G.R. No.

L-12219 March 15, 1918

AMADO PICART, plaintiff-appellant,
vs.
FRANK SMITH, JR., defendant-appellee.
Alejo Mabanag for appellant.
G. E. Campbell for appellee.
STREET, J .:
In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith, jr., the sum
of P31,000, as damages alleged to have been caused by an automobile driven by the defendant.
From a judgment of the Court of First Instance of the Province of La Union absolving the defendant
from liability the plaintiff has appealed.
The occurrence which gave rise to the institution of this action took place on December 12, 1912, on
the Carlatan Bridge, at San Fernando, La Union. It appears that upon the occasion in question the
plaintiff was riding on his pony over said bridge. Before he had gotten half way across, the defendant
approached from the opposite direction in an automobile, going at the rate of about ten or twelve
miles per hour. As the defendant neared the bridge he saw a horseman on it and blew his horn to
give warning of his approach. He continued his course and after he had taken the bridge he gave
two more successive blasts, as it appeared to him that the man on horseback before him was not
observing the rule of the road.
The plaintiff, it appears, saw the automobile coming and heard the warning signals. However, being
perturbed by the novelty of the apparition or the rapidity of the approach, he pulled the pony closely
up against the railing on the right side of the bridge instead of going to the left. He says that the
reason he did this was that he thought he did not have sufficient time to get over to the other side.
The bridge is shown to have a length of about 75 meters and a width of 4.80 meters. As the
automobile approached, the defendant guided it toward his left, that being the proper side of the
road for the machine. In so doing the defendant assumed that the horseman would move to the
other side. The pony had not as yet exhibited fright, and the rider had made no sign for the
automobile to stop. Seeing that the pony was apparently quiet, the defendant, instead of veering to
the right while yet some distance away or slowing down, continued to approach directly toward the
horse without diminution of speed. When he had gotten quite near, there being then no possibility of
the horse getting across to the other side, the defendant quickly turned his car sufficiently to the right
to escape hitting the horse alongside of the railing where it as then standing; but in so doing the
automobile passed in such close proximity to the animal that it became frightened and turned its
body across the bridge with its head toward the railing. In so doing, it as struck on the hock of the left
hind leg by the flange of the car and the limb was broken. The horse fell and its rider was thrown off
with some violence. From the evidence adduced in the case we believe that when the accident
occurred the free space where the pony stood between the automobile and the railing of the bridge
was probably less than one and one half meters. As a result of its injuries the horse died. The
plaintiff received contusions which caused temporary unconsciousness and required medical
attention for several days.
The question presented for decision is whether or not the defendant in maneuvering his car in the
manner above described was guilty of negligence such as gives rise to a civil obligation to repair the
damage done; and we are of the opinion that he is so liable. As the defendant started across the
bridge, he had the right to assume that the horse and the rider would pass over to the proper side;
but as he moved toward the center of the bridge it was demonstrated to his eyes that this would not
be done; and he must in a moment have perceived that it was too late for the horse to cross with
safety in front of the moving vehicle. In the nature of things this change of situation occurred while
the automobile was yet some distance away; and from this moment it was not longer within the
power of the plaintiff to escape being run down by going to a place of greater safety. The control of
the situation had then passed entirely to the defendant; and it was his duty either to bring his car to
an immediate stop or, seeing that there were no other persons on the bridge, to take the other side
and pass sufficiently far away from the horse to avoid the danger of collision. Instead of doing this,
the defendant ran straight on until he was almost upon the horse. He was, we think, deceived into
doing this by the fact that the horse had not yet exhibited fright. But in view of the known nature of
horses, there was an appreciable risk that, if the animal in question was unacquainted with
automobiles, he might get exited and jump under the conditions which here confronted him. When
the defendant exposed the horse and rider to this danger he was, in our opinion, negligent in the eye
of the law.
The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that person would have used in the
same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard
supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the Roman law.
The existence of negligence in a given case is not determined by reference to the personal judgment
of the actor in the situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in
the particular case. Abstract speculations cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the circumstances which are before them
or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they
can be expected to take care only when there is something before them to suggest or warn of
danger. Could a prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by ignoring of the suggestion born of this prevision, is
always necessary before negligence can be held to exist. Stated in these terms, the proper criterion
for determining the existence of negligence in a given case is this: Conduct is said to be negligent
when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to
another was sufficiently probable to warrant his foregoing conduct or guarding against its
consequences.
