to a suspensive condition, thus produces no 22 legal effect and is ineffective at the moment. Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the case in the Philippine courts violated the rules on forum shopping and litis pendencia. The trial court expounded: THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING This court frowns upon the fact that the parties herein are both vigorously pursuing their appeal of the decision of the U.S. District court dismissing the case filed thereat. To allow the parties to litigate in this court when they are actively pursuing the same cases in another forum, violates the rule on forum shopping so abhorred in this jurisdiction. x x x. xxxx THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN JURISDICTION Moreover, the filing of the case in the U.S. courts divested this court of its own jurisdiction. This court takes note that the U.S. District Court did not decline jurisdiction over the cause of action. The case was dismissed on the ground of forum non conveniens, which is really a matter of venue. By taking cognizance of the case, the U.S. District Court has, in essence, concurrent jurisdiction with this court over the subject matter of this case. It is settled that initial acquisition of jurisdiction divests another of its own jurisdiction. x x x. xxxx THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA" Furthermore, the case filed in the U.S. court involves the same parties, same rights and interests, as in this case. There exists litis pendencia since there are two cases involving the same parties and interests. The court would like to emphasize that in accordance with the rule on litis pendencia x x x; the subsequent case must be dismissed. Applying the foregoing [precept] to the case-at-bar, this court concludes that since the case between the parties in the U.S. is still pending, then this case is barred by 23 the rule on "litis pendencia." In fine, the trial court held that: It behooves this Court, then to dismiss this case. For to continue with these proceedings, would be violative of the constitutional provision on the Bill of Rights guaranteeing speedy disposition of cases (Ref. Sec. 16, Article III, Constitution). The court has no other choice. To insist on further proceedings with this

case, as it is now presented, might accord this court a charming appearance. But the same insistence would actually thwart the very ends of justice which it seeks to achieve. This evaluation and action is made not on account of but rather with due consideration to the fact that the dismissal of this case does not necessarily deprive the parties especially the plaintiffs of their possible remedies. The court is cognizant that the Federal Court may resume proceedings of that earlier case between the herein parties involving the same acts or omissions as in this case. WHEREFORE, in view of the foregoing considerations, this case is now considered DISMISSED. On June 4, 1996, the RTC of General Santos City likewise issued an Order, with Counterclaim.
25 24

dismissing DOWs Answer

CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration of the RTC Order dated 27 May 20, 1996, while DOW filed a motion for reconsideration of the RTC Order dated June 4, 1996. 28 Subsequently, DOW and OCCIDENTAL also filed a Joint Motion for Reconsideration of the RTC Order dated May 20, 1996. In an Order dated July 9, 1996, the RTC of General Santos City declared that it had already lost its jurisdiction over the case as it took into consideration the Manifestation of the counsel of NAVIDA, et al., which stated that the latter had already filed a petition for review on certiorari before this Court. CHIQUITA and SHELL filed their motions for reconsideration
30 29

26

of the above order.

On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in order to assail the RTC Order dated May 20, 1996, which was docketed as G.R. No. 125078. The RTC of General Santos City then issued an Order dated August 14, 1996, which merely noted the incidents still pending in Civil Case No. 5617 and reiterated that it no longer had any jurisdiction over the case. On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review on Certiorari, challenging the orders of the RTC of General Santos City dated May 20, 1996, June 4, 1996 and July 9, 1996. Their petition was docketed as G.R. No. 125598. In their petition, DOW and OCCIDENTAL aver that the RTC of General Santos City erred in ruling that it has no jurisdiction over the subject matter of the case as well as the persons of the defendant companies. In a Resolution No. 125078.
33 32 31

dated October 7, 1996, this Court resolved to consolidate G.R. No. 125598 with G.R.

CHIQUITA filed a Petition for Review on Certiorari, which sought the reversal of the RTC Orders dated May 20, 1996, July 9, 1996 and August 14, 1996. The petition was docketed as G.R. No. 126018. In a 35 Resolution dated November 13, 1996, the Court dismissed the aforesaid petition for failure of CHIQUITA to show that the RTC committed grave abuse of discretion. CHIQUITA filed a Motion for 36 37 Reconsideration, but the same was denied through a Resolution dated January 27, 1997. Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos. 126654, 127856, and 128398 Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL MONTE, and CHIQUITA was filed before Branch 16 of the RTC of Davao City by 155 plaintiffs from Davao City. This case was docketed as Civil Case No. 24,251-96. These plaintiffs (the petitioners in G.R. No. 126654, 38 hereinafter referred to as ABELLA, et al.) amended their Joint-Complaint on May 21, 1996.

34

Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the banana plantation and/or as residents near the said plantation, they were made to use and/or were exposed to nematocides, which contained the chemical DBCP. According to ABELLA, et al., such exposure resulted in "serious and permanent injuries to their health, including, but not limited to, sterility and severe injuries 39 to their reproductive capacities." ABELLA, et al., claimed that the defendant companies manufactured, produced, sold, distributed, used, and/or made available in commerce, DBCP without warning the users of its hazardous effects on health, and without providing instructions on its proper use and application, which the defendant companies knew or ought to have known, had they exercised ordinary care and prudence. Except for DOW, the other defendant companies filed their respective motions for bill of particulars to which ABELLA, et al., filed their opposition. DOW and DEL MONTE filed their respective Answers dated May 17, 1996 and June 24, 1996. The RTC of Davao City, however, junked Civil Case No. 24,251-96 in its Order dated October 1, 1996, which, in its entirety, reads: Upon a thorough review of the Complaint and Amended Complaint For: Damages filed by the plaintiffs against the defendants Shell Oil Company, DOW Chemicals Company, Occidental Chemical Corporation, Standard Fruit Company, Standard Fruit and Steamship, DOLE Food Company, DOLE Fresh Fruit Company, Chiquita Brands, Inc., Chiquita Brands International, Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign corporations with Philippine Representatives, the Court, as correctly pointed out by one of the defendants, is convinced that plaintiffs "would have this Honorable Court dismiss the case to pave the way for their getting an affirmance by the Supreme Court" (#10 of Defendants Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruit Co., Reply to Opposition dated July 22, 1996). Consider these: 1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in the Philippines; they have no agents as well (par. 18); plaintiffs are suing the defendants for tortuous acts committed by these foreign corporations on their respective countries, as plaintiffs, after having elected to sue in the place of defendants residence, are now compelled by a decision of a Texas District Court to file cases under torts in this jurisdiction forcauses of actions which occurred abroad (par. 19); a petition was filed by same plaintiffs against same defendants in the Courts of Texas, USA, plaintiffs seeking for payment of damages based on negligence, strict liability, conspiracy and international tort theories (par. 27); upon defendants Motion to Dismiss on Forum non [conveniens], said petition was provisionally dismissed on condition that these cases be filed in the Philippines or before 11 August 1995 (Philippine date; Should the Philippine Courts refuse or deny jurisdiction, the U. S. Courts will reassume jurisdiction.) 11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal District Court issued a Memorandum and Order conditionally dismissing several of the consolidated actions including those filed by the Filipino complainants. One of the conditions imposed was for the plaintiffs to file actions in their home countries or the countries in which they were injured x x x. Notwithstanding, the Memorandum and [O]rder further provided that should the highest court of any foreign country affirm the dismissal for lack of jurisdictions over these actions filed by the plaintiffs in their home countries [or] the countries where they were injured, the said plaintiffs may return to that court and, upon proper motion, the Court will resume jurisdiction as if the case had never been dismissed for forum non conveniens. The Court however is constrained to dismiss the case at bar not solely on the basis of the above but because it shares the opinion of legal experts given in the interview made by the Inquirer in its Special report "Pesticide Cause Mass Sterility," to wit: 1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The Philippines should be an inconvenient forum to file this kind of damage suit against foreign companies since the causes of action alleged in the petition do not exist under Philippine laws. There has been no

decided case in Philippine Jurisprudence awarding to those adversely affected by DBCP. This means there is no available evidence which will prove and disprove the relation between sterility and DBCP. 2. Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is allowed in the Philippines the device has been employed strictly. Mass sterility will not qualify as a class suit injury within the contemplation of Philippine statute. 3. Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of doctrine here that permits these causes to be heard. No product liability ever filed or tried here. Case ordered dismissed.
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Docketed as G.R. No. 126654, the petition for review, filed on November 12, 1996 by ABELLA, et al., assails before this Court the above-quoted order of the RTC of Davao City. ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil Case No. 24,251-96 on the ground of lack of jurisdiction. According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject matter of the case since Articles 2176 and 2187 of the Civil Code are broad enough to cover the acts complained of and to support their claims for damages. ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal luminaries reported in a newspaper, by the RTC of Davao City is bereft of basis. According to them, their cause of action is based on quasi-delict under Article 2176 of the Civil Code. They also maintain that the absence of jurisprudence regarding the award of damages in favor of those adversely affected by the DBCP does not preclude them from presenting evidence to prove their allegations that their exposure to DBCP caused their sterility and/or infertility. SHELL, DOW, and CHIQUITA each filed their respective motions for reconsideration of the Order dated October 1, 1996 of the RTC of Davao City. DEL MONTE also filed its motion for reconsideration, which contained an additional motion for the inhibition of the presiding judge. The presiding judge of Branch 16 then issued an Order dated December 2, 1996, voluntarily inhibiting himself from trying the case. Thus, the case was re-raffled to Branch 13 of the RTC of Davao City. In an Order dated December 16, 1996, the RTC of Davao City affirmed the Order dated October 1, 1996, and denied the respective motions for reconsideration filed by defendant companies. Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997, questioning the Orders dated October 1, 1996 and December 16, 1996 of the RTC of Davao City. This case was docketed as G.R. No. 128398. In its petition, CHIQUITA argues that the RTC of Davao City erred in dismissing the case motu proprio as it acquired jurisdiction over the subject matter of the case as well as over the persons of the defendant companies which voluntarily appeared before it. CHIQUITA also claims that the RTC of Davao City cannot dismiss the case simply on the basis of opinions of alleged legal experts appearing in a newspaper article. Initially, this Court in its Resolution dated July 28, 1997, dismissed the petition filed by CHIQUITA for submitting a defective certificate against forum shopping. CHIQUITA, however, filed a motion for 44 reconsideration, which was granted by this Court in the Resolution dated October 8, 1997.
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On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this Court assailing the above-mentioned orders of the RTC of Davao City. Its petition was docketed as G.R. No. 127856. DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil Case No. 24,251-96, as defined under the law and that the said court already obtained jurisdiction over its person by its voluntary appearance and the filing of a motion for bill of particulars and, later, an answer to the complaint. According to DEL MONTE, the RTC of Davao City, therefore, acted beyond its authority when it dismissed the case motu proprio or without any motion to dismiss from any of the parties to the case. In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this Court consolidated G.R. Nos. 125078, 125598, 126654, 127856, and 128398. The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-Respondents filed by NAVIDA, et al. and ABELLA, et al. On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed before this Court a Consolidated 45 Motion (to Drop Party-Respondents). The plaintiff claimants alleged that they had amicably settled their cases with DOW, OCCIDENTAL, and SHELL sometime in July 1997. This settlement agreement was evidenced by facsimiles of the "Compromise Settlement, Indemnity, and Hold Harmless Agreement," which were attached to the said motion. Pursuant to said agreement, the plaintiff claimants sought to withdraw their petitions as against DOW, OCCIDENTAL, and SHELL. DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as the settlement entered into between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL. The Memoranda of the Parties Considering the allegations, issues, and arguments adduced by the parties, this Court, in a Resolution 46 dated June 22, 1998, required all the parties to submit their respective memoranda. CHIQUITA filed its Memorandum on August 28, 1998; SHELL asked to be excused from the filing of a memorandum alleging that it had already executed a compromise agreement with the plaintiff 48 49 claimants. DOLE filed its Memorandum on October 12, 1998 while DEL MONTE filed on October 13, 50 1998. NAVIDA, et al., and ABELLA, et al., filed their Consolidated Memorandum on February 3, 51 52 1999; and DOW and OCCIDENTAL jointly filed a Memorandum on December 23, 1999. The Motion to Withdraw Petition for Review in G.R. No. 125598 On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in G.R. No. 53 125598, explaining that the said petition "is already moot and academic and no longer presents a justiciable controversy" since they have already entered into an amicable settlement with NAVIDA, et al. DOW and OCCIDENTAL added that they have fully complied with their obligations set forth in the 1997 Compromise Agreements. DOLE filed its Manifestation dated September 6, 2004, interposing no objection to the withdrawal of the petition, and further stating that they maintain their position that DOW and OCCIDENTAL, as well as other settling defendant companies, should be retained as defendants for purposes of prosecuting the cross-claims of DOLE, in the event that the complaint below is reinstated. NAVIDA, et al., also filed their Comment dated September 14, 2004, stating that they agree with the view of DOW and OCCIDENTAL that the petition in G.R. No. 125598 has become moot and academic because Civil Case No. 5617 had already been amicably settled by the parties in 1997.
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On September 27, 2004, DEL MONTE filed its Comment on Motion to Withdraw Petition for Review Filed 56 by Petitioners in G.R. No. 125598, stating that it has no objections to the withdrawal of the petition filed by DOW and OCCIDENTAL in G.R. No. 125598. In a Resolution dated October 11, 2004, this Court granted, among others, the motion to withdraw petition for review filed by DOW and OCCIDENTAL. THE ISSUES In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al., presented the following issues for our consideration: IN REFUTATION I. THE COURT DISMISSED THE CASE DUE TO LACK OF JURISDICTION. a) The court did not simply dismiss the case because it was filed in bad faith with petitioners intending to have the same dismissed and returned to the Texas court. b) The court dismissed the case because it was convinced that it did not have jurisdiction. IN SUPPORT OF THE PETITION II. THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF THE CASE. a. The acts complained of occurred within Philippine territory. b. Art. 2176 of the Civil Code of the Philippines is broad enough to cover the acts complained of. c. Assumption of jurisdiction by the U.S. District Court over petitioner[s] claims di d not divest Philippine [c]ourts of jurisdiction over the same. d. The Compromise Agreement and the subsequent Consolidated Motion to Drop Party Respondents Dow, Occidental and Shell does not unjustifiably prejudice remaining respondents 58 Dole, Del Monte and Chiquita. DISCUSSION On the issue of jurisdiction Essentially, the crux of the controversy in the petitions at bar is whether the RTC of General Santos City and the RTC of Davao City erred in dismissing Civil Case Nos. 5617 and 24,251-96, respectively, for lack of jurisdiction. Remarkably, none of the parties to this case claims that the courts a quo are bereft of jurisdiction to determine and resolve the above-stated cases. All parties contend that the RTC of General Santos City and the RTC of Davao City have jurisdiction over the action for damages, specifically for approximately P2.7 million for each of the plaintiff claimants. NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or omissions of defendant companies occurred within Philippine territory. Specifically, the use of and exposure to DBCP that was manufactured, distributed or otherwise put into the stream of commerce by defendant companies
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happened in the Philippines. Said fact allegedly constitutes reasonable basis for our courts to assume jurisdiction over the case. Furthermore, NAVIDA, et al., and ABELLA, et al., assert that the provisions of Chapter 2 of the Preliminary Title of the Civil Code, as well as Article 2176 thereof, are broad enough to cover their claim for damages. Thus, NAVIDA, et al., and ABELLA, et al., pray that the respective rulings of the RTC of General Santos City and the RTC of Davao City in Civil Case Nos. 5617 and 24,251-96 be reversed and that the said cases be remanded to the courts a quo for further proceedings. DOLE similarly maintains that the acts attributed to defendant companies constitute a quasi-delict, which falls under Article 2176 of the Civil Code. In addition, DOLE states that if there were no actionable wrongs committed under Philippine law, the courts a quo should have dismissed the civil cases on the ground that the Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., stated no cause of action against the defendant companies. DOLE also argues that if indeed there is no positive law defining the alleged acts of defendant companies as actionable wrong, Article 9 of the Civil Code dictates that a judge may not refuse to render a decision on the ground of insufficiency of the law. The court may still resolve the case, applying the customs of the place and, in the absence thereof, the general principles of law. DOLE posits that the Philippines is the situs of the tortious acts allegedly committed by defendant companies as NAVIDA, et al., and ABELLA, et al., point to their alleged exposure to DBCP which occurred in the Philippines, as the cause of the sterility and other reproductive system problems that they allegedly suffered. Finally, DOLE adds that the RTC of Davao City gravely erred in relying upon newspaper reports in dismissing Civil Case No. 24,251-96 given that newspaper articles are hearsay and without any evidentiary value. Likewise, the alleged legal opinions cited in the newspaper reports were taken judicial notice of, without any notice to the parties. DOLE, however, opines that the dismissal of Civil Case Nos. 5617 and 24,251-96 was proper, given that plaintiff claimants merely prosecuted the cases with the sole intent of securing a dismissal of the actions for the purpose of convincing the U.S. Federal District Court to re-assume jurisdiction over the cases. In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject matter of the cases filed before them. The Amended Joint-Complaints sought approximately P2.7 million in damages for each plaintiff claimant, which amount falls within the jurisdiction of the RTC. CHIQUITA avers that the pertinent matter is the place of the alleged exposure to DBCP, not the place of manufacture, packaging, distribution, sale, etc., of the said chemical. This is in consonance with the lex loci delicti commisi theory in determining the situs of a tort, which states that the law of the place where the alleged wrong was committed will govern the action. CHIQUITA and the other defendant companies also submitted themselves to the jurisdiction of the RTC by making voluntary appearances and seeking for affirmative reliefs during the course of the proceedings. None of the defendant companies ever objected to the exercise of jurisdiction by the courts a quo over their persons. CHIQUITA, thus, prays for the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the RTC of Davao City, respectively. The RTC of General Santos City and the RTC of Davao City have jurisdiction over Civil Case Nos. 5617 and 24,251-96, respectively The rule is settled that jurisdiction over the subject matter of a case is conferred by law and is determined by the allegations in the complaint and the character of the relief sought, irrespective of whether the 59 plaintiffs are entitled to all or some of the claims asserted therein. Once vested by law, on a particular court or body, the jurisdiction over the subject matter or nature of the action cannot be dislodged by anybody other than by the legislature through the enactment of a law. At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, was: SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: xxxx

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of 60 the abovementioned items exceeds Two hundred thousand pesos (P200,000.00). Corollary thereto, Supreme Court Administrative Circular No. 09-94, states: 2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies to cases where the damages are merely incidental to or a consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action, or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court. Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded Amended Joint-Complaints filed before the courts a quo, the following prayer: PRAYER WHEREFORE, premises considered, it is most respectfully prayed that after hearing, judgment be rendered in favor of the plaintiffs ordering the defendants: a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million Five Hundred Thousand Pesos (P1,500,00.00); b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand Pesos (P400,000.00) each; c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand Pesos (P600,000.00); d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos (P200,000.00); and e) TO PAY THE COSTS of the suit.
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From the foregoing, it is clear that the claim for damages is the main cause of action and that the total amount sought in the complaints is approximately P2.7 million for each of the plaintiff claimants. The RTCs unmistakably have jurisdiction over the cases filed in General Santos City and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al., fall within the purview of the definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129. Moreover, the allegations in both Amended Joint-Complaints narrate that: THE CAUSES OF ACTION 4. The Defendants manufactured, sold, distributed, used, AND/OR MADE AVAILABLE IN COMMERCE nematocides containing the chemical dibromochloropropane, commonly known as DBCP. THE CHEMICAL WAS USED AGAINST the parasite known as the nematode, which plagued banana plantations, INCLUDING THOSE in the Philippines. AS IT TURNED OUT, DBCP not only destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS ON THE HEALTH OF PERSONS EXPOSED TO IT AFFECTING the human reproductive system as well.