Applying this test to the conduct of the defendant in the present case we think that negligence is
clearly established. A prudent man, placed in the position of the defendant, would in our opinion,
have recognized that the course which he was pursuing was fraught with risk, and would therefore
have foreseen harm to the horse and the rider as reasonable consequence of that course. Under
these circumstances the law imposed on the defendant the duty to guard against the threatened
harm.
It goes without saying that the plaintiff himself was not free from fault, for he was guilty of antecedent
negligence in planting himself on the wrong side of the road. But as we have already stated, the
defendant was also negligent; and in such case the problem always is to discover which agent is
immediately and directly responsible. It will be noted that the negligent acts of the two parties were
not contemporaneous, since the negligence of the defendant succeeded the negligence of the
plaintiff by an appreciable interval. Under these circumstances the law is that the person who has
the last fair chance to avoid the impending harm and fails to do so is chargeable with the
consequences, without reference to the prior negligence of the other party.
The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359) should perhaps
be mentioned in this connection. This Court there held that while contributory negligence on the part
of the person injured did not constitute a bar to recovery, it could be received in evidence to reduce
the damages which would otherwise have been assessed wholly against the other party. The
defendant company had there employed the plaintiff, as a laborer, to assist in transporting iron rails
from a barge in Manila harbor to the company's yards located not far away. The rails were conveyed
upon cars which were hauled along a narrow track. At certain spot near the water's edge the track
gave way by reason of the combined effect of the weight of the car and the insecurity of the road
bed. The car was in consequence upset; the rails slid off; and the plaintiff's leg was caught and
broken. It appeared in evidence that the accident was due to the effects of the typhoon which had
dislodged one of the supports of the track. The court found that the defendant company was
negligent in having failed to repair the bed of the track and also that the plaintiff was, at the moment
of the accident, guilty of contributory negligence in walking at the side of the car instead of being in
front or behind. It was held that while the defendant was liable to the plaintiff by reason of its
negligence in having failed to keep the track in proper repair nevertheless the amount of the
damages should be reduced on account of the contributory negligence in the plaintiff. As will be
seen the defendant's negligence in that case consisted in an omission only. The liability of the
company arose from its responsibility for the dangerous condition of its track. In a case like the one
now before us, where the defendant was actually present and operating the automobile which
caused the damage, we do not feel constrained to attempt to weigh the negligence of the respective
parties in order to apportion the damage according to the degree of their relative fault. It is enough to
say that the negligence of the defendant was in this case the immediate and determining cause of
the accident and that the antecedent negligence of the plaintiff was a more remote factor in the case.
A point of minor importance in the case is indicated in the special defense pleaded in the defendant's
answer, to the effect that the subject matter of the action had been previously adjudicated in the
court of a justice of the peace. In this connection it appears that soon after the accident in question
occurred, the plaintiff caused criminal proceedings to be instituted before a justice of the peace
charging the defendant with the infliction of serious injuries (lesiones graves). At the preliminary
investigation the defendant was discharged by the magistrate and the proceedings were dismissed.
Conceding that the acquittal of the defendant at the trial upon the merits in a criminal prosecution for
the offense mentioned would be res adjudicata upon the question of his civil liability arising from
negligence -- a point upon which it is unnecessary to express an opinion -- the action of the justice of
the peace in dismissing the criminal proceeding upon the preliminary hearing can have no effect.
(See U. S. vs. Banzuela and Banzuela, 31 Phil. Rep., 564.)
From what has been said it results that the judgment of the lower court must be reversed, and
judgment is her rendered that the plaintiff recover of the defendant the sum of two hundred pesos
(P200), with costs of other instances. The sum here awarded is estimated to include the value of the
horse, medical expenses of the plaintiff, the loss or damage occasioned to articles of his apparel,
and lawful interest on the whole to the date of this recovery. The other damages claimed by the
plaintiff are remote or otherwise of such character as not to be recoverable. So ordered.





G.R. No. L-13505 February 4, 1919
GEO. W. DAYWALT, plaintiff-appellant,
vs.
LA CORPORACION DE LOS PADRES AGUSTINOS RECOLETOS, ET AL., defendants-appellees.
C. C. Cohn and Thos. D. Aitken for appellant.
Crossfield & O'Brien for appellee.