5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s WHILE (a) they used this product in the banana plantations WHERE they were employed, and/or (b) they resided within the agricultural area WHERE IT WAS USED. As a result of such exposure, the plaintiffs suffered serious and permanent injuries TO THEIR HEALTH, including, but not limited to, STERILITY and severe injuries to their reproductive capacities. 6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY MANUFACTURED, produced, sold, and/or USED DBCP and/or otherwise, PUT THE SAME into the stream of commerce, WITHOUT INFORMING THE USERS OF ITS HAZARDOUS EFFECTS ON HEALTH AND/OR WITHOUT INSTRUCTIONS ON ITS PROPER USE AND APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing materials which THEY knew, or in the exercise of ordinary care and prudence ought to have known, were highly harmful and injurious to the Plaintiffs health and well-being. 7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, DISTRIBUTED, MADE AVAILABLE OR PUT DBCP INTO THE STREAM OF COMMERCE were negligent OR AT FAULT in that they, AMONG OTHERS: a. Failed to adequately warn Plaintiffs of the dangerous characteristics of DBCP, or to cause their subsidiaries or affiliates to so warn plaintiffs; b. Failed to provide plaintiffs with information as to what should be reasonably safe and sufficient clothing and proper protective equipment and appliances, if any, to protect plaintiffs from the harmful effects of exposure to DBCP, or to cause their subsidiaries or affiliates to do so; c. Failed to place adequate warnings, in a language understandable to the worker, on containers of DBCP-containing materials to warn of the dangers to health of coming into contact with DBCP, or to cause their subsidiaries or affiliates to do so; d. Failed to take reasonable precaution or to exercise reasonable care to publish, adopt and enforce a safety plan and a safe method of handling and applying DBCP, or to cause their subsidiaries or affiliates to do so; e. Failed to test DBCP prior to releasing these products for sale, or to cause their subsidiaries or affiliates to do so; and f. Failed to reveal the results of tests conducted on DBCP to each plaintiff, governmental agencies and the public, or to cause their subsidiaries or affiliate to do so. 8. The illnesses and injuries of each plaintiff are also due to the FAULT or negligence of defendants Standard Fruit Company, Dole Fresh Fruit Company, Dole Food Company, Inc., Chiquita Brands, Inc. and Chiquita Brands International, Inc. in that they failed to exercise reasonable care to prevent each plaintiffs harmful exposure to DBCP-containing products which defendants knew or should have known were hazardous to each plaintiff in that they, AMONG OTHERS: a. Failed to adequately supervise and instruct Plaintiffs in the safe and proper application of DBCP-containing products; b. Failed to implement proper methods and techniques of application of said products, or to cause such to be implemented; c. Failed to warn Plaintiffs of the hazards of exposure to said products or to cause them to be so warned;

d. Failed to test said products for adverse health effects, or to cause said products to be tested; e. Concealed from Plaintiffs information concerning the observed effects of said products on Plaintiffs; f. Failed to monitor the health of plaintiffs exposed to said products; g. Failed to place adequate labels on containers of said products to warn them of the damages of said products; and h. Failed to use substitute nematocides for said products or to cause such substitutes to [be] 62 used. (Emphasis supplied and words in brackets ours.) Quite evidently, the allegations in the Amended Joint-Complaints of NAVIDA, et al., and ABELLA, et al., attribute to defendant companies certain acts and/or omissions which led to their exposure to nematocides containing the chemical DBCP. According to NAVIDA, et al., and ABELLA, et al., such exposure to the said chemical caused ill effects, injuries and illnesses, specifically to their reproductive system. Thus, these allegations in the complaints constitute the cause of action of plaintiff claimants a quasidelict, which under the Civil Code is defined as an act, or omission which causes damage to another, there being fault or negligence. To be precise, Article 2176 of the Civil Code provides: 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. As specifically enumerated in the amended complaints, NAVIDA, et al., and ABELLA, et al., point to the acts and/or omissions of the defendant companies in manufacturing, producing, selling, using, and/or otherwise putting into the stream of commerce, nematocides which contain DBCP, "without informing the 63 users of its hazardous effects on health and/or without instructions on its proper use and application." Verily, in Citibank, N.A. v. Court of Appeals, this Court has always reminded that jurisdiction of the court over the subject matter of the action is determined by the allegations of the complaint, irrespective of whether or not the plaintiffs are entitled to recover upon all or some of the claims asserted therein. The jurisdiction of the court cannot be made to depend upon the defenses set up in the answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would almost entirely depend upon the defendants. What determines the jurisdiction of the court is the nature of the action pleaded as appearing from the allegations in the complaint. The averments therein and the character of the relief sought are the ones to be consulted. Clearly then, the acts and/or omissions attributed to the defendant companies constitute a quasi-delict which is the basis for the claim for damages filed by NAVIDA, et al., and ABELLA, et al., with individual claims of approximatelyP2.7 million for each plaintiff claimant, which obviously falls within the purview of the civil action jurisdiction of the RTCs. Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly suffered resulted from their exposure to DBCP while they were employed in the banana plantations located in the Philippines or while they were residing within the agricultural areas also located in the Philippines. The factual allegations in the Amended Joint-Complaints all point to their cause of action, which undeniably occurred in the Philippines. The RTC of General Santos City and the RTC of Davao City obviously have reasonable basis to assume jurisdiction over the cases.
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It is, therefore, error on the part of the courts a quo when they dismissed the cases on the ground of lack of jurisdiction on the mistaken assumption that the cause of action narrated by NAVIDA, et al., and ABELLA, et al., took place abroad and had occurred outside and beyond the territorial boundaries of the Philippines, i.e., "the manufacture of the pesticides, their packaging in containers, their distribution 65 through sale or other disposition, resulting in their becoming part of the stream of commerce," and, hence, outside the jurisdiction of the RTCs. Certainly, the cases below are not criminal cases where territoriality, or the situs of the act complained of, would be determinative of jurisdiction and venue for trial of cases. In personal civil actions, such as claims for payment of damages, the Rules of Court allow the action to be commenced and tried in the appropriate court, where any of the plaintiffs or defendants resides, or in the case of a non-resident 66 defendant, where he may be found, at the election of the plaintiff. In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al., and ABELLA, et al., are available only in the Philippines. First, plaintiff claimants are all residents of the Philippines, either in General Santos City or in Davao City. Second, the specific areas where they were allegedly exposed to the chemical DBCP are within the territorial jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially filed their claims for damages. Third, the testimonial and documentary evidence from important witnesses, such as doctors, co-workers, family members and other members of the community, would be easier to gather in the Philippines. Considering the great number of plaintiff claimants involved in this case, it is not far-fetched to assume that voluminous records are involved in the presentation of evidence to support the claim of plaintiff claimants. Thus, these additional factors, coupled with the fact that the alleged cause of action of NAVIDA, et al., and ABELLA, et al., against the defendant companies for damages occurred in the Philippines, demonstrate that, apart from the RTC of General Santos City and the RTC of Davao City having jurisdiction over the subject matter in the instant civil 67 cases, they are, indeed, the convenient fora for trying these cases. The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction over the persons of all the defendant companies It is well to stress again that none of the parties claims that the courts a quo lack jurisdiction over the cases filed before them. All parties are one in asserting that the RTC of General Santos City and the RTC of Davao City have validly acquired jurisdiction over the persons of the defendant companies in the action below. All parties voluntarily, unconditionally and knowingly appeared and submitted themselves to the jurisdiction of the courts a quo. Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that "[t]he defendants voluntary appearance in the action shall be equivalent to service of summons." In this connection, all the defendant companies designated and authorized representatives to receive summons and to represent them in the proceedings before the courts a quo. All the defendant companies submitted themselves to the jurisdiction of the courts a quo by making several voluntary appearances, by praying for various affirmative reliefs, and by actively participating during the course of the proceedings below. In line herewith, this Court, in Meat Packing Corporation of the Philippines v. Sandiganbayan, held that jurisdiction over the person of the defendant in civil cases is acquired either by his voluntary appearance in court and his submission to its authority or by service of summons. Furthermore, the active participation of a party in the proceedings is tantamount to an invocation of the courts jurisdiction and a willingness to abide by the resolution of the case, and will bar said party from later on impugning the court or bodys 69 jurisdiction. Thus, the RTC of General Santos City and the RTC of Davao City have validly acquired jurisdiction over the persons of the defendant companies, as well as over the subject matter of the instant case. What is more, this jurisdiction, which has been acquired and has been vested on the courts a quo, continues until the termination of the proceedings.
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It may also be pertinently stressed that "jurisdiction" is different from the "exercise of jurisdiction." Jurisdiction refers to the authority to decide a case, not the orders or the decision rendered therein. Accordingly, where a court has jurisdiction over the persons of the defendants and the subject matter, as in the case of the courts a quo, the decision on all questions arising therefrom is but an exercise of such jurisdiction. Any error that the court may commit in the exercise of its jurisdiction is merely an error of judgment, which does not affect its authority to decide the case, much less divest the court of the 70 jurisdiction over the case. Plaintiffs purported bad faith in filing the subject civil cases in Philippine courts Anent the insinuation by DOLE that the plaintiff claimants filed their cases in bad faith merely to procure a dismissal of the same and to allow them to return to the forum of their choice, this Court finds such argument much too speculative to deserve any merit. It must be remembered that this Court does not rule on allegations that are unsupported by evidence on record. This Court does not rule on allegations which are manifestly conjectural, as these may not exist at all. This Court deals with facts, not fancies; on realities, not appearances. When this Court acts on 71 appearances instead of realities, justice and law will be short-lived. This is especially true with respect to allegations of bad faith, in line with the basic rule that good faith is always presumed and bad faith must 72 be proved. In sum, considering the fact that the RTC of General Santos City and the RTC of Davao City have jurisdiction over the subject matter of the amended complaints filed by NAVIDA, et al., and ABELLA, et al., and that the courts a quo have also acquired jurisdiction over the persons of all the defendant companies, it therefore, behooves this Court to order the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the RTC of Davao City, respectively. On the issue of the dropping of DOW, OCCIDENTAL and SHELL as respondents in view of their amicable settlement with NAVIDA, et al., and ABELLA, et al. NAVIDA, et al., and ABELLA, et al., are further praying that DOW, OCCIDENTAL and SHELL be dropped as respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96. The non-settling defendants allegedly manifested that they intended to file their cross-claims against their codefendants who entered into compromise agreements. NAVIDA, et al., and ABELLA, et al., argue that the non-settling defendants did not aver any cross-claim in their answers to the complaint and that they subsequently sought to amend their answers to plead their cross-claims only after the settlement between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL were executed. NAVIDA, et al., and ABELLA, et al., therefore, assert that the cross-claims are already barred. In their Memoranda, CHIQUITA and DOLE are opposing the above motion of NAVIDA, et al., and ABELLA, et al., since the latters Amended Complaints cited several instances of tortious condu ct that were allegedly committed jointly and severally by the defendant companies. This solidary obligation on the part of all the defendants allegedly gives any co-defendant the statutory right to proceed against the other co-defendants for the payment of their respective shares. Should the subject motion of NAVIDA, et al., and ABELLA, et al., be granted, and the Court subsequently orders the remand of the action to the trial court for continuance, CHIQUITA and DOLE would allegedly be deprived of their right to prosecute their cross-claims against their other co-defendants. Moreover, a third party complaint or a separate trial, according to CHIQUITA, would only unduly delay and complicate the proceedings. CHIQUITA and DOLE similarly insist that the motion of NAVIDA, et al., and ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL as respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96, be denied. Incidentally, on April 2, 2007, after the parties have submitted their respective memoranda, DEL MONTE 73 filed a Manifestation and Motion before the Court, stating that similar settlement agreements were

allegedly executed by the plaintiff claimants with DEL MONTE and CHIQUITA sometime in 1999. Purportedly included in the agreements were Civil Case Nos. 5617 and 24,251-96. Attached to the said manifestation were copies of the Compromise Settlement, Indemnity, and Hold Harmless Agreement between DEL MONTE and the settling plaintiffs, as well as the Release in Full executed by the 74 latter. DEL MONTE specified therein that there were "only four (4) plaintiffs in Civil Case No. 5617 who 75 are claiming against the Del Monte parties" and that the latter have executed amicable settlements which completely satisfied any claims against DEL MONTE. In accordance with the alleged compromise agreements with the four plaintiffs in Civil Case No. 5617, DEL MONTE sought the dismissal of the Amended Joint-Complaint in the said civil case. Furthermore, in view of the above settlement agreements with ABELLA, et al., in Civil Case No. 24,251-96, DEL MONTE stated that it no longer wished to pursue its petition in G.R. No. 127856 and accordingly prayed that it be allowed to withdraw the same. Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be remanded to the RTC of General Santos City and the RTC of Davao City, respectively, the Court deems that the Consolidated Motions (to Drop Party-Respondents) filed by NAVIDA, et al., and ABELLA, et al., should likewise be referred to the said trial courts for appropriate disposition. Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced." Like any other contract, an extrajudicial compromise agreement is not excepted from rules and principles of a contract. It is a consensual contract, perfected by mere consent, the latter being manifested by the meeting of the 76 offer and the acceptance upon the thing and the cause which are to constitute the contract. Judicial 77 approval is not required for its perfection. A compromise has upon the parties the effect and authority of 78 79 res judicata and this holds true even if the agreement has not been judicially approved. In addition, as a binding contract, a compromise agreement determines the rights and obligations of only the parties to 80 it. In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of Davao City should first receive in evidence and examine all of the alleged compromise settlements involved in the cases at bar to determine the propriety of dropping any party as a defendant therefrom. The Court notes that the Consolidated Motions (to Drop Party-Respondents) that was filed by NAVIDA, et al., and ABELLA, et al., only pertained to DOW, OCCIDENTAL and SHELL in view of the latter companies alleged compromise agreements with the plaintiff claimants. However, in subsequent developments, DEL MONTE and CHIQUITA supposedly reached their own amicable settlements with the plaintiff claimants, but DEL MONTE qualified that it entered into a settlement agreement with only four of the plaintiff claimants in Civil Case No. 5617. These four plaintiff claimants were allegedly the only ones who were asserting claims against DEL MONTE. However, the said allegation of DEL MONTE was simply stipulated in their Compromise Settlement, Indemnity, and Hold Harmless Agreement and its truth could not be verified with certainty based on the records elevated to this Court. Significantly, the 336 plaintiff claimants in Civil Case No. 5617 jointly filed a complaint without individually specifying their claims against DEL MONTE or any of the other defendant companies. Furthermore, not one plaintiff claimant filed a motion for the removal of either DEL MONTE or CHIQUITA as defendants in Civil Case Nos. 5617 and 24,251-96. There is, thus, a primary need to establish who the specific parties to the alleged compromise agreements are, as well as their corresponding rights and obligations therein. For this purpose, the courts a quo may require the presentation of additional evidence from the parties. Thereafter, on the basis of the records of the cases at bar and the additional evidence submitted by the parties, if any, the trial courts can then determine who among the defendants may be dropped from the said cases. It is true that, under Article 2194 of the Civil Code, the responsibility of two or more persons who are liable for the same quasi-delict is solidary. A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole 81 obligation from any or all of the debtors.