STREET, J .:
In the year 1902, Teodorica Endencia, an unmarried woman, resident in the Province of Mindoro,
executed a contract whereby she obligated herself to convey to Geo. W. Daywalt, a tract of land
situated in the barrio of Mangarin, municipality of Bulalacao, now San Jose, in said province. It was
agreed that a deed should be executed as soon as the title to the land should be perfected by
proceedings in the Court of Land Registration and a Torrens certificate should be produced therefore
in the name of Teodorica Endencia. A decree recognizing the right of Teodorica as owner was
entered in said court in August 1906, but the Torrens certificate was not issued until later. The
parties, however, met immediately upon the entering of this decree and made a new contract with a
view to carrying their original agreement into effect. This new contract was executed in the form of a
deed of conveyance and bears date of August 16, 1906. The stipulated price was fixed at P4,000,
and the area of the land enclosed in the boundaries defined in the contract was stated to be 452
hectares and a fraction.
The second contract was not immediately carried into effect for the reason that the Torrens
certificate was not yet obtainable and in fact said certificate was not issued until the period of
performance contemplated in the contract had expired. Accordingly, upon October 3, 1908, the
parties entered into still another agreement, superseding the old, by which Teodorica Endencia
agreed upon receiving the Torrens title to the land in question, to deliver the same to the Hongkong
and Shanghai Bank in Manila, to be forwarded to the Crocker National Bank in San Francisco,
where it was to be delivered to the plaintiff upon payment of a balance of P3,100.
The Torrens certificate was in time issued to Teodorica Endencia, but in the course of the
proceedings relative to the registration of the land, it was found by official survey that the area of the
tract inclosed in the boundaries stated in the contract was about 1.248 hectares of 452 hectares as
stated in the contract. In view of this development Teodorica Endencia became reluctant to transfer
the whole tract to the purchaser, asserting that she never intended to sell so large an amount of land
and that she had been misinformed as to its area.
This attitude of hers led to litigation in which Daywalt finally succeeded, upon appeal to the Supreme
Court, in obtaining a decree for specific performance; and Teodorica Endencia was ordered to
convey the entire tract of land to Daywalt pursuant to the contract of October 3, 1908, which contract
was declared to be in full force and effect. This decree appears to have become finally effective in
the early part of the year 1914.
1

The defendant, La Corporacion de los Padres Recoletos, is a religious corporation, with its domicile
in the city of Manila. Said corporation was formerly the owner of a large tract of land, known as the
San Jose Estate, on the island of Mindoro, which was sold to the Government of the Philippine
Islands in the year 1909. The same corporation was at this time also the owner of another estate on
the same island immediately adjacent to the land which Teodorica Endencia had sold to Geo. W.
Daywalt; and for many years the Recoletos Fathers had maintained large herds of cattle on the
farms referred to. Their representative, charged with management of these farms, was father Isidoro
Sanz, himself a members of the order. Father Sanz had long been well acquainted with Teodorica
Endencia and exerted over her an influence and ascendency due to his religious character as well
as to the personal friendship which existed between them. Teodorica appears to be a woman of little
personal force, easily subject to influence, and upon all the important matters of business was
accustomed to seek, and was given, the advice of father Sanz and other members of his order with
whom she came in contact.
Father Sanz was fully aware of the existence of the contract of 1902 by which Teodorica Endencia
agreed to sell her land to the plaintiff as well as of the later important developments connected with
the history of that contract and the contract substituted successively for it; and in particular Father
Sanz, as well as other members of the defendant corporation, knew of the existence of the contract
of October 3, 1908, which, as we have already seen finally fixed the rights of the parties to the
property in question. When the Torrens certificate was finally issued in 1909 in favor of Teodorica
Endencia, she delivered it for safekeeping to the defendant corporation, and it was then taken to
Manila where it remained in the custody and under the control of P. Juan Labarga the procurador
and chief official of the defendant corporation, until the deliver thereof to the plaintiff was made
compulsory by reason of the decree of the Supreme Court in 1914.
When the defendant corporation sold the San Jose Estate, it was necessary to bring the cattle off of
that property; and, in the first half of 1909, some 2,368 head were removed to the estate of the
corporation immediately adjacent to the property which the plaintiff had purchased from Teodorica
Endencia. As Teodorica still retained possession of said property Father Sanz entered into an
arrangement with her whereby large numbers of cattle belonging to the defendant corporation were
pastured upon said land during a period extending from June 1, 1909, to May 1, 1914.
Under the first cause stated in the complaint in the present action the plaintiff seeks to recover from
the defendant corporation the sum of P24,000, as damages for the use and occupation of the land in
question by reason of the pasturing of cattle thereon during the period stated. The trial court came to
the conclusion that the defendant corporation was liable for damages by reason of the use and
occupation of the premises in the manner stated; and fixed the amount to be recovered at P2,497.
The plaintiff appealed and has assigned error to this part of the judgment of the court below, insisting
that damages should have been awarded in a much larger sum and at least to the full extent of
P24,000, the amount claimed in the complaint.
As the defendant did not appeal, the property of allowing damages for the use and occupation of the
land to the extent o P2,497, the amount awarded, is not now in question an the only thing here to be
considered, in connection with this branch of the case, is whether the damages allowed under this
head should be increased. The trial court rightly ignored the fact that the defendant corporation had
paid Teodorica Endencia of ruse and occupation of the same land during the period in question at
the rate of P425 per annum, inasmuch as the final decree of this court in the action for specific
performance is conclusive against her right, and as the defendant corporation had notice of the
rights of the plaintiff under this contract of purchase, it can not be permitted that the corporation
should escape liability in this action by proving payment of rent to a person other than the true
owner.
With reference to the rate of which compensation should be estimated the trial court came to the
following conclusion:
As to the rate of the compensation, the plaintiff contends that the defendant corporation
maintained at leas one thousand head of cattle on the land and that the pasturage was of the
value of forty centavos per head monthly, or P4,800 annually, for the whole tract. The court
can not accept this view. It is rather improbable that 1,248 hectares of wild Mindoro land
would furnish sufficient pasturage for one thousand head of cattle during the entire year, and,
considering the locality, the rate of forty centavos per head monthly seems too high. The
evidence shows that after having recovered possession of the land the plaintiff rented it to
the defendant corporation for fifty centavos per hectares annually, the tenant to pay the taxes
on the land, and this appears to be a reasonable rent. There is no reason to suppose that the
land was worth more for grazing purposes during the period from 1909 to 1913, than it was
at the later period. Upon this basis the plaintiff is entitled to damages in the sum of p2,497,
and is under no obligation to reimburse the defendants for the land taxes paid by either of
them during the period the land was occupied by the defendant corporation. It may be
mentioned in this connection that the Lontok tract adjoining the land in question and
containing over three thousand hectares appears to have been leased for only P1,000 a
year, plus the taxes.
From this it will be seen that the trial court estimated the rental value of the land for grazing purposes
at 50 centavos per hectare per annum, and roughly adopted the period of four years as the time for
which compensation at that rate should be made. As the court had already found that the defendant
was liable for these damages from June, 1, 1909, to May 1, 1914, or a period of four years and
eleven months, there seems some ground for the contention made in the appellant's first assignment
of error that the court's computation was erroneous, even accepting the rule upon which the
damages were assessed, as it is manifest that at the rate of 50 centavos per hectare per annum, the
damages for four years and eleven months would be P3,090.
Notwithstanding this circumstance, we are of the opinion that the damages assessed are sufficient to
compensate the plaintiff for the use and occupation of the land during the whole time it was used.
There is evidence in the record strongly tending to show that the wrongful use of the land by the
defendant was not continuous throughout the year but was confined mostly to the reason when the
forage obtainable on the land of the defendant corporation was not sufficient to maintain its cattle, for
which reason it became necessary to allow them to go over to pasture on the land in question; and it
is not clear that the whole of the land was used for pasturage at any time. Considerations of this
character probably led the trial court to adopt four years as roughly being the period during which
compensation should be allowed. But whether this was advertently done or not, we see no sufficient
reason, in the uncertainty of the record with reference to the number of the cattle grazed and the
period when the land was used, for substituting our guess for the estimate made by the trial court.
In the second cause of action stated in the complaint the plaintiff seeks to recover from the
defendant corporation the sum of P500,000, as damages, on the ground that said corporation, for its
own selfish purposes, unlawfully induced Teodorica Endencia to refrain from the performance of her
contract for the sale of the land in question and to withhold delivery to the plaintiff of the Torrens title,
and further, maliciously and without reasonable cause, maintained her in her defense to the action of
specific performance which was finally decided in favor of the plaintiff in this court. The cause of
action here stated is based on liability derived from the wrongful interference of the defendant in the
performance of the contract between the plaintiff and Teodorica Endencia; and the large damages
laid in the complaint were, according to the proof submitted by the plaintiff, incurred as a result of a
combination of circumstances of the following nature: In 1911, it appears, the plaintiff, as the owner
of the land which he had bought from Teodorica Endencia entered into a contract (Exhibit C) with S.