In solidary obligations, the paying debtors right of reimbursement is provided for under Article 1217 of the Civil Code, to wit: Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each.1avvphil The above right of reimbursement of a paying debtor, and the corresponding liability of the co-debtors to reimburse, will only arise, however, if a solidary debtor who is made to answer for an obligation actually delivers payment to the creditor. As succinctly held in Lapanday Agricultural Development Corporation v. 82 Court of Appeals, "[p]ayment, which means not only the delivery of money but also the performance, in any other manner, of the obligation, is the operative fact which will entitle either of the solidary debtors to 83 seek reimbursement for the share which corresponds to each of the [other] debtors." In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the merits must necessarily be conducted first in order to establish whether or not defendant companies are liable for the claims for damages filed by the plaintiff claimants, which would necessarily give rise to an obligation to pay on the part of the defendants. At the point in time where the proceedings below were prematurely halted, no cross-claims have been interposed by any defendant against another defendant. If and when such a cross-claim is made by a non-settling defendant against a settling defendant, it is within the discretion of the trial court to determine the propriety of allowing such a cross-claim and if the settling defendant must remain a party to the case purely in relation to the cross claim. In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals, the Court had the occasion to state that "where there are, along with the parties to the compromise, other persons involved in the litigation who have not taken part in concluding the compromise agreement but are adversely affected or feel prejudiced thereby, should not be precluded from invoking in the same 85 proceedings an adequate relief therefor." Relevantly, in Philippine International Surety Co., Inc. v. Gonzales, the Court upheld the ruling of the trial court that, in a joint and solidary obligation, the paying debtor may file a third-party complaint and/or a cross-claim to enforce his right to seek contribution from his co-debtors. Hence, the right of the remaining defendant(s) to seek reimbursement in the above situation, if proper, is not affected by the compromise agreements allegedly entered into by NAVIDA, et al., and ABELLA, et al., with some of the defendant companies. WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R. Nos. 125078, 126654, and 128398. We REVERSE and SET ASIDE the Order dated May 20, 1996 of the Regional Trial Court of General Santos City, Branch 37, in Civil Case No. 5617, and the Order dated October 1, 1996 of the Regional Trial Court of Davao City, Branch 16, and its subsequent Order dated December 16, 1996 denying reconsideration in Civil Case No. 24,251-96, and REMAND the records of this case to the respective Regional Trial Courts of origin for further and appropriate proceedings in line with the ruling herein that said courts have jurisdiction over the subject matter of the amended complaints in Civil Case Nos. 5617 and 24,251-96.
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The Court likewise GRANTS the motion filed by Del Monte to withdraw its petition in G.R. No. 127856. In view of the previous grant of the motion to withdraw the petition in G.R. No. 125598, both G.R. Nos. 127856 and 125598 are considered CLOSED AND TERMINATED. No pronouncement as to costs. SO ORDERED. G.R. No. 121920 August 9, 2005 THE MUNICIPALITY OF SAN JUAN, METRO MANILA, Petitioners, vs. THE HON. COURT OF APPEALS, LAURA BIGLANG-AWA, METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS), and KWOK CHEUNG, Respondent. DECISION GARCIA, J.: In this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court, petitioner 1 Municipality of San Juan urges us to annul and set aside the decision dated 08 September 1995 of the Court of Appeals in CA-G.R. CV No. 38906, affirming with modification an earlier decision of the Regional Trial Court at Pasig City in an action for damages thereat commenced by private respondent Laura Biglang-awa against, among others, the herein petitioner. The material facts are not at all disputed: Under a "Contract For Water Service Connections" entered into by and between the Metropolitan Waterworks and Sewerage System (MWSS) and Kwok Cheung as sole proprietor of K.C. Waterworks System Construction (KC, for short), the former engaged the services of the latter to install water service connections. Article 11 (Scope of Work), paragraph 2.01 of the agreement provides: 2.01 The CONTRACTOR agrees to install water service connections, transfer location of tapping to the nearest main, undertake separation of service connection, change rusted connections, within the service area of the MWSS specified in each job order covered by this Contract, from the water main up to the installation of the verticals. Tapping of the service pipe connection and mounting of water meter shall be undertaken exclusively or solely by the MWSS; On 20 May 1988, KC was given a Job Order by the South Sector Office of MWSS to conduct and effect excavations at the corner of M. Paterno and Santolan Road, San Juan, Metro Manila, a national road, for the laying of water pipes and tapping of water to the respective houses of water concessionaires. That same day, KC dispatched five (5) of its workers under Project Engineer Ernesto Battad, Jr. to conduct the digging operations in the specified place. The workers installed four (4) barricades made up of two-inch thick GI pipes welded together, 1.3 meters wide and 1.2 meters high, at the area where the digging is to take place. The digging operations started at 9 oclock in the morning and ended at about 3 oclock in the afternoon. The workers dug a hole one (1) meter wide and 1.5 meters deep, after which they refilled the excavated portion of the road with the same gravel and stone excavated from the area. At that time, only of the job was finished in view of the fact that the workers were still required to reexcavate that particular portion for the tapping of pipes for the water connections to the concessionaires. Meanwhile, between 10 oclock and 11 oclock in the evening of 31 May 1988, Priscilla Chan was driving her Toyota Crown car with Plate No. PDK 991 at a speed of thirty (30) kilometers per hour on the right
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side of Santolan Road towards the direction of Pinaglabanan, San Juan, Metro Manila. With her on board the car and seated on the right front seat was Assistant City Prosecutor Laura Biglang-awa. The road was flooded as it was then raining hard. Suddenly, the left front wheel of the car fell on a manhole where the workers of KC had earlier made excavations. As a result, the humerus on the right arm of Prosecutor Biglang-awa was fractured. Thereupon, Priscilla Chan contacted Biglang-awas husband who immediately arrived at the scene and brought his wife to the Cardinal Santos Hospital. Dispatched to the scene of the accident to conduct an investigation thereof, Pfc. Felix Ramos of the Traffic Division of the San Juan Police Station, upon arriving thereat, saw Priscilla Chans car already extracted from the manhole and placed beside the excavated portion of the road. According to this police officer, he did not see any barricades at the scene when he arrived less than an hour later. A Traffic 3 Accident Investigation Report was thereafter prepared and signed by Pfc. Ramos. At the hospital, the attending physician, after having performed a close reduction and application of abduction splint on Biglang-awa, placed a plastic cast on her right arm. Barring complications, the injury she suffered was expected to heal in four (4) to six (6) weeks, although she must revisit her doctor from time to time for check-up and rehabilitation. After some time, the plastic cast was removed. Biglang-awa sustained no deformity and no tenderness of the area of the injury but she could not sleep on her right 4 side because she still felt pain in that portion of her body. A Medical Certificate on her injuries was issued by Dr. Antonio Rivera. Consequent to the foregoing incident, Biglang-awa filed before the Regional Trial Court at Pasig, Metro Manila a complaint for damages against MWSS, the Municipality of San Juan and a number of San Juan municipal officials. Later, Biglang-awa amended her complaint twice. In her second amended complaint, she included KC as one of the defendants. After due proceedings, the trial court rendered judgment in favor of Biglang-awa adjudging MWSS and the Municipality of San Juan jointly and severally liable to her. Dated 29 February 1992, the 5 decision dispositively reads in full, thus: WHEREFORE, foregoing considered, judgment is hereby rendered declaring the Municipality of San Juan, Metro Manila and the Metropolitan Waterworks and Sewerage System jointly and severally liable to the plaintiff [Biglang-awa]. Both defendants are ordered to pay plaintiff the amounts of: (a) P18,389.55, for actual damages suffered by the plaintiff; (b) P15,000.00, for moral damages; (c) P10,000.00, for exemplary damages; (d) P5,000.00, for attorneys fees; and (e) to pay the costs. SO ORDERED. Unable to accept the judgment, both Biglang-awa and the Municipality of San Juan went to the Court of Appealsvia ordinary appeal under Rule 41 of the Rules of Court, which appeal was thereat docketed as CA-G.R. CV No. 38906.

As stated at the outset hereof, the appellate court, in a decision dated 08 September 1995, affirmed with modification that of the trial court, to wit: IN THE LIGHT OF ALL THE FOREGOING, the Decision appealed from is AFFIRMED but modified as follows: 1. The Appellees KC and MWSS and the Appellant San Juan are hereby ordered to pay, jointly and severally, to [Biglang-awa] the amounts of P50,000.00 by way of moral damages, P50,000.00 by way of exemplary damages and P5,000.00 by way of attorneys fees, without prejudice to the right of the Appellee MWSS for reimbursement from the Appellee KC under the Contract, Exhibit "3-MWSS": 2. The counterclaims of the Appellees and Appellant San Juan and the cross-claim of the latter are DISMISSED. Without pronouncement as to costs. SO ORDERED. (Words in bracket supplied). Therefrom, petitioner Municipality of San Juan came to this Court thru the present recourse, on its submissions that: I. THE RESPONDENT APPELLATE COURT HAS DECIDED A QUESTION OF SUBSTANCE NOT HEREFORE DECIDED BY THE SUPREME COURT. II. THE RESPONDENT APPELLATE COURT HAS DECIDED A QUESTION PROBABLY NOT IN ACCORD WITH THE LAW AND JURISPRUDENCE. With no similar recourse having been taken by the other parties, the Court shall limit itself to the liability or non-liability of petitioner municipality for the injury sustained by Biglang-awa. In denying liability for the subject accident, petitioner essentially anchored its defense on two provisions of laws, namely: (1) Section 149, [1][z] of Batas Pambansa Blg. 337, otherwise known as the Local Government Code of 1983; and (2) Section 8, Ordinance 82-01, of the Metropolitan Manila Commission. Petitioner maintains that under Section 149, [1][z] of the Local Government Code, it is obliged to provide for the construction, improvement, repair and maintenance of only municipal streets, avenues, alleys, sidewalks, bridges, parks and other public places. Ergo, since Santolan Road is concededly a national and not a municipal road, it cannot be held liable for the injuries suffered by Biglang-awa on account of the accident that occurred on said road. Additionally, petitioner contends that under Section 8, Ordinance No. 82-01, of the Metropolitan Manila Commission, which reads: In the event of death, injury and/or damages caused by the non-completion of such works and/or failure of one undertaking the work to adopt the required precautionary measures for the protection of the general public or violation of any of the terms or conditions of the permit, the permittee/excavator shall assume fully all liabilities for such death, injury or damage arising therefrom. For this purpose, the excavator/permittee shall purchase insurance coverage to answer for third party liability, only the Project Engineer of KC and MWSS can be held liable for the same accident.
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The petition must have to be denied. Jurisprudence teaches that for liability to arise under Article 2189 of the Civil Code, ownership of the roads, streets, bridges, public buildings and other public works, is not a controlling factor, it being sufficient that a province, city or municipality has control or supervision thereof. This, we made clear 9 in City of Manila vs. Teotico, et al : At any rate, under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach that the defective roads or streets belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or municipality have either "control or supervision" over said street or road. x x x It is argued, however, that under Section 149, [1][z] of the Local Government Code, petitioner has control or supervision only over municipal and not national roads, like Santolan Road. Sadly, petitioner failed to take note of the other provisions of Section 149 of the same Code, more particularly the following: Section 149. Powers and Duties. (1) The sangguniang bayan shall: (bb) Regulate the drilling and excavation of the ground for the laying of gas, water, sewer, and other pipes; the building and repair of tunnels, sewers, drains and other similar structures; erecting of poles and the use of crosswalks, curbs and gutters therein, and adopt measures to ensure public safety against open canals, manholes, live wires and other similar hazards to life and property, and provide just compensation or relief for persons suffering from them; (Underscoring supplied) Clear it is from the above that the Municipality of San Juan can "regulate" the drilling and excavation of the ground for the laying of gas, water, sewer, and other pipes within its territorial jurisdiction. Doubtless, the term "regulate" found in the aforequoted provision of Section 149 can only mean that petitioner municipality exercises the power of control, or, at the very least, supervision over all excavations for the laying of gas, water, sewer and other pipes within its territory. We must emphasize that under paragraph [1][bb] of Section 149, supra, of the Local Government Code, the phrases "regulate the drilling and excavation of the ground for the laying of gas, water, sewer, and other pipes", and "adopt measures to ensure public safety against open canals, manholes, live wires and other similar hazards to life and property", are not modified by the term "municipal road". And neither can it be fairly inferred from the same provision of Section 149 that petitioners power of regula tion vis-vis the activities therein mentioned applies only in cases where such activities are to be performed in municipal roads. To our mind, the municipalitys liability for injuries caused by its failure to regulate the drilling and excavation of the ground for the laying of gas, water, sewer, and other pipes, attaches regardless of whether the drilling or excavation is made on a national or municipal road, for as long as the same is within its territorial jurisdiction. We are thus in full accord with the following pronouncements of the appellate court in the decision under review: While it may be true that the Department of Public Works and Highways may have issued the requisite permit to the Appellee KC and/or concessionaires for the excavation on said road, the Appellant San Juan is not thereby relieved of its liability to [Biglang-awa] for its own gross negligence. Indeed, Evangeline Alfonso, the witness for the Appellant San Juan unabashedly [sic] admitted, when she testified in the Court a quo, that even if the Department of Public Works and Highways failed to effect the
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requisite refilling, the Appellant San Juan was mandated to undertake the necessary precautionary measures to avert accidents and insure the safety of pedestrians and commuters: xxx The [petitioner] cannot validly shirk from its obligation to maintain and insure the safe condition of the road merely because the permit for the excavation may have been issued by a government entity or unit other than the Appellant San Juan or that the excavation may have been done by a contractor under contract with a public entity like the Appellee MWSS. Neither is the [petitioner] relieved of liability based on its purported lack of knowledge of the excavation and the condition of the road during the period from May 20, 1988 up to May 30, 1988 when the accident occurred. It must be borne in mind that the obligation of the [petitioner] to maintain the safe condition of the road within its territory is a continuing one which is not suspended while a street is being repaired (Corpus Juris Secundum, MunicipalCorporations, page 120). Knowledge of the condition of the road and the defects and/or obstructions on the road may be actual or constructive. It is enough that the authorities should have known of the aforesaid circumstances in the exercise of ordinary care (City of Louiseville versus Harris, 180 Southwestern Reporter. page 65). In the present recourse, Santolan Road and the Greenhills area coming from Ortigas Avenue going to Pinaglabanan, San Juan, Metro Manila is a busy thoroughfare. The gaping hole in the middle of the road of Santolan Road could not have been missed by the authorities concerned. After all, the [petitioner] San Juan is mandated to effect a constant and unabated monitoring of the conditions of the roads to insure the safety of motorists. Persuasive authority has it that: It is the duty of the municipal authorities to exercise an active vigilance over the streets; to see that they are kept in a reasonably safe condition for public travel. They cannot fold their arms and shut their eyes and say they have no notice. (Todd versus City of Troy, 61 New York 506). (Words in bracket supplied). Nor can petitioner seek shelter on Section 8 of Ordinance 82-01 of the Metropolitan Manila Commission. Concededly, Section 8 of the Ordinance makes the permittee/excavator liable for death, injury and/or damages caused by the non-completion of works and/or failure of the one undertaking the works to adopt the required precautionary measures for the protection of the general public. Significantly, however, nowhere can it be found in said Ordinance any provision exempting municipalities in Metro Manila from liabilities caused by their own negligent acts. Afortiori, nothing prevents this Court from applying other relevant laws concerning petitioners liability for the injuries sustained by Biglang -awa on that fateful rainy evening of 31 May 1988. WHEREFORE, the instant petition is DENIED and the assailed decision of the appellate court AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. 71049 May 29, 1987 BERNARDINO JIMENEZ, petitioner, vs. CITY OF MANILA and INTERMEDIATE APPELLATE COURT, respondents.

PARAS, J.: This is a petition for review on certiorari of: (1) the decision * of the Intermediate Appellate Court in ACG.R. No. 013887-CV Bernardino Jimenez v. Asiatic Integrated Corporation and City of Manila , reversing the decision ** of the Court of First Instance of Manila, Branch XXII in Civil Case No. 96390 between the same parties, but only insofar as holding Asiatic Integrated Corporation solely liable for damages and attorney's fees instead of making the City of Manila jointly and solidarily liable with it as prayed for by the petitioner and (2) the resolution of the same Appellate Court denying his Partial Motion for Reconsideration (Rollo, p. 2). The dispositive portion of the Intermediate Appellate Court's decision is as follows: WHEREFORE, the decision appealed from is hereby REVERSED. A new one is hereby entered ordering the defendant Asiatic Integrated Corporation to pay the plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for the operation and management of a school bus, P20,000.00 as moral damages due to pains, sufferings and sleepless nights and P l0,000.00 as attorney's fees. SO ORDERED. (p. 20, Rollo) The findings of respondent Appellate Court are as follows: The evidence of the plaintiff (petitioner herein) shows that in the morning of August 15, 1974 he, together with his neighbors, went to Sta. Ana public market to buy "bagoong" at the time when the public market was flooded with ankle deep rainwater. After purchasing the "bagoong" he turned around to return home but he stepped on an uncovered opening which could not be seen because of the dirty rainwater, causing a dirty and rusty four- inch nail, stuck inside the uncovered opening, to pierce the left leg of plaintiffpetitioner penetrating to a depth of about one and a half inches. After administering first aid treatment at a nearby drugstore, his companions helped him hobble home. He felt ill and developed fever and he had to be carried to Dr. Juanita Mascardo. Despite the medicine administered to him by the latter, his left leg swelled with great pain. He was then rushed to the Veterans Memorial Hospital where he had to be confined for twenty (20) days due to high fever and severe pain. Upon his discharge from the hospital, he had to walk around with crutches for fifteen (15) days. His injury prevented him from attending to the school buses he is operating. As a result, he had to engage the services of one Bienvenido Valdez to supervise his business for an aggregate compensation of nine hundred pesos (P900.00). (Decision, AC-G.R. CV No. 01387, Rollo, pp. 13-20). Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation under whose administration the Sta. Ana Public Market had been placed by virtue of a Management and Operating Contract (Rollo, p. 47). The lower court decided in favor of respondents, the dispositive portion of the decision reading: WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiff dismissing the complaint with costs against the plaintiff. For lack of sufficient evidence, the counterclaims of the defendants are likewise dismissed. (Decision, Civil Case No. 96390, Rollo, p. 42). As above stated, on appeal, the Intermediate Appellate Court held the Asiatic Integrated Corporation liable for damages but absolved respondent City of Manila. Hence this petition.

The lone assignment of error raised in this petition is on whether or not the Intermediate Appellate Court erred in not ruling that respondent City of Manila should be jointly and severally liable with Asiatic Integrated Corporation for the injuries petitioner suffered. In compliance with the resolution of July 1, 1985 of the First Division of this Court (Rollo, p. 29) respondent City of Manila filed its comment on August 13, 1985 (Rollo, p. 34) while petitioner filed its reply on August 21, 1985 (Reno, p. 51). Thereafter, the Court in the resolution of September 11, 1985 (Rollo, p. 62) gave due course to the petition and required both parties to submit simultaneous memoranda Petitioner filed his memorandum on October 1, 1985 (Rollo, p. 65) while respondent filed its memorandum on October 24, 1985 (Rollo, p. 82). In the resolution of October 13, 1986, this case was transferred to the Second Division of this Court, the same having been assigned to a member of said Division (Rollo, p. 92). The petition is impressed with merit. As correctly found by the Intermediate Appellate Court, there is no doubt that the plaintiff suffered injuries when he fell into a drainage opening without any cover in the Sta. Ana Public Market. Defendants do not deny that plaintiff was in fact injured although the Asiatic Integrated Corporation tries to minimize the extent of the injuries, claiming that it was only a small puncture and that as a war veteran, plaintiff's hospitalization at the War Veteran's Hospital was free. (Decision, AC-G.R. CV No. 01387, Rollo, p. 6). Respondent City of Manila maintains that it cannot be held liable for the injuries sustained by the petitioner because under the Management and Operating Contract, Asiatic Integrated Corporation assumed all responsibility for damages which may be suffered by third persons for any cause attributable to it. It has also been argued that the City of Manila cannot be held liable under Article 1, Section 4 of Republic Act No. 409 as amended (Revised Charter of Manila) which provides: The City shall not be liable or held for damages or injuries to persons or property arising from the failure of the Mayor, the Municipal Board, or any other City Officer, to enforce the provisions of this chapter, or any other law or ordinance, or from negligence of said Mayor, Municipal Board, or any other officers while enforcing or attempting to enforce said provisions. This issue has been laid to rest in the case of City of Manila v. Teotico (22 SCRA 269-272 [1968]) where the Supreme Court squarely ruled that Republic Act No. 409 establishes a general rule regulating the liability of the City of Manila for "damages or injury to persons or property arising from the failure of city officers" to enforce the provisions of said Act, "or any other law or ordinance or from negligence" of the City "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions." Upon the other hand, Article 2189 of the Civil Code of the Philippines which provides that: Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by any person by reason of defective conditions of roads, streets, bridges, public buildings and other public works under their control or supervision. constitutes a particular prescription making "provinces, cities and municipalities ... liable for damages for the death of, or injury suffered by any person by reason" specifically "of the defective condition of

roads, streets, bridges, public buildings, and other public works under their control or supervision." In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability arising from negligence, in general, regardless of the object, thereof, while Article 2189 of the Civil Code governs liability due to "defective streets, public buildings and other public works" in particular and is therefore decisive on this specific case. In the same suit, the Supreme Court clarified further that under Article 2189 of the Civil Code, it is not necessary for the liability therein established to attach, that the defective public works belong to the province, city or municipality from which responsibility is exacted. What said article requires is that the province, city or municipality has either "control or supervision" over the public building in question. In the case at bar, there is no question that the Sta. Ana Public Market, despite the Management and Operating Contract between respondent City and Asiatic Integrated Corporation remained under the control of the former. For one thing, said contract is explicit in this regard, when it provides: II That immediately after the execution of this contract, the SECOND PARTY shall start the painting, cleaning, sanitizing and repair of the public markets and talipapas and within ninety (90) days thereof, the SECOND PARTY shall submit a program of improvement, development, rehabilitation and reconstruction of the city public markets and talipapas subject to prior approval of the FIRST PARTY. (Rollo, p. 44) xxx xxx xxx VI That all present personnel of the City public markets and talipapas shall be retained by the SECOND PARTY as long as their services remain satisfactory and they shall be extended the same rights and privileges as heretofore enjoyed by them. Provided, however, that the SECOND PARTY shall have the right, subject to prior approval of the FIRST PARTY to discharge any of the present employees for cause. (Rollo, p. 45). VII That the SECOND PARTY may from time to time be required by the FIRST PARTY, or his duly authorized representative or representatives, to report, on the activities and operation of the City public markets and talipapas and the facilities and conveniences installed therein, particularly as to their cost of construction, operation and maintenance in connection with the stipulations contained in this Contract. (lbid) The fact of supervision and control of the City over subject public market was admitted by Mayor Ramon Bagatsing in his letter to Secretary of Finance Cesar Virata which reads: These cases arose from the controversy over the Management and Operating Contract entered into on December 28, 1972 by and between the City of Manila and the Asiatic Integrated Corporation, whereby in consideration of a fixed service fee, the City hired the services of the said corporation to undertake the physical management, maintenance, rehabilitation and development of the City's public markets and' Talipapas' subject to the control and supervision of the City. xxx xxx xxx