B. Wakefield, of San Francisco, for the sale and disposal of said lands to a sugar growing and milling
enterprise, the successful launching of which depended on the ability of Daywalt to get possession
of the land and the Torrens certificate of title. In order to accomplish this end, the plaintiff returned to
the Philippine Islands, communicated his arrangement to the defendant,, and made repeated efforts
to secure the registered title for delivery in compliance with said agreement with Wakefield.
Teodorica Endencia seems to have yielded her consent to the consummation of her contract, but the
Torrens title was then in the possession of Padre Juan Labarga in Manila, who refused to deliver the
document. Teodorica also was in the end contract with the plaintiff, with the result that the plaintiff
was kept out of possession until the Wakefield project for the establishment of a large sugar growing
and milling enterprise fell through. In the light of what has happened in recent years in the sugar
industry, we feel justified in saying that the project above referred to, if carried into effect, must
inevitably have proved a great success.
The determination of the issue presented in this second cause of action requires a consideration of
two points. The first is whether a person who is not a party to a contract for the sale of land makes
himself liable for damages to the vendee, beyond the value of the use and occupation, by colluding
with the vendor and maintaining him in the effort to resist an action for specific performance. The
second is whether the damages which the plaintiff seeks to recover under this head are too remote
and speculative to be the subject of recovery.
As preliminary to a consideration of the first of these questions, we deem it well it dispose of the
contention that the members of the defendants corporation, in advising and prompting Teodorica
Endencia not to comply with the contract of sale, were actuated by improper and malicious motives.
The trial court found that this contention was not sustained, observing that while it was true that the
circumstances pointed to an entire sympathy on the part of the defendant corporation with the efforts
of Teodorica Endencia to defeat the plaintiff's claim to the land, the fact that its officials may have
advised her not to carry the contract into effect would not constitute actionable interference with such
contract. It may be added that when one considers the hardship that the ultimate performance of that
contract entailed on the vendor, and the doubt in which the issue was involved to the extent that
the decision of the Court of the First Instance was unfavorable to the plaintiff and the Supreme Court
itself was divided the attitude of the defendant corporation, as exhibited in the conduct of
its procurador, Juan Labarga, and other members of the order of the Recollect Fathers, is not
difficult to understand. To our mind a fair conclusion on this feature of the case is that father Juan
Labarga and his associates believed in good faith that the contract cold not be enforced and that
Teodorica would be wronged if it should be carried into effect. Any advice or assistance which they
may have given was, therefore, prompted by no mean or improper motive. It is not, in our opinion, to
be denied that Teodorica would have surrendered the documents of title and given possession of the
land but for the influence and promptings of members of the defendants corporation. But we do not
credit the idea that they were in any degree influenced to the giving of such advice by the desire to
secure to themselves the paltry privilege of grazing their cattle upon the land in question to the
prejudice of the just rights of the plaintiff.
The attorney for the plaintiff maintains that, by interfering in the performance of the contract in
question and obstructing the plaintiff in his efforts to secure the certificate of tittle to the land, the
defendant corporation made itself a co-participant with Teodorica Endencia in the breach of said
contract; and inasmuch as father Juan Labarga, at the time of said unlawful intervention between the
contracting parties, was fully aware of the existence of the contract (Exhibit C) which the plaintiff had
made with S. B. Wakefield, of San Francisco, it is insisted that the defendant corporation is liable for
the loss consequent upon the failure of the project outlined in said contract.
In this connection reliance is placed by the plaintiff upon certain American and English decisions in
which it is held that a person who is a stranger to contract may, by an unjustifiable interference in the
performance thereof, render himself liable for the damages consequent upon non-performance. It is
said that the doctrine of these cases was recognized by this court in Gilchrist vs. Cuddy (29 Phil.
Rep., 542); and we have been earnestly pressed to extend the rule there enunciated to the situation
here presente.
Somewhat more than half a century ago the English Court of the Queen's Bench saw its way clear to
permit an action for damages to be maintained against a stranger to a contract wrongfully interfering
in its performance. The leading case on this subject is Lumley vs. Gye ([1853], 2 El. & Bl., 216). It
there appeared that the plaintiff, as manager of a theatre, had entered into a contract with Miss
Johanna Wagner, an opera singer,, whereby she bound herself for a period to sing in the plaintiff's
theatre and nowhere else. The defendant, knowing of the existence of this contract, and, as the
declaration alleged, "maliciously intending to injure the plaintiff," enticed and produced Miss Wagner
to leave the plaintiff's employment. It was held that the plaintiff was entitled to recover damages. The
right which was here recognized had its origin in a rule, long familiar to the courts of the common
law, to the effect that any person who entices a servant from his employment is liable in damages to
the master. The master's interest in the service rendered by his employee is here considered as a
distinct subject of juridical right. It being thus accepted that it is a legal wrong to break up a relation
of personal service, the question now arose whether it is illegal for one person to interfere with any
contract relation subsisting between others. Prior to the decision of Lumley vs. Gye [supra] it had
been supposed that the liability here under consideration was limited to the cases of the enticement
of menial servants, apprentices, and others to whom the English Statutes of Laborers were
applicable. But in the case cited the majority of the judges concurred in the opinion that the principle
extended to all cases of hiring. This doctrine was followed by the Court of Appeal in Bowen vs. Hall
([1881], 6 Q. B., Div., 333); and in Temperton vs. Russell ([1893], Q. B., 715), it was held that the
right of action for maliciously procuring a breach of contract is not confined to contracts for personal
services, but extends to contracts in general. In that case the contract which the defendant had
procured to be breached was a contract for the supply of building material.
Malice in some form is generally supposed to be an essential ingredient in cases of interference with
contract relations. But upon the authorities it is enough if the wrong-doer, having knowledge of the
existence of the contract relations, in bad faith sets about to break it up. Whether his motive is to
benefit himself or gratify his spite by working mischief to the employer is immaterial. Malice in the
sense of ill-will or spite is not essential.
Upon the question as to what constitutes legal justification, a good illustration was put in the leading
case. If a party enters into contract to go for another upon a journey to a remote and unhealthful
climate, and a third person, with a bona fide purpose of benefiting the one who is under contract to
go, dissuades him from the step, no action will lie. But if the advice is not disinterested and the
persuasion is used for "the indirect purpose of benefiting the defendant at the expense of the
plaintiff," the intermedler is liable if his advice is taken and the contract broken.
The doctrine embodied in the cases just cited has sometimes been found useful, in the complicated
relations of modern industry, as a means of restraining the activities of labor unions and industrial
societies when improperly engaged in the promotion of strikes. An illustration of the application of
the doctrine in question in a case of this kind is found in South Wales Miners
Federation vs. Glamorgan Coal Co. ([1905]), A. C., 239). It there appeared that certain miners
employed in the plaintiff's collieries, acting under the order of the executive council of the defendant
federation, violated their contract with the plaintiff by abstaining from work on certain days. The
federation and council acted without any actual malice or ill-will towards the plaintiff, and the only
object of the order in question was that the price of coal might thereby be kept up, a factor which
affected the miner's wage scale. It was held that no sufficient justification was shown and that the
federation was liable.
In the United States, the rule established in England by Lumley vs. Gye [supra] and subsequent
cases is commonly accepted, though in a few of the States the broad idea that a stranger to a
contract can be held liable upon its is rejected, and in these jurisdictions the doctrine, if accepted at
all, is limited to the situation where the contract is strictly for personal service. (Boyson vs. Thorn, 98
Cal., 578; Chambers & Marshall vs. Baldwin 91 Ky., 121; Bourlier vs. Macauley, 91 Ky., 135;
Glencoe Land & Gravel Co. vs. Hudson Bros. Com. Co., 138 Mo., 439.)
It should be observed in this connection that, according to the English and American authorities, no
question can be made as to the liability to one who interferes with a contract existing between others
by means which, under known legal cannons, can be denominated an unlawful means. Thus, if
performance is prevented by force, intimidation, coercion, or threats, or by false or defamatory
statements, or by nuisance or riot, the person using such unlawful means is, under all the
authorities, liable for the damage which ensues. And in jurisdictions where the doctrine of
Lumley vs. Gye [supra] is rejected, no liability can arise from a meddlesome and malicious
interference with a contract relation unless some such unlawful means as those just indicated are
used. (See cases last above cited.)