It is believed that there is nothing incongruous in the exercise of these powers vis-a-vis the existence of the contract, inasmuch as the City retains the power of supervision and control over its public markets and talipapas under the terms of the contract. (Exhibit "7A") (Emphasis supplied.) (Rollo, p. 75). In fact, the City of Manila employed a market master for the Sta. Ana Public Market whose primary duty is to take direct supervision and control of that particular market, more specifically, to check the safety of the place for the public. Thus the Asst. Chief of the Market Division and Deputy Market Administrator of the City of Manila testified as follows: Court This market master is an employee of the City of Manila? Mr. Ymson Yes, Your Honor. Q What are his functions? A Direct supervision and control over the market area assigned to him."(T.s.n.,pp. 41-42, Hearing of May 20, 1977.) xxx xxx xxx Court As far as you know there is or is there any specific employee assigned with the task of seeing to it that the Sta. Ana Market is safe for the public? Mr. Ymson Actually, as I stated, Your Honor, that the Sta. Ana has its own market [Link] primary duty of that market master is to make the direct supervision and control of that particular market, the check or verifying whether the place is safe for public safety is vested in the market master. (T.s.n., pp. 2425, Hearing of July 27, 1977.) (Emphasis supplied.) (Rollo, p. 76). Finally, Section 30 (g) of the Local Tax Code as amended, provides: The treasurer shall exercise direct and immediate supervision administration and control over public markets and the personnel thereof, including those whose duties concern the maintenance and upkeep of the market and ordinances and other pertinent rules and regulations. (Emphasis supplied.) (Rollo, p. 76) The contention of respondent City of Manila that petitioner should not have ventured to go to Sta. Ana Public Market during a stormy weather is indeed untenable. As observed by respondent Court of Appeals, it is an error for the trial court to attribute the negligence to herein petitioner. More specifically stated, the findings of appellate court are as follows: ... The trial court even chastised the plaintiff for going to market on a rainy day just to buy bagoong. A customer in a store has the right to assume that the owner will comply with his duty to keep the premises safe for customers. If he ventures to the store on the basis of such assumption and is injured because the owner did not comply with his duty, no negligence can be imputed to the customer. (Decision, AC-G. R. CV No. 01387, Rollo, p. 19).

As a defense against liability on the basis of a quasi-delict, one must have exercised the diligence of a good father of a family. (Art. 1173 of the Civil Code). There is no argument that it is the duty of the City of Manila to exercise reasonable care to keep the public market reasonably safe for people frequenting the place for their marketing needs. While it may be conceded that the fulfillment of such duties is extremely difficult during storms and floods, it must however, be admitted that ordinary precautions could have been taken during good weather to minimize the dangers to life and limb under those difficult circumstances. For instance, the drainage hole could have been placed under the stalls instead of on the passage ways. Even more important is the fact, that the City should have seen to it that the openings were covered. Sadly, the evidence indicates that long before petitioner fell into the opening, it was already uncovered, and five (5) months after the incident happened, the opening was still uncovered. (Rollo, pp. 57; 59). Moreover, while there are findings that during floods the vendors remove the iron grills to hasten the flow of water (Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17), there is no showing that such practice has ever been prohibited, much less penalized by the City of Manila. Neither was it shown that any sign had been placed thereabouts to warn passersby of the impending danger. To recapitulate, it appears evident that the City of Manila is likewise liable for damages under Article 2189 of the Civil Code, respondent City having retained control and supervision over the Sta. Ana Public Market and as tort-feasor under Article 2176 of the Civil Code on quasi-delicts Petitioner had the right to assume that there were no openings in the middle of the passageways and if any, that they were adequately covered. Had the opening been covered, petitioner could not have fallen into it. Thus the negligence of the City of Manila is the proximate cause of the injury suffered, the City is therefore liable for the injury suffered by the peti- 4 petitioner. Respondent City of Manila and Asiatic Integrated Corporation being joint tort-feasors are solidarily liable under Article 2194 of the Civil Code. PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED, making the City of Manila and the Asiatic Integrated Corporation solidarily liable to pay the plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for the operation and management of the school bus, P20,000.00 as moral damages due to pain, sufferings and sleepless nights and P10,000.00 as attorney's fees. SO ORDERED. G.R. No. L-12986 March 31, 1966

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF DOMINGA ONG, petitioners-appellants, vs. CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondents-appellees. Ross, Selph, Carrascoso and Janda for the respondents. Bernabe Africa, etc. for the petitioners. MAKALINTAL., J.: This case is before us on a petition for review of the decision of the Court of Appeals, which affirmed that of the Court of First Instance of Manila dismissing petitioners' second amended complaint against respondents.

The action is for damages under Articles 1902 and 1903 of the old Civil Code. It appears that in the afternoon of March 18, 1948 a fire broke out at the Caltex service station at the corner of Antipolo street and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank truck into the underground storage, right at the opening of the receiving tank where the nozzle of the hose was inserted. The fire spread to and burned several neighboring houses, including the personal properties and effects inside them. Their owners, among them petitioners here, sued respondents Caltex (Phil.), Inc. and Mateo Boquiren, the first as alleged owner of the station and the second as its agent in charge of operation. Negligence on the part of both of them was attributed as the cause of the fire. The trial court and the Court of Appeals found that petitioners failed to prove negligence and that respondents had exercised due care in the premises and with respect to the supervision of their employees. The first question before Us refers to the admissibility of certain reports on the fire prepared by the Manila Police and Fire Departments and by a certain Captain Tinio of the Armed Forces of the Philippines. Portions of the first two reports are as follows: 1. Police Department report: Investigation disclosed that at about 4:00 P.M. March 18, 1948, while Leandro Flores was transferring gasoline from a tank truck, plate No. T-5292 into the underground tank of the Caltex Gasoline Station located at the corner of Rizal Avenue and Antipolo Street, this City, an unknown Filipino lighted a cigarette and threw the burning match stick near the main valve of the said underground tank. Due to the gasoline fumes, fire suddenly blazed. Quick action of Leandro Flores in pulling off the gasoline hose connecting the truck with the underground tank prevented a terrific explosion. However, the flames scattered due to the hose from which the gasoline was spouting. It burned the truck and the following accessorias and residences. 2. The Fire Department report: In connection with their allegation that the premises was (sic) subleased for the installation of a coca-cola and cigarette stand, the complainants furnished this Office a copy of a photograph taken during the fire and which is submitted herewith. it appears in this picture that there are in the premises a coca-cola cooler and a rack which according to information gathered in the neighborhood contained cigarettes and matches, installed between the gasoline pumps and the underground tanks. The report of Captain Tinio reproduced information given by a certain Benito Morales regarding the history of the gasoline station and what the chief of the fire department had told him on the same subject. The foregoing reports were ruled out as "double hearsay" by the Court of Appeals and hence inadmissible. This ruling is now assigned as error. It is contended: first, that said reports were admitted by the trial court without objection on the part of respondents; secondly, that with respect to the police report (Exhibit V-Africa) which appears signed by a Detective Zapanta allegedly "for Salvador Capacillo," the latter was presented as witness but respondents waived their right to cross-examine him although they had the opportunity to do so; and thirdly, that in any event the said reports are admissible as an exception to the hearsay rule under section 35 of Rule 123, now Rule 130. The first contention is not borne out by the record. The transcript of the hearing of September 17, 1953 (pp. 167-170) shows that the reports in question, when offered as evidence, were objected to by counsel for each of respondents on the ground that they were hearsay and that they were "irrelevant, immaterial and impertinent." Indeed, in the court's resolution only Exhibits J, K, K-5 and X-6 were admitted without objection; the admission of the others, including the disputed ones, carried no such explanation.

On the second point, although Detective Capacillo did take the witness stand, he was not examined and he did not testify as to the facts mentioned in his alleged report (signed by Detective Zapanta). All he said was that he was one of those who investigated "the location of the fire and, if possible, gather witnesses as to the occurrence, and that he brought the report with him. There was nothing, therefore, on which he need be cross-examined; and the contents of the report, as to which he did not testify, did not thereby become competent evidence. And even if he had testified, his testimony would still have been objectionable as far as information gathered by him from third persons was concerned. Petitioners maintain, however, that the reports in themselves, that is, without further testimonial evidence on their contents, fall within the scope of section 35, Rule 123, which provides that "entries in official records made in the performance of his duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated." There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made by a public officer, or by another person specially enjoined by law to do so; (b) that it was made by the public officer in the performance of his duties, or by such other person in the performance of a duty specially enjoined by law; and (c) that the public officer or other person had sufficient knowledge of the facts by him stated, which must have been acquired by him personally or through official information (Moran, Comments on the Rules of Court, Vol. 3 [1957] p. 398). Of the three requisites just stated, only the last need be considered here. Obviously the material facts recited in the reports as to the cause and circumstances of the fire were not within the personal knowledge of the officers who conducted the investigation. Was knowledge of such facts, however, acquired by them through official information? As to some facts the sources thereof are not even identified. Others are attributed to Leopoldo Medina, referred to as an employee at the gas station were the fire occurred; to Leandro Flores, driver of the tank truck from which gasoline was being transferred at the time to the underground tank of the station; and to respondent Mateo Boquiren, who could not, according to Exhibit V-Africa, give any reason as to the origin of the fire. To qualify their statements as "official information" acquired by the officers who prepared the reports, the persons who made the statements not only must have personal knowledge of the facts stated but must have the duty to give 1 such statements for record. The reports in question do not constitute an exception to the hearsay rule; the facts stated therein were not acquired by the reporting officers through official information, not having been given by the informants pursuant to any duty to do so. The next question is whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa loquitur should apply so as to presume negligence on the part of appellees. Both the trial court and the appellate court refused to apply the doctrine in the instant case on the grounds that "as to (its) applicability ... in the Philippines, there seems to he nothing definite," and that while the rules do not prohibit its adoption in appropriate cases, "in the case at bar, however, we find no practical use for such doctrine." The question deserves more than such summary dismissal. The doctrine has actually been applied in this jurisdiction, in the case of Espiritu vs. Philippine Power and Development Co. (CA-G.R. No. 3240-R, September 20, 1949), wherein the decision of the Court of Appeals was penned by Mr. Justice J.B.L. Reyes now a member of the Supreme Court. The facts of that case are stated in the decision as follows: In the afternoon of May 5, 1946, while the plaintiff-appellee and other companions were loading grass between the municipalities of Bay and Calauan, in the province of Laguna, with clear weather and without any wind blowing, an electric transmission wire, installed and maintained by the defendant Philippine Power and Development Co., Inc. alongside the road, suddenly parted, and one of the broken ends hit the head of the plaintiff as he was about to board the truck. As a result, plaintiff received the full shock of 4,400 volts carried by the wire and was knocked

unconscious to the ground. The electric charge coursed through his body and caused extensive and serious multiple burns from skull to legs, leaving the bone exposed in some parts and causing intense pain and wounds that were not completely healed when the case was tried on June 18, 1947, over one year after the mishap. The defendant therein disclaimed liability on the ground that the plaintiff had failed to show any specific act of negligence, but the appellate court overruled the defense under the doctrine of res ipsa loquitur. The court said: The first point is directed against the sufficiency of plaintiff's evidence to place appellant on its defense. While it is the rule, as contended by the appellant, that in case of noncontractual negligence, or culpa aquiliana, the burden of proof is on the plaintiff to establish that the proximate cause of his injury was the negligence of the defendant, it is also a recognized principal that "where the thing which caused injury, without fault of the injured person, is under the exclusive control of the defendant and the injury is such as in the ordinary course of things does not occur if he having such control use proper care, it affords reasonable evidence, in the absence of the explanation, that the injury arose from defendant's want of care." And the burden of evidence is shifted to him to establish that he has observed due care and diligence. (San Juan Light & Transit Co. v. Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is known by the name of res ipsa loquitur (the transaction speaks for itself), and is peculiarly applicable to the case at bar, where it is unquestioned that the plaintiff had every right to be on the highway, and the electric wire was under the sole control of defendant company. In the ordinary course of events, electric wires do not part suddenly in fair weather and injure people, unless they are subjected to unusual strain and stress or there are defects in their installation, maintenance and supervision; just as barrels do not ordinarily roll out of the warehouse windows to injure passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co. 722; 159 Eng. Reprint 299, the leading case that established that rule). Consequently, in the absence of contributory negligence (which is admittedly not present), the fact that the wire snapped suffices to raise a reasonable presumption of negligence in its installation, care and maintenance. Thereafter, as observed by Chief Baron Pollock, "if there are any facts inconsistent with negligence, it is for the defendant to prove." It is true of course that decisions of the Court of Appeals do not lay down doctrines binding on the Supreme Court, but we do not consider this a reason for not applying the particular doctrine of res ipsa loquitur in the case at bar. Gasoline is a highly combustible material, in the storage and sale of which extreme care must be taken. On the other hand, fire is not considered a fortuitous event, as it arises almost invariably from some act of man. A case strikingly similar to the one before Us is Jones vs. Shell Petroleum Corporation, et al., 171 So. 447: Arthur O. Jones is the owner of a building in the city of Hammon which in the year 1934 was leased to the Shell Petroleum Corporation for a gasoline filling station. On October 8, 1934, during the term of the lease, while gasoline was being transferred from the tank wagon, also operated by the Shell Petroleum Corporation, to the underground tank of the station, a fire started with resulting damages to the building owned by Jones. Alleging that the damages to his building amounted to $516.95, Jones sued the Shell Petroleum Corporation for the recovery of that amount. The judge of the district court, after hearing the testimony, concluded that plaintiff was entitled to a recovery and rendered judgment in his favor for $427.82. The Court of Appeals for the First Circuit reversed this judgment, on the ground the testimony failed to show with reasonable certainty any negligence on the part of the Shell Petroleum Corporation or any of its agents or employees. Plaintiff applied to this Court for a Writ of Review which was granted, and the case is now before us for decision.1wph1.t In resolving the issue of negligence, the Supreme Court of Louisiana held:

Plaintiff's petition contains two distinct charges of negligence one relating to the cause of the fire and the other relating to the spreading of the gasoline about the filling station. Other than an expert to assess the damages caused plaintiff's building by the fire, no witnesses were placed on the stand by the defendant. Taking up plaintiff's charge of negligence relating to the cause of the fire, we find it established by the record that the filling station and the tank truck were under the control of the defendant and operated by its agents or employees. We further find from the uncontradicted testimony of plaintiff's witnesses that fire started in the underground tank attached to the filling station while it was being filled from the tank truck and while both the tank and the truck were in charge of and being operated by the agents or employees of the defendant, extended to the hose and tank truck, and was communicated from the burning hose, tank truck, and escaping gasoline to the building owned by the plaintiff. Predicated on these circumstances and the further circumstance of defendant's failure to explain the cause of the fire or to show its lack of knowledge of the cause, plaintiff has evoked the doctrine of res ipsa loquitur. There are many cases in which the doctrine may be successfully invoked and this, we think, is one of them. Where the thing which caused the injury complained of is shown to be under the management of defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose from want of care. (45 C.J. #768, p. 1193). This statement of the rule of res ipsa loquitur has been widely approved and adopted by the courts of last resort. Some of the cases in this jurisdiction in which the doctrine has been applied are the following, viz.: Maus v. Broderick, 51 La. Ann. 1153, 25 So. 977; Hebert v. Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64 L.R.A. 101, 100 Am. St. Rep. 505; Willis v. Vicksburg, etc., R. Co., 115 La. 63, 38 So. 892; Bents v. Page, 115 La. 560, 39 So. 599. The principle enunciated in the aforequoted case applies with equal force here. The gasoline station, with all its appliances, equipment and employees, was under the control of appellees. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire started were appellees and their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care. In the report submitted by Captain Leoncio Mariano of the Manila Police Department (Exh. X-1 Africa) the following appears: Investigation of the basic complaint disclosed that the Caltex Gasoline Station complained of occupies a lot approximately 10 m x 10 m at the southwest corner of Rizal Avenue and Antipolo. The location is within a very busy business district near the Obrero Market, a railroad crossing and very thickly populated neighborhood where a great number of people mill around t until gasoline tever be theWactjvities of these peopleor lighting a cigarette cannot be excluded and this constitute a secondary hazard to its operation which in turn endangers the entire neighborhood to conflagration.