This brings us to the decision made by this court in Gilchrist vs. Cuddy (29 Phil. Rep., 542). It there
appeared that one Cuddy, the owner of a cinematographic film, let it under a rental contract to the
plaintiff Gilchrist for a specified period of time. In violation of the terms of this agreement, Cuddy
proceeded to turn over the film also under a rental contract, to the defendants Espejo and
Zaldarriaga. Gilchrist thereupon restored to the Court of First Instance and produced an injunction
restraining the defendants from exhibiting the film in question in their theater during the period
specified in the contract of Cuddy with Gilchrist. Upon appeal to this court it was in effect held that
the injunction was not improperly granted, although the defendants did not, at the time their contract
was made, know the identity of the plaintiff as the person holding the prior contract but did know of
the existence of a contract in favor of someone. It was also said arguendo, that the defendants
would have been liable in damages under article 1902 of the Civil Code, if the action had been
brought by the plaintiff to recover damages. The force of the opinion is, we think, somewhat
weakened by the criticism contain in the concurring opinion, where it is said that the question of
breach of contract by inducement was not really involved in the case. Taking the decision upon the
point which was rally decided, it is authority for the proposition that one who buys something which
he knows has been sold to some other person can be restrained from using that thing to the
prejudice of the person having the prior and better right.
Translated into terms applicable to the case at bar, the decision in Gilchrist vs. Cuddy (29 Phil. Rep.,
542), indicates that the defendant corporation, having notice of the sale of the land in question to
Daywalt, might have been enjoined by the latter from using the property for grazing its cattle thereon.
That the defendant corporation is also liable in this action for the damage resulting to the plaintiff
from the wrongful use and occupation of the property has also been already determined. But it will
be observed that in order to sustain this liability it is not necessary to resort to any subtle exegesis
relative to the liability of a stranger to a contract for unlawful interference in the performance thereof.
It is enough that defendant use the property with notice that the plaintiff had a prior and better right.
Article 1902 of the Civil Code declares that any person who by an act or omission, characterized by
fault or negligence, causes damage to another shall be liable for the damage so done. Ignoring so
much of this article as relates to liability for negligence, we take the rule to be that a person is liable
for damage done to another by any culpable act; and by "culpable act" we mean any act which is
blameworthy when judged by accepted legal standards. The idea thus expressed is undoubtedly
broad enough to include any rational conception of liability for the tortious acts likely to be developed
in any society. Thus considered, it cannot be said that the doctrine of Lumley vs. Gye [supra] and
related cases is repugnant to the principles of the civil law.
Nevertheless, it must be admitted that the codes and jurisprudence of the civil law furnish a
somewhat uncongenial field in which to propagate the idea that a stranger to a contract may sued for
the breach thereof. Article 1257 of the Civil Code declares that contracts are binding only between
the parties and their privies. In conformity with this it has been held that a stranger to a contract has
no right of action for the nonfulfillment of the contract except in the case especially contemplated in
the second paragraph of the same article. (Uy Tam and Uy Yet vs. Leonard, 30 Phil. Rep., 471.) As
observed by this court in Manila Railroad Co. vs. Compaia Transatlantica, R. G. No. 11318 (38
Phil. Rep., 875), a contract, when effectually entered into between certain parties, determines not
only the character and extent of the liability of the contracting parties but also the person or entity by
whom the obligation is exigible. The same idea should apparently be applicable with respect to the
person against whom the obligation of the contract may be enforced; for it is evident that there must
be a certain mutuality in the obligation, and if the stranger to a contract is not permitted to sue to
enforce it, he cannot consistently be held liable upon it.
If the two antagonistic ideas which we have just brought into juxtaposition are capable of
reconciliation, the process must be accomplished by distinguishing clearly between the right of
action arising from the improper interference with the contract by a stranger thereto, considered as
an independent act generate of civil liability, and the right of action ex contractu against a party to
the contract resulting from the breach thereof. However, we do not propose here to pursue the
matter further, inasmuch as, for reasons presently to be stated, we are of the opinion that neither the
doctrine of Lumley vs. Gye [supra] nor the application made of it by this court in Gilchristvs. Cuddy
(29 Phil. Rep., 542), affords any basis for the recovery of the damages which the plaintiff is
supposed to have suffered by reason of his inability to comply with the terms of the Wakefield
contract.
Whatever may be the character of the liability which a stranger to a contract may incur by advising or
assisting one of the parties to evade performance, there is one proposition upon which all must
agree. This is, that the stranger cannot become more extensively liable in damages for the
nonperformance of the contract than the party in whose behalf he intermeddles. To hold the stranger
liable for damages in excess of those that could be recovered against the immediate party to the
contract would lead to results at once grotesque and unjust. In the case at bar, as Teodorica
Endencia was the party directly bound by the contract, it is obvious that the liability of the defendant
corporation, even admitting that it has made itself coparticipant in the breach of the contract, can in
no even exceed hers. This leads us to consider at this point the extent of the liability of Teodorica
Endencia to the plaintiff by reason of her failure to surrender the certificate of title and to place the
plaintiff in possession.