Furthermore, aside from precautions already taken by its operator the concrete walls south and west adjoining the neighborhood are only 2-1/2 meters high at most and cannot avoid the flames from leaping over it in case of fire. Records show that there have been two cases of fire which caused not only material damages but desperation and also panic in the neighborhood. Although the soft drinks stand had been eliminated, this gasoline service station is also used by its operator as a garage and repair shop for his fleet of taxicabs numbering ten or more, adding another risk to the possible outbreak of fire at this already small but crowded gasoline station. The foregoing report, having been submitted by a police officer in the performance of his duties on the basis of his own personal observation of the facts reported, may properly be considered as an exception to the hearsay rule. These facts, descriptive of the location and objective circumstances surrounding the operation of the gasoline station in question, strengthen the presumption of negligence under the doctrine of res ipsa loquitur, since on their face they called for more stringent measures of caution than those which would satisfy the standard of due diligence under ordinary circumstances. There is no more eloquent demonstration of this than the statement of Leandro Flores before the police investigator. Flores was the driver of the gasoline tank wagon who, alone and without assistance, was transferring the contents thereof into the underground storage when the fire broke out. He said: "Before loading the underground tank there were no people, but while the loading was going on, there were people who went to drink coca-cola (at the coca-cola stand) which is about a meter from the hole leading to the underground tank." He added that when the tank was almost filled he went to the tank truck to close the valve, and while he had his back turned to the "manhole" he, heard someone shout "fire." Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission on the part of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from leaping over it. As it was the concrete wall was only 2-1/2 meters high, and beyond that height it consisted merely of galvanized iron sheets, which would predictably crumple and melt when subjected to intense heat. Defendants' negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to the neighboring houses. There is an admission on the part of Boquiren in his amended answer to the second amended complaint that "the fire was caused through the acts of a stranger who, without authority, or permission of answering defendant, passed through the gasoline station and negligently threw a lighted match in the premises." No evidence on this point was adduced, but assuming the allegation to be true certainly any unfavorable inference from the admission may be taken against Boquiren it does not extenuate his negligence. A decision of the Supreme Court of Texas, upon facts analogous to those of the present case, states the rule which we find acceptable here. "It is the rule that those who distribute a dangerous article or agent, owe a degree of protection to the public proportionate to and commensurate with a danger involved ... we think it is the generally accepted rule as applied to torts that 'if the effects of the actor's negligent conduct actively and continuously operate to bring about harm to another, the fact that the active and substantially simultaneous operation of the effects of a third person's innocent, tortious or criminal act is also a substantial factor in bringing about the harm, does not protect the actor from liability.' (Restatement of the Law of Torts, vol. 2, p. 1184, #439). Stated in another way, "The intention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer from consequences of negligence, if such negligence directly and proximately cooperates with the independent cause in the resulting injury." (MacAfee, et al. vs. Traver's Gas Corporation, 153 S.W. 2nd 442.) The next issue is whether Caltex should be held liable for the damages caused to appellants. This issue depends on whether Boquiren was an independent contractor, as held by the Court of Appeals, or an agent of Caltex. This question, in the light of the facts not controverted, is one of law and hence may be passed upon by this Court. These facts are: (1) Boquiren made an admission that he was an agent of Caltex; (2) at the time of the fire Caltex owned the gasoline station and all the equipment therein; (3) Caltex exercised control over Boquiren in the management of the state; (4) the delivery truck used in

delivering gasoline to the station had the name of CALTEX painted on it; and (5) the license to store gasoline at the station was in the name of Caltex, which paid the license fees. (Exhibit T-Africa; Exhibit UAfrica; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa). In Boquiren's amended answer to the second amended complaint, he denied that he directed one of his drivers to remove gasoline from the truck into the tank and alleged that the "alleged driver, if one there was, was not in his employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the owners of the gasoline station." It is true that Boquiren later on amended his answer, and that among the changes was one to the effect that he was not acting as agent of Caltex. But then again, in his motion to dismiss appellants' second amended complaint the ground alleged was that it stated no cause of action since under the allegations thereof he was merely acting as agent of Caltex, such that he could not have incurred personal liability. A motion to dismiss on this ground is deemed to be an admission of the facts alleged in the complaint. Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the business conducted at the service station in question was owned and operated by Boquiren. But Caltex did not present any contract with Boquiren that would reveal the nature of their relationship at the time of the fire. There must have been one in existence at that time. Instead, what was presented was a license agreement manifestly tailored for purposes of this case, since it was entered into shortly before the expiration of the one-year period it was intended to operate. This so-called license agreement (Exhibit 5Caltex) was executed on November 29, 1948, but made effective as of January 1, 1948 so as to cover the date of the fire, namely, March 18, 1948. This retroactivity provision is quite significant, and gives rise to the conclusion that it was designed precisely to free Caltex from any responsibility with respect to the fire, as shown by the clause that Caltex "shall not be liable for any injury to person or property while in the property herein licensed, it being understood and agreed that LICENSEE (Boquiren) is not an employee, representative or agent of LICENSOR (Caltex)." But even if the license agreement were to govern, Boquiren can hardly be considered an independent contractor. Under that agreement Boquiren would pay Caltex the purely nominal sum of P1.00 for the use of the premises and all the equipment therein. He could sell only Caltex Products. Maintenance of the station and its equipment was subject to the approval, in other words control, of Caltex. Boquiren could not assign or transfer his rights as licensee without the consent of Caltex. The license agreement was supposed to be from January 1, 1948 to December 31, 1948, and thereafter until terminated by Caltex upon two days prior written notice. Caltex could at any time cancel and terminate the agreement in case Boquiren ceased to sell Caltex products, or did not conduct the business with due diligence, in the judgment of Caltex. Termination of the contract was therefore a right granted only to Caltex but not to Boquiren. These provisions of the contract show the extent of the control of Caltex over Boquiren. The control was such that the latter was virtually an employee of the former. Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or terminate his services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the operator; and that the receipts signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator was an agent of the company and not an independent contractor should not be disturbed. To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties, should thereby a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their respective obligations stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the contract by the parties, the former must

prevail over the latter. (Shell Company of the Philippines, Ltd. vs. Firemens' Insurance Company of Newark, New Jersey, 100 Phil. 757). The written contract was apparently drawn for the purpose of creating the apparent relationship of employer and independent contractor, and of avoiding liability for the negligence of the employees about the station; but the company was not satisfied to allow such relationship to exist. The evidence shows that it immediately assumed control, and proceeded to direct the method by which the work contracted for should be performed. By reserving the right to terminate the contract at will, it retained the means of compelling submission to its orders. Having elected to assume control and to direct the means and methods by which the work has to be performed, it must be held liable for the negligence of those performing service under its direction. We think the evidence was sufficient to sustain the verdict of the jury. (Gulf Refining Company v. Rogers, 57 S.W. 2d, 183). Caltex further argues that the gasoline stored in the station belonged to Boquiren. But no cash invoices were presented to show that Boquiren had bought said gasoline from Caltex. Neither was there a sales contract to prove the same. As found by the trial court the Africas sustained a loss of P9,005.80, after deducting the amount of P2,000.00 collected by them on the insurance of the house. The deduction is now challenged as erroneous on the ground that Article 2207 of the New Civil Code, which provides for the subrogation of the insurer to the rights of the insured, was not yet in effect when the loss took place. However, regardless of the silence of the law on this point at that time, the amount that should be recovered be measured by the damages actually suffered, otherwise the principle prohibiting unjust enrichment would be violated. With respect to the claim of the heirs of Ong P7,500.00 was adjudged by the lower court on the basis of the assessed value of the property destroyed, namely, P1,500.00, disregarding the testimony of one of the Ong children that said property was worth P4,000.00. We agree that the court erred, since it is of common knowledge that the assessment for taxation purposes is not an accurate gauge of fair market value, and in this case should not prevail over positive evidence of such value. The heirs of Ong are therefore entitled to P10,000.00. Wherefore, the decision appealed from is reversed and respondents-appellees are held liable solidarily to appellants, and ordered to pay them the aforesaid sum of P9,005.80 and P10,000.00, respectively, with interest from the filing of the complaint, and costs. G.R. No. L-12986 March 31, 1966

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF DOMINGA ONG, petitioners-appellants, vs. CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondents-appellees. Ross, Selph, Carrascoso and Janda for the respondents. Bernabe Africa, etc. for the petitioners. MAKALINTAL., J.: This case is before us on a petition for review of the decision of the Court of Appeals, which affirmed that of the Court of First Instance of Manila dismissing petitioners' second amended complaint against respondents. The action is for damages under Articles 1902 and 1903 of the old Civil Code. It appears that in the afternoon of March 18, 1948 a fire broke out at the Caltex service station at the corner of Antipolo street and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank truck into the

underground storage, right at the opening of the receiving tank where the nozzle of the hose was inserted. The fire spread to and burned several neighboring houses, including the personal properties and effects inside them. Their owners, among them petitioners here, sued respondents Caltex (Phil.), Inc. and Mateo Boquiren, the first as alleged owner of the station and the second as its agent in charge of operation. Negligence on the part of both of them was attributed as the cause of the fire. The trial court and the Court of Appeals found that petitioners failed to prove negligence and that respondents had exercised due care in the premises and with respect to the supervision of their employees. The first question before Us refers to the admissibility of certain reports on the fire prepared by the Manila Police and Fire Departments and by a certain Captain Tinio of the Armed Forces of the Philippines. Portions of the first two reports are as follows: 1. Police Department report: Investigation disclosed that at about 4:00 P.M. March 18, 1948, while Leandro Flores was transferring gasoline from a tank truck, plate No. T-5292 into the underground tank of the Caltex Gasoline Station located at the corner of Rizal Avenue and Antipolo Street, this City, an unknown Filipino lighted a cigarette and threw the burning match stick near the main valve of the said underground tank. Due to the gasoline fumes, fire suddenly blazed. Quick action of Leandro Flores in pulling off the gasoline hose connecting the truck with the underground tank prevented a terrific explosion. However, the flames scattered due to the hose from which the gasoline was spouting. It burned the truck and the following accessorias and residences. 2. The Fire Department report: In connection with their allegation that the premises was (sic) subleased for the installation of a coca-cola and cigarette stand, the complainants furnished this Office a copy of a photograph taken during the fire and which is submitted herewith. it appears in this picture that there are in the premises a coca-cola cooler and a rack which according to information gathered in the neighborhood contained cigarettes and matches, installed between the gasoline pumps and the underground tanks. The report of Captain Tinio reproduced information given by a certain Benito Morales regarding the history of the gasoline station and what the chief of the fire department had told him on the same subject. The foregoing reports were ruled out as "double hearsay" by the Court of Appeals and hence inadmissible. This ruling is now assigned as error. It is contended: first, that said reports were admitted by the trial court without objection on the part of respondents; secondly, that with respect to the police report (Exhibit V-Africa) which appears signed by a Detective Zapanta allegedly "for Salvador Capacillo," the latter was presented as witness but respondents waived their right to cross-examine him although they had the opportunity to do so; and thirdly, that in any event the said reports are admissible as an exception to the hearsay rule under section 35 of Rule 123, now Rule 130. The first contention is not borne out by the record. The transcript of the hearing of September 17, 1953 (pp. 167-170) shows that the reports in question, when offered as evidence, were objected to by counsel for each of respondents on the ground that they were hearsay and that they were "irrelevant, immaterial and impertinent." Indeed, in the court's resolution only Exhibits J, K, K-5 and X-6 were admitted without objection; the admission of the others, including the disputed ones, carried no such explanation. On the second point, although Detective Capacillo did take the witness stand, he was not examined and he did not testify as to the facts mentioned in his alleged report (signed by Detective Zapanta). All he said

was that he was one of those who investigated "the location of the fire and, if possible, gather witnesses as to the occurrence, and that he brought the report with him. There was nothing, therefore, on which he need be cross-examined; and the contents of the report, as to which he did not testify, did not thereby become competent evidence. And even if he had testified, his testimony would still have been objectionable as far as information gathered by him from third persons was concerned. Petitioners maintain, however, that the reports in themselves, that is, without further testimonial evidence on their contents, fall within the scope of section 35, Rule 123, which provides that "entries in official records made in the performance of his duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated." There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made by a public officer, or by another person specially enjoined by law to do so; (b) that it was made by the public officer in the performance of his duties, or by such other person in the performance of a duty specially enjoined by law; and (c) that the public officer or other person had sufficient knowledge of the facts by him stated, which must have been acquired by him personally or through official information (Moran, Comments on the Rules of Court, Vol. 3 [1957] p. 398). Of the three requisites just stated, only the last need be considered here. Obviously the material facts recited in the reports as to the cause and circumstances of the fire were not within the personal knowledge of the officers who conducted the investigation. Was knowledge of such facts, however, acquired by them through official information? As to some facts the sources thereof are not even identified. Others are attributed to Leopoldo Medina, referred to as an employee at the gas station were the fire occurred; to Leandro Flores, driver of the tank truck from which gasoline was being transferred at the time to the underground tank of the station; and to respondent Mateo Boquiren, who could not, according to Exhibit V-Africa, give any reason as to the origin of the fire. To qualify their statements as "official information" acquired by the officers who prepared the reports, the persons who made the statements not only must have personal knowledge of the facts stated but must have the duty to give 1 such statements for record. The reports in question do not constitute an exception to the hearsay rule; the facts stated therein were not acquired by the reporting officers through official information, not having been given by the informants pursuant to any duty to do so. The next question is whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa loquitur should apply so as to presume negligence on the part of appellees. Both the trial court and the appellate court refused to apply the doctrine in the instant case on the grounds that "as to (its) applicability ... in the Philippines, there seems to he nothing definite," and that while the rules do not prohibit its adoption in appropriate cases, "in the case at bar, however, we find no practical use for such doctrine." The question deserves more than such summary dismissal. The doctrine has actually been applied in this jurisdiction, in the case of Espiritu vs. Philippine Power and Development Co. (CA-G.R. No. 3240-R, September 20, 1949), wherein the decision of the Court of Appeals was penned by Mr. Justice J.B.L. Reyes now a member of the Supreme Court. The facts of that case are stated in the decision as follows: In the afternoon of May 5, 1946, while the plaintiff-appellee and other companions were loading grass between the municipalities of Bay and Calauan, in the province of Laguna, with clear weather and without any wind blowing, an electric transmission wire, installed and maintained by the defendant Philippine Power and Development Co., Inc. alongside the road, suddenly parted, and one of the broken ends hit the head of the plaintiff as he was about to board the truck. As a result, plaintiff received the full shock of 4,400 volts carried by the wire and was knocked unconscious to the ground. The electric charge coursed through his body and caused extensive and serious multiple burns from skull to legs, leaving the bone exposed in some parts and

causing intense pain and wounds that were not completely healed when the case was tried on June 18, 1947, over one year after the mishap. The defendant therein disclaimed liability on the ground that the plaintiff had failed to show any specific act of negligence, but the appellate court overruled the defense under the doctrine of res ipsa loquitur. The court said: The first point is directed against the sufficiency of plaintiff's evidence to place appellant on its defense. While it is the rule, as contended by the appellant, that in case of noncontractual negligence, or culpa aquiliana, the burden of proof is on the plaintiff to establish that the proximate cause of his injury was the negligence of the defendant, it is also a recognized principal that "where the thing which caused injury, without fault of the injured person, is under the exclusive control of the defendant and the injury is such as in the ordinary course of things does not occur if he having such control use proper care, it affords reasonable evidence, in the absence of the explanation, that the injury arose from defendant's want of care." And the burden of evidence is shifted to him to establish that he has observed due care and diligence. (San Juan Light & Transit Co. v. Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is known by the name of res ipsa loquitur (the transaction speaks for itself), and is peculiarly applicable to the case at bar, where it is unquestioned that the plaintiff had every right to be on the highway, and the electric wire was under the sole control of defendant company. In the ordinary course of events, electric wires do not part suddenly in fair weather and injure people, unless they are subjected to unusual strain and stress or there are defects in their installation, maintenance and supervision; just as barrels do not ordinarily roll out of the warehouse windows to injure passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co. 722; 159 Eng. Reprint 299, the leading case that established that rule). Consequently, in the absence of contributory negligence (which is admittedly not present), the fact that the wire snapped suffices to raise a reasonable presumption of negligence in its installation, care and maintenance. Thereafter, as observed by Chief Baron Pollock, "if there are any facts inconsistent with negligence, it is for the defendant to prove." It is true of course that decisions of the Court of Appeals do not lay down doctrines binding on the Supreme Court, but we do not consider this a reason for not applying the particular doctrine of res ipsa loquitur in the case at bar. Gasoline is a highly combustible material, in the storage and sale of which extreme care must be taken. On the other hand, fire is not considered a fortuitous event, as it arises almost invariably from some act of man. A case strikingly similar to the one before Us is Jones vs. Shell Petroleum Corporation, et al., 171 So. 447: Arthur O. Jones is the owner of a building in the city of Hammon which in the year 1934 was leased to the Shell Petroleum Corporation for a gasoline filling station. On October 8, 1934, during the term of the lease, while gasoline was being transferred from the tank wagon, also operated by the Shell Petroleum Corporation, to the underground tank of the station, a fire started with resulting damages to the building owned by Jones. Alleging that the damages to his building amounted to $516.95, Jones sued the Shell Petroleum Corporation for the recovery of that amount. The judge of the district court, after hearing the testimony, concluded that plaintiff was entitled to a recovery and rendered judgment in his favor for $427.82. The Court of Appeals for the First Circuit reversed this judgment, on the ground the testimony failed to show with reasonable certainty any negligence on the part of the Shell Petroleum Corporation or any of its agents or employees. Plaintiff applied to this Court for a Writ of Review which was granted, and the case is now before us for decision.1wph1.t In resolving the issue of negligence, the Supreme Court of Louisiana held:

Plaintiff's petition contains two distinct charges of negligence one relating to the cause of the fire and the other relating to the spreading of the gasoline about the filling station. Other than an expert to assess the damages caused plaintiff's building by the fire, no witnesses were placed on the stand by the defendant. Taking up plaintiff's charge of negligence relating to the cause of the fire, we find it established by the record that the filling station and the tank truck were under the control of the defendant and operated by its agents or employees. We further find from the uncontradicted testimony of plaintiff's witnesses that fire started in the underground tank attached to the filling station while it was being filled from the tank truck and while both the tank and the truck were in charge of and being operated by the agents or employees of the defendant, extended to the hose and tank truck, and was communicated from the burning hose, tank truck, and escaping gasoline to the building owned by the plaintiff. Predicated on these circumstances and the further circumstance of defendant's failure to explain the cause of the fire or to show its lack of knowledge of the cause, plaintiff has evoked the doctrine of res ipsa loquitur. There are many cases in which the doctrine may be successfully invoked and this, we think, is one of them. Where the thing which caused the injury complained of is shown to be under the management of defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose from want of care. (45 C.J. #768, p. 1193). This statement of the rule of res ipsa loquitur has been widely approved and adopted by the courts of last resort. Some of the cases in this jurisdiction in which the doctrine has been applied are the following, viz.: Maus v. Broderick, 51 La. Ann. 1153, 25 So. 977; Hebert v. Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64 L.R.A. 101, 100 Am. St. Rep. 505; Willis v. Vicksburg, etc., R. Co., 115 La. 63, 38 So. 892; Bents v. Page, 115 La. 560, 39 So. 599. The principle enunciated in the aforequoted case applies with equal force here. The gasoline station, with all its appliances, equipment and employees, was under the control of appellees. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire started were appellees and their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care. In the report submitted by Captain Leoncio Mariano of the Manila Police Department (Exh. X-1 Africa) the following appears: Investigation of the basic complaint disclosed that the Caltex Gasoline Station complained of occupies a lot approximately 10 m x 10 m at the southwest corner of Rizal Avenue and Antipolo. The location is within a very busy business district near the Obrero Market, a railroad crossing and very thickly populated neighborhood where a great number of people mill around t until gasoline tever be theWactjvities of these peopleor lighting a cigarette cannot be excluded and this constitute a secondary hazard to its operation which in turn endangers the entire neighborhood to conflagration.

Furthermore, aside from precautions already taken by its operator the concrete walls south and west adjoining the neighborhood are only 2-1/2 meters high at most and cannot avoid the flames from leaping over it in case of fire. Records show that there have been two cases of fire which caused not only material damages but desperation and also panic in the neighborhood. Although the soft drinks stand had been eliminated, this gasoline service station is also used by its operator as a garage and repair shop for his fleet of taxicabs numbering ten or more, adding another risk to the possible outbreak of fire at this already small but crowded gasoline station. The foregoing report, having been submitted by a police officer in the performance of his duties on the basis of his own personal observation of the facts reported, may properly be considered as an exception to the hearsay rule. These facts, descriptive of the location and objective circumstances surrounding the operation of the gasoline station in question, strengthen the presumption of negligence under the doctrine of res ipsa loquitur, since on their face they called for more stringent measures of caution than those which would satisfy the standard of due diligence under ordinary circumstances. There is no more eloquent demonstration of this than the statement of Leandro Flores before the police investigator. Flores was the driver of the gasoline tank wagon who, alone and without assistance, was transferring the contents thereof into the underground storage when the fire broke out. He said: "Before loading the underground tank there were no people, but while the loading was going on, there were people who went to drink coca-cola (at the coca-cola stand) which is about a meter from the hole leading to the underground tank." He added that when the tank was almost filled he went to the tank truck to close the valve, and while he had his back turned to the "manhole" he, heard someone shout "fire." Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission on the part of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from leaping over it. As it was the concrete wall was only 2-1/2 meters high, and beyond that height it consisted merely of galvanized iron sheets, which would predictably crumple and melt when subjected to intense heat. Defendants' negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to the neighboring houses. There is an admission on the part of Boquiren in his amended answer to the second amended complaint that "the fire was caused through the acts of a stranger who, without authority, or permission of answering defendant, passed through the gasoline station and negligently threw a lighted match in the premises." No evidence on this point was adduced, but assuming the allegation to be true certainly any unfavorable inference from the admission may be taken against Boquiren it does not extenuate his negligence. A decision of the Supreme Court of Texas, upon facts analogous to those of the present case, states the rule which we find acceptable here. "It is the rule that those who distribute a dangerous article or agent, owe a degree of protection to the public proportionate to and commensurate with a danger involved ... we think it is the generally accepted rule as applied to torts that 'if the effects of the actor's negligent conduct actively and continuously operate to bring about harm to another, the fact that the active and substantially simultaneous operation of the effects of a third person's innocent, tortious or criminal act is also a substantial factor in bringing about the harm, does not protect the actor from liability.' (Restatement of the Law of Torts, vol. 2, p. 1184, #439). Stated in another way, "The intention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer from consequences of negligence, if such negligence directly and proximately cooperates with the independent cause in the resulting injury." (MacAfee, et al. vs. Traver's Gas Corporation, 153 S.W. 2nd 442.) The next issue is whether Caltex should be held liable for the damages caused to appellants. This issue depends on whether Boquiren was an independent contractor, as held by the Court of Appeals, or an agent of Caltex. This question, in the light of the facts not controverted, is one of law and hence may be passed upon by this Court. These facts are: (1) Boquiren made an admission that he was an agent of Caltex; (2) at the time of the fire Caltex owned the gasoline station and all the equipment therein; (3) Caltex exercised control over Boquiren in the management of the state; (4) the delivery truck used in

delivering gasoline to the station had the name of CALTEX painted on it; and (5) the license to store gasoline at the station was in the name of Caltex, which paid the license fees. (Exhibit T-Africa; Exhibit UAfrica; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa). In Boquiren's amended answer to the second amended complaint, he denied that he directed one of his drivers to remove gasoline from the truck into the tank and alleged that the "alleged driver, if one there was, was not in his employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the owners of the gasoline station." It is true that Boquiren later on amended his answer, and that among the changes was one to the effect that he was not acting as agent of Caltex. But then again, in his motion to dismiss appellants' second amended complaint the ground alleged was that it stated no cause of action since under the allegations thereof he was merely acting as agent of Caltex, such that he could not have incurred personal liability. A motion to dismiss on this ground is deemed to be an admission of the facts alleged in the complaint. Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the business conducted at the service station in question was owned and operated by Boquiren. But Caltex did not present any contract with Boquiren that would reveal the nature of their relationship at the time of the fire. There must have been one in existence at that time. Instead, what was presented was a license agreement manifestly tailored for purposes of this case, since it was entered into shortly before the expiration of the one-year period it was intended to operate. This so-called license agreement (Exhibit 5Caltex) was executed on November 29, 1948, but made effective as of January 1, 1948 so as to cover the date of the fire, namely, March 18, 1948. This retroactivity provision is quite significant, and gives rise to the conclusion that it was designed precisely to free Caltex from any responsibility with respect to the fire, as shown by the clause that Caltex "shall not be liable for any injury to person or property while in the property herein licensed, it being understood and agreed that LICENSEE (Boquiren) is not an employee, representative or agent of LICENSOR (Caltex)." But even if the license agreement were to govern, Boquiren can hardly be considered an independent contractor. Under that agreement Boquiren would pay Caltex the purely nominal sum of P1.00 for the use of the premises and all the equipment therein. He could sell only Caltex Products. Maintenance of the station and its equipment was subject to the approval, in other words control, of Caltex. Boquiren could not assign or transfer his rights as licensee without the consent of Caltex. The license agreement was supposed to be from January 1, 1948 to December 31, 1948, and thereafter until terminated by Caltex upon two days prior written notice. Caltex could at any time cancel and terminate the agreement in case Boquiren ceased to sell Caltex products, or did not conduct the business with due diligence, in the judgment of Caltex. Termination of the contract was therefore a right granted only to Caltex but not to Boquiren. These provisions of the contract show the extent of the control of Caltex over Boquiren. The control was such that the latter was virtually an employee of the former. Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or terminate his services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the operator; and that the receipts signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator was an agent of the company and not an independent contractor should not be disturbed. To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties, should thereby a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their respective obligations stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the contract by the parties, the former must

prevail over the latter. (Shell Company of the Philippines, Ltd. vs. Firemens' Insurance Company of Newark, New Jersey, 100 Phil. 757). The written contract was apparently drawn for the purpose of creating the apparent relationship of employer and independent contractor, and of avoiding liability for the negligence of the employees about the station; but the company was not satisfied to allow such relationship to exist. The evidence shows that it immediately assumed control, and proceeded to direct the method by which the work contracted for should be performed. By reserving the right to terminate the contract at will, it retained the means of compelling submission to its orders. Having elected to assume control and to direct the means and methods by which the work has to be performed, it must be held liable for the negligence of those performing service under its direction. We think the evidence was sufficient to sustain the verdict of the jury. (Gulf Refining Company v. Rogers, 57 S.W. 2d, 183). Caltex further argues that the gasoline stored in the station belonged to Boquiren. But no cash invoices were presented to show that Boquiren had bought said gasoline from Caltex. Neither was there a sales contract to prove the same. As found by the trial court the Africas sustained a loss of P9,005.80, after deducting the amount of P2,000.00 collected by them on the insurance of the house. The deduction is now challenged as erroneous on the ground that Article 2207 of the New Civil Code, which provides for the subrogation of the insurer to the rights of the insured, was not yet in effect when the loss took place. However, regardless of the silence of the law on this point at that time, the amount that should be recovered be measured by the damages actually suffered, otherwise the principle prohibiting unjust enrichment would be violated. With respect to the claim of the heirs of Ong P7,500.00 was adjudged by the lower court on the basis of the assessed value of the property destroyed, namely, P1,500.00, disregarding the testimony of one of the Ong children that said property was worth P4,000.00. We agree that the court erred, since it is of common knowledge that the assessment for taxation purposes is not an accurate gauge of fair market value, and in this case should not prevail over positive evidence of such value. The heirs of Ong are therefore entitled to P10,000.00. Wherefore, the decision appealed from is reversed and respondents-appellees are held liable solidarily to appellants, and ordered to pay them the aforesaid sum of P9,005.80 and P10,000.00, respectively, with interest from the filing of the complaint, and costs. G.R. No. 170141 April 22, 2008

JAPAN AIRLINES, petitioner, vs. JESUS SIMANGAN, respondent. DECISION REYES R.T., J.: WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and 1 on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with 2 even by Japan Airlines (JAL).

In this petition for review on certiorari, petitioner JAL appeals the: (1) Decision dated May 31, 2005 of the Court of Appeals (CA) ordering it to pay respondent Jesus Simangan moral and exemplary damages; 5 and (2) Resolution of the same court dated September 28, 2005 denying JAL's motion for reconsideration. The Facts In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in UCLA School of Medicine in Los Angeles, California, U.S.A. Upon request of UCLA, respondent undertook a series of laboratory tests at the National Kidney Institute in Quezon City to verify whether his 6 blood and tissue type are compatible with Loreto's. Fortunately, said tests proved that respondent's 7 blood and tissue type were well-matched with Loreto's. Respondent needed to go to the United States to complete his preliminary work-up and donation surgery. Hence, to facilitate respondent's travel to the United States, UCLA wrote a letter to the American Consulate in Manila to arrange for his visa. In due time, respondent was issued an emergency U.S. visa 8 by the American Embassy in Manila. Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from petitioner 9 JAL for US$1,485.00 and was issued the corresponding boarding pass. He was scheduled to a particular 10 flight bound for Los Angeles, California, U.S.A. via Narita, Japan. On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the 11 12 company of several relatives and friends. He was allowed to check-in at JAL's counter. His plane ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and 13 security routines. After passing through said immigration and security procedures, respondent was 14 allowed by JAL to enter its airplane. While inside the airplane, JAL's airline crew suspected respondent of carrying a falsified travel document and imputed that he would only use the trip to the United States as a pretext to stay and work in 15 Japan. The stewardess asked respondent to show his travel documents. Shortly after, the stewardess along with a Japanese and a Filipino haughtily ordered him to stand up and leave the 16 plane. Respondent protested, explaining that he was issued a U.S. visa. Just to allow him to board the 17 plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in Narita. His 18 pleas were ignored. He was then constrained to go out of the plane. In a nutshell, respondent was bumped off the flight. Respondent went to JAL's ground office and waited there for three hours. Meanwhile, the plane took off 19 and he was left behind. Afterwards, he was informed that his travel documents were, indeed, in 20 order. Respondent was refunded the cost of his plane ticket less the sum of US$500.00 which was 21 22 deducted by JAL. Subsequently, respondent's U.S. visa was cancelled. Displeased by the turn of events, respondent filed an action for damages against JAL with the Regional Trial Court (RTC) in Valenzuela City, docketed as Civil Case No. 4195-V-93. He claimed he was not able 23 to donate his kidney to Loreto; and that he suffered terrible embarrassment and mental anguish. He prayed that he be awarded P3 million as moral damages, P1.5 million as exemplary damages 24 and P500,000.00 as attorney's fees. JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow respondent to fly on his scheduled departure was due to "a need for his travel documents to be 25 authenticated by the United States Embassy" because no one from JAL's airport staff had encountered 26 a parole visa before. It posited that the authentication required additional time; that respondent was advised to take the flight the following day, July 30, 1992. JAL alleged that respondent agreed to be 27 rebooked on July 30, 1992.

JAL also lodged a counterclaim anchored on respondent's alleged wrongful institution of the complaint. It 28 prayed for litigation expenses, exemplary damages and attorney's fees. On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of respondent (plaintiff), disposing as follows: WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the amount ofP1,000,000.00 as moral damages, the amount of P500,000.00 as exemplary damages 29 and the amount ofP250,000.00 as attorney's fees, plus the cost of suit. The RTC explained: In summarily and insolently ordering the plaintiff to disembark while the latter was already settled in his assigned seat, the defendant violated the contract of carriage; that when the plaintiff was ordered out of the plane under the pretext that the genuineness of his travel documents would be verified it had caused him embarrassment and besmirched reputation; and that when the plaintiff was finally not allowed to take the flight, he suffered more wounded feelings and social humiliation for which the plaintiff was asking to be awarded moral and exemplary damages as well as attorney's fees. The reason given by the defendant that what prompted them to investigate the genuineness of the travel documents of the plaintiff was that the plaintiff was not then carrying a regular visa but just a letter does not appear satisfactory. The defendant is engaged in transporting passengers by plane from country to country and is therefore conversant with the travel documents. The defendant should not be allowed to pretend, to the prejudice of the plaintiff not to know that the travel documents of the plaintiff are valid documents to allow him entry in the United States. The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in his assigned seat clearly demonstrated that the defendant breached its contract of carriage with the plaintiff as passenger in bad faith and as such the plaintiff is entitled to moral and exemplary 30 damages as well as to an award of attorney's fees. Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not guilty of breach of 31 contract of carriage, hence, not liable for damages. It posited that it is the one entitled to recover on its 32 counterclaim. CA Ruling In a Decision dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that it lowered the amount of moral and exemplary damages and deleted the award of attorney's fees. The fallo of the CA decision reads: WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant JAPAN AIR LINES is ordered to pay appellee JESUS SIMANGAN the reduced sums, as follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages, and Two Hundred Fifty Thousand Pesos (P250,000.00) as exemplary damages. The award of attorney's fees is hereby 34 DELETED. The CA elucidated that since JAL issued to respondent a round trip plane ticket for a lawful consideration, 35 36 "there arose a perfected contract between them." It found that respondent was "haughtily ejected" by 37 JAL and that "he was certainly embarrassed and humiliated" when, in the presence of other passengers, JAL's airline staff "shouted at him to stand up and arrogantly asked him to produce his travel
33

papers, without the least courtesy every human being is entitled to"; 39 deplane on the grounds that his papers were fake." The CA ratiocinated:

38

and that "he was compelled to

While the protection of passengers must take precedence over convenience, the implementation of security measures must be attended by basic courtesies. In fact, breach of the contract of carriage creates against the carrier a presumption of liability, by a simple proof of injury, relieving the injured passenger of the duty to establish the fault of the carrier or of his employees; and placing on the carrier the burden to prove that it was due to an unforeseen event or toforce majeure. That appellee possessed bogus travel documents and that he might stay illegally in Japan are allegations without substantiation. Also, appellant's attempt to rebook appellee the following day was too late and did not relieve it from liability. The damage had been done. Besides, its belated theory of novation, i.e., that appellant's original obligation to carry appellee to Narita and Los Angeles on July 29, 1992 was extinguished by novation when appellant and appellant agreed that appellee will instead take appellant's flight to Narita on the following day, July 30, 1992, deserves little attention. It is inappropriate at bar. Questions not taken up during the trial cannot be raised 40 for the first time on appeal. (Underscoring ours and citations were omitted) Citing Ortigas, Jr. v. Lufthansa German Airlines, the CA declared that "(i)n contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passengers 42 to the award of moral damages in accordance with Article 2220 of the Civil Code." Nevertheless, the CA modified the damages awarded by the RTC. It explained: Fundamental in the law on damages is that one injured by a breach of a contract, or by a wrongful or negligent act or omission shall have a fair and just compensation commensurate to the loss sustained as consequence of the defendant's act. Being discretionary on the court, the amount, however, should not be palpably and scandalously excessive. Here, the trial court's award of P1,000,000.00 as moral damages appears to be overblown. No other proof of appellee's social standing, profession, financial capabilities was presented except that he was single and a businessman. To Us, the sum of 500,000.00 is just and fair. For, moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendant's culpable action. Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to a reasonable level. The award of exemplary damages is designed to permit the courts to mould behavior that has socially deleterious consequences and its imposition is required by public policy to suppress the wanton acts of the offender. Hence, the sum of P250,000.00 is adequate under the circumstances. The award of P250,000.00 as attorney's fees lacks factual basis. Appellee was definitely compelled to litigate in protecting his rights and in seeking relief from appellant's misdeeds. Yet, the record is devoid of evidence to show the cost of the services of his counsel and/or the actual 43 expenses incurred in prosecuting his action. (Citations were omitted)
41

When JAL's motion for reconsideration was denied, it resorted to the petition at bar. Issues JAL poses the following issues I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO MORAL DAMAGES, CONSIDERING THAT: A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT. B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF CONTRACT CASES ONLY WHEN THE BREACH IS ATTENDED BY FRAUD OR BAD FAITH. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT FRAUDULENTLY OR IN BAD FAITH AS TO ENTITLE RESPONDENT TO MORAL DAMAGES. C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH EFFECTED IN GOOD FAITH FROM ONE ATTENDED BY BAD FAITH. II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO EXEMPLARY DAMAGES CONSIDERING THAT: A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN BREACH OF CONTRACT OF CARRIAGE UNLESS THE CARRIER IS GUILTY OF WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT CONDUCT. B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT IN A WANTON FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO ENTITLE RESPONDENT TO EXEMPLARY DAMAGES. III. ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF DAMAGES, WHETHER OR NOT THE COURT OF APPEALS AWARD OF P750,000 IN DAMAGES WAS EXCESSIVE AND UNPRECEDENTED. IV. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON 44 ITSCOUNTERCLAIM. (Underscoring Ours) Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty of contract of carriage; (2) whether or not respondent is entitled to moral and exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for damages. Our Ruling

This Court is not a trier of facts. Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA. The CA also gave its nod to the reasoning of the RTC except as to the awards of damages, which were reduced, and that of attorney's fees, which was deleted. We are not a trier of facts. We generally rely upon, and are bound by, the conclusions on this matter of the lower courts, which are better equipped and have better opportunity to assess the evidence first-hand, 45 including the testimony of the witnesses. We have repeatedly held that the findings of fact of the CA are final and conclusive and cannot be 46 reviewed on appeal to the Supreme Court provided they are based on substantial evidence. We have 47 no jurisdiction, as a rule, to reverse their findings. Among the exceptions to this rule are: (a) when the conclusion is a finding grounded entirely on speculations, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) where there is grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of facts are conflicting; (f) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the 48 admissions of both appellant and appellee. The said exceptions, which are being invoked by JAL, are not found here. There is no indication that the findings of the CA are contrary to the evidence on record or that vital testimonies of JAL's witnesses were disregarded. Neither did the CA commit misapprehension of facts nor did it fail to consider relevant facts. Likewise, there was no grave abuse of discretion in the appreciation of facts or mistaken and absurd inferences. We thus sustain the coherent facts as established by the courts below, there being no sufficient showing that the said courts committed reversible error in reaching their conclusions. JAL is guilty of breach of contract of carriage. That respondent purchased a round trip plane ticket from JAL and was issued the corresponding 49 boarding pass is uncontroverted. His plane ticket, boarding pass, travel authority and personal articles 50 were subjected to rigid immigration and security procedure. After passing through said immigration and security procedure, he was allowed by JAL to enter its airplane to fly to Los Angeles, California, U.S.A. 51 via Narita, Japan. Concisely, there was a contract of carriage between JAL and respondent. Nevertheless, JAL made respondent get off the plane on his scheduled departure on July 29, 1992. He was not allowed by JAL to fly. JAL thus failed to comply with its obligation under the contract of carriage. JAL justifies its action by arguing that there was "a need to verify the authenticity of respondent's travel 52 53 document." It alleged that no one from its airport staff had encountered a parole visa before. It further contended that respondent agreed to fly the next day so that it could first verify his travel document, 54 hence, there was novation. It maintained that it was not guilty of breach of contract of carriage as 55 respondent was not able to travel to the United States due to his own voluntary desistance. We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need to 56 first check the authenticity of his travel documents with the U.S. Embassy. As admitted by JAL, "the 57 flight could not wait for Mr. Simangan because it was ready to depart." Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left behind. The latter was unceremoniously bumped off despite his protestations and valid

travel documents and notwithstanding his contract of carriage with JAL. Damage had already been done when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure JAL's default. Considering that respondent was forced to get out of the plane and left behind against his will, he could not have freely consented to be rebooked the next day. In short, he did not agree to the alleged novation. Since novation implies a waiver of the right the creditor had before the novation, such waiver must be 58 express. It cannot be supposed, without clear proof, that respondent had willingly done away with his right to fly on July 29, 1992. Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL personnel imputed that respondent would only use the trip to the United States as a pretext to stay and 59 work in Japan. Apart from the fact that respondent's plane ticket, boarding pass, travel authority and personal articles 60 already passed the rigid immigration and security routines, JAL, as a common carrier, ought to know the kind of valid travel documents respondent carried. As provided in Article 1755 of the New Civil Code: "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 61 circumstances." Thus, We find untenable JAL's defense of "verification of respondent's documents" in its breach of contract of carriage. It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot 62 be interfered with even by JAL. In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and its non-performance by the carrier through the latter's failure to carry the passenger 63 safely to his destination. Respondent has complied with these twin requisites. Respondent is entitled to moral and exemplary damages and attorney's fees plus legal interest . With reference to moral damages, JAL alleged that they are not recoverable in actions ex contractu except only when the breach is attended by fraud or bad faith. It is contended that it did not act fraudulently or in bad faith towards respondent, hence, it may not be held liable for moral damages. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of 64 contract for it is not one of the items enumerated under Article 2219 of the Civil Code. As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in which the 65 carrier is guilty of fraud or bad faith, as provided in Article 2220. The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of carriage with respondent in bad faith. JAL personnel summarily and insolently ordered respondent to disembark while the latter was already settled in his assigned seat. He was ordered out of the plane under the alleged reason that the genuineness of his travel documents should be verified. These findings of facts were upheld by the CA, to wit: x x x he was haughtily ejected by appellant. He was certainly embarrassed and humiliated when, in the presence of other passengers, the appellant's airline staff shouted at him to stand up and arrogantly asked him to produce his travel papers, without the least courtesy every human being is entitled to. Then, he was compelled to deplane on the grounds that his papers were fake. His protestation of having been issued a U.S. visa coupled with his plea to appellant to closely monitor his movements when the aircraft stops over in Narita, were ignored. Worse, he was made

to wait for many hours at the office of appellant only to be told later that he has valid travel 66 documents. (Underscoring ours) Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on breach of a contract of carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack of care for the interests of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in securing the contract and in the execution 67 thereof, as well as in the enforcement of its terms, or any other kind of deceit. JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts against respondent. Exemplary damages, which are awarded by way of example or correction for the public good, may be recovered in contractual obligations, as in this case, if defendant 68 acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is, in fact, that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks to compel them to control their employees, to tame their 69 reckless instincts and to force them to take adequate care of human beings and their property. Neglect or malfeasance of the carrier's employees could give ground for an action for damages. Passengers have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration and are entitled to be protected against personal misconduct, injurious language, 70 indignities and abuses from such employees. The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages in respondent's favor is, in Our view, reasonable and realistic. This award is reasonably sufficient to indemnify him for the humiliation and embarrassment he suffered. This also serves as an example to discourage the repetition of similar oppressive acts. With respect to attorney's fees, they may be awarded when defendant's act or omission has compelled 71 plaintiff to litigate with third persons or to incur expenses to protect his interest. The Court, 72 in Construction Development Corporation of the Philippines v. Estrella , citing Traders Royal Bank 73 Employees Union-Independent v. National Labor Relations Commission, elucidated thus: There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client. In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the 74 award shall pertain to the lawyer as additional compensation or as part thereof . It was therefore erroneous for the CA to delete the award of attorney's fees on the ground that the record is devoid of evidence to show the cost of the services of respondent's counsel. The amount is actually discretionary upon the Court so long as it passes the test of reasonableness. They may be recovered as actual or compensatory damages when exemplary damages are awarded and whenever the court deems 75 it just and equitable, as in this case.

Considering the factual backdrop of this case, attorney's fees in the amount of P200,000.00 is reasonably modest. The above liabilities of JAL in the total amount of P800,000.00 earn legal interest pursuant to the Court's 76 ruling inConstruction Development Corporation of the Philippines v. Estrella , citing Eastern Shipping 77 Lines, Inc. v. Court of Appeals, to wit: Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint, we held in Eastern Shipping Lines, Inc. v. Court of Appeals, that when an obligation, regardless of its source,i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained) . The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a 78 forbearance of credit. (Emphasis supplied and citations omitted) Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay respondent legal interest. Pursuant to the above ruling of the Court, the legal interest is 6% and it shall be reckoned from September 21, 2000 when the RTC rendered its judgment. From the time this Decision becomes final and executory, the interest rate shall be 12% until its satisfaction. JAL is not entitled to its counterclaim for damages. The counterclaim of JAL in its Answer is a compulsory counterclaim for damages and attorney's fees arising from the filing of the complaint. There is no mention of any other counter claims. This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch as the complaint against it is obviously not malicious or unfounded. It was filed by respondent precisely to claim his right to damages against JAL. Well-settled is the rule that the commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant 80 to impose a penalty on the right to litigate.
79

We reiterate case law that if damages result from a party's exercise of a right, it is damnum absque 81 injuria. Lawful acts give rise to no injury. Walang perhuwisyong maaring idulot ang paggamit sa sariling karapatan. During the trial, however, JAL presented a witness who testified that JAL suffered further damages. Allegedly, respondent caused the publications of his subject complaint against JAL in the newspaper for 82 which JAL suffered damages. Although these additional damages allegedly suffered by JAL were not incorporated in its Answer as they 83 arose subsequent to its filing, JAL's witness was able to testify on the same before the RTC. Hence, although these issues were not raised by the pleadings, they shall be treated in all respects as if they had been raised in the pleadings. As provided in Section 5, Rule 10 of the Rules of Court, "(w)hen issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings." Nevertheless, JAL's counterclaim cannot be granted. JAL is a common carrier. JAL's business is mainly with the traveling public. It invites people to avail 84 themselves of the comforts and advantages it offers. Since JAL deals with the public, its bumping off of respondent without a valid reason naturally drew public attention and generated a public issue. The publications involved matters about which the public has the right to be informed because they relate to a public issue. This public issue or concern is a legitimate topic of a public comment that may be validly published. Assuming that respondent, indeed, caused the publication of his complaint, he may not be held liable for damages for it. The constitutional guarantee of freedom of the speech and of the press includes fair commentaries on matters of public interest. This is explained by the Court in Borjal v. Court of 85 Appeals, to wit: To reiterate, fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander. The doctrine of fair comment means that while in general every discreditable imputation publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. If the comment is an expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred 86 from the facts. (Citations omitted and underscoring ours) Even though JAL is not a public official, the rule on privileged commentaries on matters of public interest applies to it. The privilege applies not only to public officials but extends to a great variety of subjects, and 87 includes matters of public concern, public men, and candidates for office. Hence, pursuant to the Borjal case, there must be an actual malice in order that a discreditable imputation to a public person in his public capacity or to a public official may be actionable. To be considered malicious, the libelous statements must be shown to have been written or published with the knowledge 88 that they are false or in reckless disregard of whether they are false or not.

Considering that the published articles involve matters of public interest and that its expressed opinion is not malicious but based on established facts, the imputations against JAL are not actionable. Therefore, JAL may not claim damages for them. WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals is AFFIRMED WITH MODIFICATION. As modified, petitioner Japan Airlines is ordered to pay respondent Jesus Simangan the following: (1) P500,000.00 as moral damages; (2) P100,000.00 as exemplary damages; and (3) P200,000.00 as attorney's fees. The total amount adjudged shall earn legal interest at the rate of 6% per annum from the date of judgment of the Regional Trial Court on September 21, 2000 until the finality of this Decision. From the time this Decision becomes final and executory, the unpaid amount, if any, shall earn legal interest at the rate of 12% per annum until its satisfaction. SO ORDERED. G.R. No. 188288 January 16, 2012

SPOUSES FERNANDO and LOURDES VILORIA, Petitioners, vs. CONTINENTAL AIRLINES, INC., DECISION REYES, J.: This is a petition for review under Rule 45 of the Rules of Court from the January 30, 2009 Decision of the Special Thirteenth Division of the Court of Appeals (CA) in CA-G.R. CV No. 88586 entitled "Spouses Fernando and Lourdes Viloria v. Continental Airlines, Inc.," the dispositive portion of which states: WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03 April 2006, awarding US$800.00 or its peso equivalent at the time of payment, plus legal rate of interest from 21 July 1997 until fully paid, [P]100,000.00 as moral damages, [P]50,000.00 as exemplary damages, [P]40,000.00 as attorneys fees and costs of suit to plaintiffs-appellees is hereby REVERSED and SET ASIDE. Defendant-appellants counterclaim is DENIED. Costs against plaintiffs-appellees. SO ORDERED.
2 1

On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC) rendered a Decision, giving due course to the complaint for sum of money and damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria (Lourdes), collectively called Spouses Viloria, against respondent Continental Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to such complaint. On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his wife, Lourdes, two (2) round trip airline tickets from San Diego, California to Newark, New Jersey on board Continental Airlines. Fernando purchased the tickets at US$400.00 each from a travel agency called "Holiday Travel" and was attended to by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando agreed to buy the said tickets after Mager informed them that there were no available seats at

Amtrak, an intercity passenger train service provider in the United States. Per the tickets, Spouses Viloria were scheduled to leave for Newark on August 13, 1997 and return to San Diego on August 21, 1997. Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or August 6, 1997. Mager informed him that flights to Newark via Continental Airlines were already fully booked and offered the alternative of a round trip flight via Frontier Air. Since flying with Frontier Air called for a higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for a refund. Mager, however, denied his request as the subject tickets are non-refundable and the only option that Continental Airlines can offer is the re-issuance of new tickets within one (1) year from the date the subject tickets were issued. Fernando decided to reserve two (2) seats with Frontier Air. As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound Station where he saw an Amtrak station nearby. Fernando made inquiries and was told that there are seats available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased two (2) tickets for Washington, D.C. From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling her that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was already fully booked. Fernando reiterated his demand for a refund but Mager was firm in her position that the subject tickets are non-refundable. Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a 3 refund and alleging that Mager had deluded them into purchasing the subject tickets. In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his complaint had 4 been referred to the Customer Refund Services of Continental Airlines at Houston, Texas. In a letter dated March 24, 1998, Continental Micronesia denied Fernandos request for a refund and advised him that he may take the subject tickets to any Continental ticketing location for the re-issuance of new tickets within two (2) years from the date they were issued. Continental Micronesia informed Fernando that the subject tickets may be used as a form of payment for the purchase of another 5 Continental ticket, albeit with a re-issuance fee. On June 17, 1999, Fernando went to Continentals ticketing office at Ayala Avenue, Maka ti City to have the subject tickets replaced by a single round trip ticket to Los Angeles, California under his name. Therein, Fernando was informed that Lourdes ticket was non-transferable, thus, cannot be used for the purchase of a ticket in his favor. He was also informed that a round trip ticket to Los Angeles was US$1,867.40 so he would have to pay what will not be covered by the value of his San Diego to Newark round trip ticket. In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no longer wished to have them replaced. In addition to the dubious circumstances under which the subject tickets were issued, Fernando claimed that CAIs act of charging him with US$1,867.40 for a round trip ticket to Los Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes ticket, 6 breached its undertaking under its March 24, 1998 letter. On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to refund the money they used in the purchase of the subject tickets with legal interest from July 21, 1997 and to payP1,000,000.00 as moral damages, P500,000.00 as exemplary damages and P250,000.00 as 7 attorneys fees. CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the subject tickets are non-refundable; (b) Fernando cannot insist on using the ticket in Lourdes name for the purchase of a round trip ticket to Los Angeles since the same is non-transferable; (c) as Mager is not a

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

The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff spouses on July 21, 1997 were no different from those offered in any other travel agency. Defendant airline impliedly if not expressly acknowledged its principal-agent relationship with Ms. Mager by its offer in the letter dated 11 March 24, 1998 an obvious attempt to assuage plaintiffs spouses hurt feelings. Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the subject tickets within two (2) years from their date of issue when it charged Fernando with the amount of US$1,867.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use Lourdes ticket. Specifically: Tickets may be reissued for up to two years from the original date of issue. When defendant airline still charged plaintiffs spouses US$1,867.40 or more than double the then going rate of US$856.00 for the unused tickets when the same were presented within two (2) years from date of issue, defendant airline 12 exhibited callous treatment of passengers. The Appellate Courts Ruling On appeal, the CA reversed the RTCs April 3, 2006 Decision, holding that CAI cannot be held liable for Magers act in the absence of any proof that a principal-agent relationship existed between CAI and Holiday Travel. According to the CA, Spouses Viloria, who have the burden of proof to establish the fact of agency, failed to present evidence demonstrating that Holiday Travel is CAIs agent. Furthermore, contrary to Spouses Vilorias claim, the contractual relationship between Holiday Travel and CAI is not an agency but that of a sale. Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was in turn a ticketing agent of Holiday Travel who was in turn a ticketing agent of Continental Airlines. Proceeding from this premise, they contend that Continental Airlines should be held liable for the acts of Mager. The trial court held the same view. We do not agree. By the contract of agency, a person binds him/herself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for him/herself; and (4) the agent acts within the scope of his/her authority. As the basis of agency is representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the principals words or actions. In the same m anner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is generally no agency. It is likewise a settled rule that persons dealing with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. Agency is never presumed, neither is it created by the mere use of the word in a trade or business name. We have perused the evidence and documents so far presented. We find nothing except bare allegations of plaintiffs-appellees that Mager/Holiday Travel was acting in behalf of Continental Airlines. From all sides of legal prism, the transaction in issue was simply a contract of sale, wherein Holiday Travel buys airline tickets from Continental Airlines and then, through its 13 employees, Mager included, sells it at a premium to clients. The CA also ruled that refund is not available to Spouses Viloria as the word "non-refundable" was clearly printed on the face of the subject tickets, which constitute their contract with CAI. Therefore, the grant of their prayer for a refund would violate the proscription against impairment of contracts. Finally, the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the higher amount of US$1,867.40 for a round trip ticket to Los Angeles. According to the CA, there is no compulsion for CAI to charge the lower amount of US$856.00, which Spouses Viloria claim to be the fee

charged by other airlines. The matter of fixing the prices for its services is CAIs prerogative, which Spouses Viloria cannot intervene. In particular: It is within the respective rights of persons owning and/or operating business entities to peg the premium of the services and items which they provide at a price which they deem fit, no matter how expensive or exhorbitant said price may seem vis--vis those of the competing companies. The Spouses Viloria may 14 not intervene with the business judgment of Continental Airlines. The Petitioners Case In this Petition, this Court is being asked to review the findings and conclusions of the CA, as the latters reversal of the RTCs April 3, 2006 Decision allegedly lacks factual and legal bases. Spouses Viloria claim that CAI acted in bad faith when it required them to pay a higher amount for a round trip ticket to Los Angeles considering CAIs undertaking to re-issue new tickets to them within the period stated in their March 24, 1998 letter. CAI likewise acted in bad faith when it disallowed Fernando to use Lourdes ticket to purchase a round trip to Los Angeles given that there is nothing in Lourdes ticket indicating that it is non-transferable. As a common carrier, it is CAIs duty to inform its passengers of the terms and conditions of their contract and passengers cannot be bound by such terms and conditions which they are not made aware of. Also, the subject contract of carriage is a contract of adhesion; therefore, any ambiguities should be construed against CAI. Notably, the petitioners are no longer questioning the validity of the subject contracts and limited its claim for a refund on CAIs alleged breach of its undertaking in its March 24, 1998 letter. The Respondents Case In its Comment, CAI claimed that Spouses Vilorias allegation of bad faith is negated by its willingness to issue new tickets to them and to credit the value of the subject tickets against the value of the new ticket Fernando requested. CAI argued that Spouses Vilorias sole basis to claim that the price at which CAI was willing to issue the new tickets is unconscionable is a piece of hearsay evidence an advertisement appearing on a newspaper stating that airfares from Manila to Los Angeles or San Francisco cost 15 US$818.00. Also, the advertisement pertains to airfares in September 2000 and not to airfares prevailing in June 1999, the time when Fernando asked CAI to apply the value of the subject tickets for 16 the purchase of a new one. CAI likewise argued that it did not undertake to protect Spouses Viloria from any changes or fluctuations in the prices of airline tickets and its only obligation was to apply the value of the subject tickets to the purchase of the newly issued tickets. With respect to Spouses Vilorias claim that they are not aware of CAIs restrictions on the subject tickets and that the terms and conditions that are printed on them are ambiguous, CAI denies any ambiguity and alleged that its representative informed Fernando that the subject tickets are non-transferable when he applied for the issuance of a new ticket. On the other hand, the word "non-refundable" clearly appears on the face of the subject tickets. CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency relationship exists between them. As an independent contractor, Holiday Travel was without capacity to bind CAI. Issues To determine the propriety of disturbing the CAs January 30, 2009 Decision and whether Spouses Viloria have the right to the reliefs they prayed for, this Court deems it necessary to resolve the following issues: a. Does a principal-agent relationship exist between CAI and Holiday Travel?

b. Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI bound by the acts of Holiday Travels agents and employees such as Mager? c. Assuming that CAI is bound by the acts of Holiday Travels agents and employees, can the representation of Mager as to unavailability of seats at Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria in the purchase of the subject tickets? d. Is CAI justified in insisting that the subject tickets are non-transferable and non-refundable? e. Is CAI justified in pegging a different price for the round trip ticket to Los Angeles requested by Fernando? f. Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to apply the value of the subject tickets in the purchase of new ones when it refused to allow Fernando to use Lourdes ticket and in charging a higher price for a round trip ticket to Los Angeles? This Courts Ruling I. A principal-agent relationship exists between CAI and Holiday Travel. With respect to the first issue, which is a question of fact that would require this Court to review and reexamine the evidence presented by the parties below, this Court takes exception to the general rule that the CAs findings of fact are conclusive upon Us and our jurisdiction is limited to the review of questions of law. It is well-settled to the point of being axiomatic that this Court is authorized to resolve questions of fact if confronted with contrasting factual findings of the trial court and appellate court and if the findings of 17 the CA are contradicted by the evidence on record. According to the CA, agency is never presumed and that he who alleges that it exists has the burden of proof. Spouses Viloria, on whose shoulders such burden rests, presented evidence that fell short of indubitably demonstrating the existence of such agency. We disagree. The CA failed to consider undisputed facts, discrediting CAIs denial that Holiday Travel is one of its agents. Furthermore, in erroneously characterizing the contractual relationship between CAI and Holiday Travel as a contract of sale, the CA failed to apply the fundamental civil law principles governing agency and differentiating it from sale. In Rallos v. Felix Go Chan & Sons Realty Corporation, spelled out the essential elements thereof:
18

this Court explained the nature of an agency and

Out of the above given principles, sprung the creation and acceptance of the relationship of agencywhereby one party, called the principal ( mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself, and (4) the agent acts within the scope of his authority.1avvphi1 Agency is basically personal, representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within 19 the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself." Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and second elements are present as CAI does not deny that it concluded an agreement with Holiday Travel, whereby Holiday Travel would enter into contracts of carriage with third persons on CAIs behalf. The third element

is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is CAI and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering that CAI has not made any allegation that Holiday Travel exceeded the authority that was granted to it. In fact, CAI consistently maintains the validity of the contracts of carriage that Holiday Travel executed with Spouses Viloria and that Mager was not guilty of any fraudulent misrepresentation. That CAI admits the authority of Holiday Travel to enter into contracts of carriage on its behalf is easily discernible from its February 24, 1998 and March 24, 1998 letters, where it impliedly recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. When Fernando informed CAI that it was Holiday Travel who issued to them the subject tickets, CAI did not deny that Holiday Travel is its authorized agent. Prior to Spouses Vilorias filing of a complaint against it, CAI never refuted that it gave Holiday Travel the power and authority to conclude contracts of carriage on its behalf. As clearly extant from the records, CAI recognized the validity of the contracts of carriage that Holiday Travel entered into with Spouses Viloria and considered itself bound with Spouses Viloria by the terms and conditions thereof; and this constitutes an unequivocal testament to Holiday Travels authority to act as its agent. This Court cannot therefore allow CAI to take an altogether different position and deny that Holiday Travel is its agent without condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who relied on good fai th on CAIs acts in recognition of Holiday Travels authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross 20 travesty of justice. Estoppel bars CAI from making such denial. As categorically provided under Article 1869 of the Civil Code, "[a]gency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority." Considering that the fundamental hallmarks of an agency are present, this Court finds it rather peculiar that the CA had branded the contractual relationship between CAI and Holiday Travel as one of sale. The distinctions between a sale and an agency are not difficult to discern and this Court, as early as 1970, had already formulated the guidelines that would aid in differentiating the two (2) contracts. 21 In Commissioner of Internal Revenue v. Constantino, this Court extrapolated that the primordial differentiating consideration between the two (2) contracts is the transfer of ownership or title over the property subject of the contract. In an agency, the principal retains ownership and control over the property and the agent merely acts on the principals behalf and under his instructions in furtherance of the objectives for which the agency was established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the property will effect a relinquishment of title, control and ownership in such a way that the recipient may do with the property as he pleases. Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the company's control, the relationship between the company and the dealer is one of agency, tested under the following criterion: "The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made. 1 Mechem on Sales, Sec. 43; 1 Mechem on Agency, Sec. 48; Williston on Sales, 1; Tiedeman on 22 Sales, 1." (Salisbury v. Brooks, 94 SE 117, 118-119)

As to how the CA have arrived at the conclusion that the contract between CAI and Holiday Travel is a sale is certainly confounding, considering that CAI is the one bound by the contracts of carriage embodied by the tickets being sold by Holiday Travel on its behalf. It is undisputed that CAI and not Holiday Travel who is the party to the contracts of carriage executed by Holiday Travel with third persons who desire to travel via Continental Airlines, and this conclusively indicates the existence of a principalagent relationship. That the principal is bound by all the obligations contracted by the agent within the scope of the authority granted to him is clearly provided under Article 1910 of the Civil Code and this constitutes the very notion of agency. II. In actions based on quasi-delict, a principal can only be held liable for the tort committed by its agents employees if it has been established by preponderance of evidence that the principal was also at fault or negligent or that the principal exercise control and supervision over them. Considering that Holiday Travel is CAIs agent, does it necessarily follow that CAI is liable for the fault or 23 negligence of Holiday Travels employees? Citing China Air Lines, Ltd. v. Court of Appeals, et al. , CAI argues that it cannot be held liable for the actions of the employee of its ticketing agent in the absence of an employer-employee relationship. An examination of this Courts pronouncements in China Air Lines will reveal that an airline company is not completely exonerated from any liability for the tort committed by its agents employees. A prior determination of the nature of the passengers cause of action is necessary. If the passengers cause of action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by the employee of the airline companys agent, there must be an independent showing that the airline company was at fault or negligent or has contributed to the negligence or tortuous conduct committed by the employee of its agent. The mere fact that the employee of the airline companys agent has committed a tort is not sufficient to hold the airline company liable. There is novinculum juris between the airline company and its agents employees and the contractual relationship between the airline company and its agent does not operate to create a juridical tie between the airline company and its agents employees. Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed by its agents employees and the principal-agency relationshipper se does not make the principal a party to such tort; hence, the need to prove the principals own fault or negligence. On the other hand, if the passengers cause of action for damages against the airline company is based on contractual breach or culpa contractual, it is not necessary that there be evidence of the airline companys fault or negligence. As this Court previously stated in China Air Lines and reiterated in Air 24 France vs. Gillego, "in an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier." Spouses Vilorias cause of action on the basis of Magers alleged fraudulent misrepresentation is clearly one of tort or quasi-delict, there being no pre-existing contractual relationship between them. Therefore, it was incumbent upon Spouses Viloria to prove that CAI was equally at fault. However, the records are devoid of any evidence by which CAIs alleged liability can be substantiated. Apart from their claim that CAI must be held liable for Magers supposed fraud because Holiday Travel is CAIs agent, Spouses Viloria did not present evidence that CAI was a party or had contributed to Magers complained act either by instructing or authorizing Holiday Travel and Mager to issue the said misrepresentation. It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and conditions of the subject contracts, which Mager entered into with them on CAIs behalf, in order to deny Spouses Vilorias request for a refund or Fernandos use of Lourdes ticket for the re -issuance of a new one, and simultaneously claim that they are not bound by Magers supposed misrepresentation for purposes of avoiding Spouses Vilorias claim for damages and maintaining the validity of the subject

contracts. It may likewise be argued that CAI cannot deny liability as it benefited from Magers acts, which were performed in compliance with Holiday Travels obligations as CAIs agent. However, a persons vicarious liability is anchored on his possession of control, whether absolute or limited, on the tortfeasor. Without such control, there is nothing which could justify extending the liability to a person other than the one who committed the tort. As this Court explained in Cangco v. Manila Railroad 25 Co.: With respect to extra-contractual obligation arising from negligence, whether of act or omission , it is competent for the legislature to elect and our Legislature has so elected to limit such liability to cases in which the person upon whom such an obligation is imposed is morally culpable or, on the contrary, for reasons of public policy, to extend that liability, without regard to the lack of moral culpability, so as to include responsibility for the negligence of those persons whose acts or omissions are imputable, by a legal fiction, to others who are in a position to exercise an absolute or limited control over them. The legislature which adopted our Civil Code has elected to limit extracontractual liability with certain well-defined exceptions to cases in which moral culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in having failed to exercise due care in one's own acts, or in having failed to exercise due care in the selection and control of one's agent or servants, or in the control of persons who, by reasons of their status, occupy a position of 26 dependency with respect to the person made liable for their conduct. (emphasis supplied) It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager by preponderant evidence. The existence of control or supervision cannot be presumed and CAI is under no 27 obligation to prove its denial or nugatory assertion. Citing Belen v. Belen, this Court ruled in Jayme v. 28 Apostol, that: In Belen v. Belen, this Court ruled that it was enough for defendant to deny an alleged employment relationship. The defendant is under no obligation to prove the negative averment. This Court said: "It is an old and well-settled rule of the courts that the burden of proving the action is upon the plaintiff, and that if he fails satisfactorily to show the facts upon which he bases his claim, the defendant is under no obligation to prove his exceptions. This [rule] is in harmony with the provisions of Section 297 of the Code of Civil Procedure holding that each party must prove his own affirmative allegations, 29 etc." (citations omitted) Therefore, without a modicum of evidence that CAI exercised control over Holiday Travels employees or that CAI was equally at fault, no liability can be imposed on CAI for Magers supposed misrepresentation. III. Even on the assumption that CAI may be held liable for the acts of Mager, still, Spouses Viloria are not entitled to a refund. Magers statement cannot be considered a causal fraud that would justify the annulment of the subject contracts that would oblige CAI to indemnify Spouses Viloria and return the money they paid for the subject tickets. Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within four (4) years from the time of the discovery of the fraud. Once a contract is annulled, the parties are obliged under Article 1398 of the same Code to restore to each other the things subject matter of the contract, including their fruits and interest. On the basis of the foregoing and given the allegation of Spouses Viloria that Fernandos consent to the subject contracts was supposedly secured by Mager through fraudulent means, it is plainly apparent that their demand for a refund is tantamount to seeking for an annulment of the subject contracts on the ground of vitiated consent.

Whether the subject contracts are annullable, this Court is required to determine whether Magers alleged misrepresentation constitutes causal fraud. Similar to the dispute on the existence of an agency, whether fraud attended the execution of a contract is factual in nature and this Court, as discussed above, may scrutinize the records if the findings of the CA are contrary to those of the RTC. Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely 30 the incidental (dolo incidente), inducement to the making of the contract. InSamson v. Court of 31 Appeals, causal fraud was defined as "a deception employed by one party prior to or simultaneous to 32 the contract in order to secure the consent of the other." Also, fraud must be serious and its existence must be established by clear and convincing evidence. As 33 ruled by this Court in Sierra v. Hon. Court of Appeals, et al., mere preponderance of evidence is not adequate: Fraud must also be discounted, for according to the Civil Code: Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which without them, he would not have agreed to. Art. 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. To quote Tolentino again, the "misrepresentation constituting the fraud must be established by full, clear, and convincing evidence, and not merely by a preponderance thereof. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each case 34 should be considered, taking into account the personal conditions of the victim." After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria has not been satisfactorily established as causal in nature to warrant the annulment of the subject contracts. In fact, Spouses Viloria failed to prove by clear and convincing evidence that Magers statement was fraudulent. Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at Amtrak for a trip to New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b) Mager knew about this; and (c) that she purposely informed them otherwise. This Court finds the only proof of Magers alleged fraud, which is Fernandos testimony that an Amtrak had assured him of the perennial availability of seats at Amtrak, to be wanting. As CAI correctly pointed out and as Fernando admitted, it was possible that during the intervening period of three (3) weeks from the time Fernando purchased the subject tickets to the time he talked to said Amtrak employee, other passengers may have cancelled their bookings and reservations with Amtrak, making it possible for Amtrak to accommodate them. Indeed, the existence of fraud cannot be proved by mere speculations and conjectures. Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed that "a person is innocent of crime or wrong" and that "private transactions have been fair and 35 regular." Spouses Viloria failed to overcome this presumption. IV. Assuming the contrary, Spouses Viloria are nevertheless deemed to have ratified the subject contracts. Even assuming that Magers representation is causal fraud, the subject contracts have been impliedly ratified when Spouses Viloria decided to exercise their right to use the subject tickets for the purchase of new ones. Under Article 1392 of the Civil Code, "ratification extinguishes the action to annul a voidable contract."

Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows: Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval 36 or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. Simultaneous with their demand for a refund on the ground of Fernandos vitiated consent, Spouses Viloria likewise asked for a refund based on CAIs supposed bad faith in reneging on its undertaking to replace the subject tickets with a round trip ticket from Manila to Los Angeles. In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on contractual breach. Resolution, the action referred to in Ar ticle 1191, is based on the defendants breach 37 of faith, a violation of the reciprocity between the parties and in Solar Harvest, Inc. v. Davao Corrugated 38 Carton Corporation, this Court ruled that a claim for a reimbursement in view of the other partys failure to comply with his obligations under the contract is one for rescission or resolution. However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2) inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment, one of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect is in the consummation stage of the contract when the parties are in the process of performing their respective obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of the contract. Accordingly, by pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly admitted the validity of the subject contracts, forfeiting their right to demand their annulment. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent 39 positions. V. Contracts cannot be rescinded for a slight or casual breach. CAI cannot insist on the non-transferability of the subject tickets. Considering that the subject contracts are not annullable on the ground of vitiated consent, the next question is: "Do Spouses Viloria have the right to rescind the contract on the ground of CAIs supposed breach of its undertaking to issue new tickets upon surrender of the subject tickets?" Article 1191, as presently worded, states: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfilment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

According to Spouses Viloria, CAI acted in bad faith and breached the subject contracts when it refused to apply the value of Lourdes ticket for Fernandos purchase of a round trip ticket to Los Angeles and in requiring him to pay an amount higher than the price fixed by other airline companies. In its March 24, 1998 letter, CAI stated that "non-refundable tickets may be used as a form of payment toward the purchase of another Continental ticket for $75.00, per ticket, reissue fee ($50.00, per ticket, for tickets purchased prior to October 30, 1997)." Clearly, there is nothing in the above-quoted section of CAIs letter from which the restriction on the non transferability of the subject tickets can be inferred. In fact, the words used by CAI in its letter supports the position of Spouses Viloria, that each of them can use the ticket under their name for the purchase of new tickets whether for themselves or for some other person. Moreover, as CAI admitted, it was only when Fernando had expressed his interest to use the subject tickets for the purchase of a round trip ticket between Manila and Los Angeles that he was informed that he cannot use the ticket in Lourdes name as payment. Contrary to CAIs claim, that the subject tickets are non -transferable cannot be implied from a plain reading of the provision printed on the subject tickets stating that "[t]o the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (a) provisions contained in this ticket, x x x (iii) carriers conditions of carriage and related regulations which are m ade part hereof (and are available on application at the offices of carrier) x x x." As a common carrier whose business is imbued with public interest, the exercise of extraordinary diligence requires CAI to inform Spouses Viloria, or all of its passengers for that matter, of all the terms and conditions governing their contract of carriage. CAI is proscribed from taking advantage of any ambiguity in the contract of carriage to impute knowledge on its passengers of and demand compliance with a certain condition or undertaking that is not clearly stipulated. Since the prohibition on transferability is not written on the face of the subject tickets and CAI failed to inform Spouses Viloria thereof, CAI cannot refuse to apply the value of Lourdes ticket as payment for Fernandos purchase of a new ticket. CAIs refusal to accept Lourdes ticket for the purchase of a new ticket for Fernando is only a casual breach. Nonetheless, the right to rescind a contract for non-performance of its stipulations is not absolute. The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the 40 41 agreement. Whether a breach is substantial is largely determined by the attendant circumstances. While CAIs refusal to allow Fernando to use the value of Lourdes ticket as payment for the purchase of a new ticket is unjustified as the non-transferability of the subject tickets was not clearly stipulated, it cannot, however be considered substantial. The endorsability of the subject tickets is not an essential part of the underlying contracts and CAIs failure to comply is not essential to its fulfillment of its undertaking to issue new tickets upon Spouses Vilorias surrender of the subject tickets. This Court takes note of CAIs willingness to perform its principal obligation and this is to apply the price of the ticket in Fernandos name to the price of the round trip ticket between Manila and Los Angeles. CAI was likewise willing to accept the ticket in Lourdes name as full or partial payment as the case may be for the purchase of any ticket, albeit under her name and for her exclusive use. In other words, CAIs willingness to comply with its undertaking under its March 24, 1998 cannot be doubted, albeit tainted with its erroneous insistence that Lourdes ticket is non-transferable. Moreover, Spouses Vilorias demand for rescission cannot prosper as CAI cannot be solely faulted for the fact that their agreement failed to consummate and no new ticket was issued to Fernando. Spouses Viloria have no right to insist that a single round trip ticket between Manila and Los Angeles should be priced at around $856.00 and refuse to pay the difference between the price of the subject tickets and the

amount fixed by CAI. The petitioners failed to allege, much less prove, that CAI had obliged itself to issue to them tickets for any flight anywhere in the world upon their surrender of the subject tickets. In its March 24, 1998 letter, it was clearly stated that "[n]on-refundable tickets may be used as a form of payment 42 toward the purchase of another Continental ticket" and there is nothing in it suggesting that CAI had obliged itself to protect Spouses Viloria from any fluctuation in the prices of tickets or that the surrender of the subject tickets will be considered as full payment for any ticket that the petitioners intend to buy regardless of actual price and destination. The CA was correct in holding that it is CAIs right and exclusive prerogative to fix the prices for its services and it may not be compelled to observe and 43 maintain the prices of other airline companies. The conflict as to the endorsability of the subject tickets is an altogether different matter, which does not preclude CAI from fixing the price of a round trip ticket between Manila and Los Angeles in an amount it deems proper and which does not provide Spouses Viloria an excuse not to pay such price, albeit subject to a reduction coming from the value of the subject tickets. It cannot be denied that Spouses Viloria had the concomitant obligation to pay whatever is not covered by the value of the subject tickets whether or not the subject tickets are transferable or not.1avvphi1 There is also no showing that Spouses Viloria were discriminated against in bad faith by being charged with a higher rate. The only evidence the petitioners presented to prove that the price of a round trip ticket between Manila and Los Angeles at that time was only $856.00 is a newspaper advertisement for another airline company, which is inadmissible for being "hearsay evidence, twice removed." Newspaper clippings are hearsay if they were offered for the purpose of proving the truth of the matter alleged. As ruled 44 in Feria v. Court of Appeals,: [N]ewspaper articles amount to "hearsay evidence, twice removed" and are therefore not only inadmissible but without any probative value at all whether objected to or not, unless offered for a purpose other than proving the truth of the matter asserted. In this case, the news article is admissible 45 only as evidence that such publication does exist with the tenor of the news therein stated. (citations omitted) The records of this case demonstrate that both parties were equally in default; hence, none of them can seek judicial redress for the cancellation or resolution of the subject contracts and they are therefore bound to their respective obligations thereunder. As the 1st sentence of Article 1192 provides: Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. (emphasis supplied) Therefore, CAIs liability for damages for its refusal to accept Lourdes ticket for the purchase of Fernandos round trip ticket is offset by Spouses Vilorias liability for their refusal to pay the amount, which is not covered by the subject tickets. Moreover, the contract between them remains, hence, CAI is duty bound to issue new tickets for a destination chosen by Spouses Viloria upon their surrender of the subject tickets and Spouses Viloria are obliged to pay whatever amount is not covered by the value of the subject tickets. This Court made a similar ruling in Central Bank of the Philippines v. Court of Appeals . Thus: Since both parties were in default in the performance of their respective reciprocal obligations, that is, Island Savings Bank failed to comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they are both liable for damages.
46

Article 1192 of the Civil Code provides that in case both parties have committed a breach of their reciprocal obligations, the liability of the first infractor shall be equitably tempered by the courts. WE rule that the liability of Island Savings Bank for damages in not furnishing the entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for not paying his 47 overdue P17,000.00 debt. x x x. Another consideration that militates against the propriety of holding CAI liable for moral damages is the absence of a showing that the latter acted fraudulently and in bad faith. Article 2220 of the Civil Code requires evidence of bad faith and fraud and moral damages are generally not recoverable in culpa 48 contractual except when bad faith had been proven. The award of exemplary damages is likewise not warranted. Apart from the requirement that the defendant acted in a wanton, oppressive and malevolent 49 manner, the claimant must prove his entitlement to moral damages.