It should in the first place be noted that the liability of Teodorica Endencia for damages resulting
from the breach of her contract with Daywalt was a proper subject for adjudication in the action for
specific performance which Daywalt instituted against her in 1909 and which was litigated by him to
a successful conclusion in this court, but without obtaining any special adjudication with reference to
damages. Indemnification for damages resulting from the breach of a contract is a right inseparably
annexed to every action for the fulfillment of the obligation (art. 1124, Civil Code); and its is clear that
if damages are not sought or recovered in the action to enforce performance they cannot be
recovered in an independent action. As to Teodorica Endencia, therefore, it should be considered
that the right of action to recover damages for the breach of the contract in question was exhausted
in the prior suit. However, her attorneys have not seen fit to interpose the defense of res judicata in
her behalf; and as the defendant corporation was not a party to that action, and such defense could
not in any event be of any avail to it, we proceed to consider the question of the liability of Teodorica
Endencia for damages without refernce to this point.
The most that can be said with refernce to the conduct of Teodorica Endencia is that she refused to
carry out a contract for the sale of certain land and resisted to the last an action for specific
performance in court. The result was that the plaintiff was prevented during a period of several years
from exerting that control over the property which he was entitled to exert and was meanwhile
unable to dispose of the property advantageously. Now, what is the measure of damages for the
wrongful detention of real property by the vender after the time has come for him to place the
purchaser in possession?
The damages ordinarily and normally recoverable against a vendor for failure to deliver land which
he has contracted to deliver is the value of the use and occupation of the land for the time during
which it is wrongfully withheld. And of course where the purchaser has not paid the purchaser
money, a deduction may be made in respect to the interest on the money which constitutes the
purchase price. Substantially the same rule holds with respect to the liability of a landlord who fails to
put his tenant in possession pursuant to contract of lease. The measure of damages is the value of
the leasehold interest, or use and occupation, less the stipulated rent, where this has not been paid.
The rule that the measure of damages for the wrongful detention of land is normally to be found in
the value of use and occupation is, we believe, one of the things that may be considered certain in
the law (39 cyc., 1630; 24 Cyc., 1052 Sedgewick on Damages, Ninth ed., sec. 185.) almost as
wellsettled, indeed, as the rule that the measure of damages for the wrongful detention of money is
to be found in the interest.
We recognize the possibility that more extensive damages may be recovered where, at the time of
the creation of the contractual obligation, the vendor, or lessor, is aware of the use to which the
purchaser or lessee desires to put the property which is the subject of the contract, and the contract
is made with the eyes of the vendor or lessor open to the possibility of the damage which may result
to the other party from his own failure to give possession. The case before us is not this character,
inasmuch as at the time when the rights of the parties under the contract were determined, nothing
was known to any to them about the San Francisco capitalist who would be willing to back the
project portrayed in Exhibit C.
The extent of the liability for the breach of a contract must be determined in the light of the situation
in existence at the time the contract is made; and the damages ordinarily recoverable are in all
events limited to such as might be reasonable are in all events limited to such as might be
reasonably foreseen in the light of the facts then known to the contracting parties. Where the
purchaser desires to protect himself, in the contingency of the failure of the vendor promptly to give
possession, from the possibility of incurring other damages than such as the incident to the normal
value of the use and occupation, he should cause to be inserted in the contract a clause providing
for stipulated amount to the paid upon failure of the vendor to give possession; and not case has
been called to our attention where, in the absence of such a stipulation, damages have been held to
be recoverable by the purchaser in excess of the normal value of use and occupation. On the
contrary, the most fundamental conceptions of the law relative to the assessment of damages are
inconsistent with such idea.
The principles governing this branch of the law were profoundly considered in the case
Hadley vs. Baxendale (9 Exch., 341), decided in the English Court of Exchequer in 1854; and a few
words relative to the principles governing will here be found instructive. The decision in that case is
considered a leading authority in the jurisprudence of the common law. The plaintiffs in that case
were proprietors of a mill in Gloucester, which was propelled by steam, and which was engaged in
grinding and supplying meal and flour to customers. The shaft of the engine got broken, and it
became necessarily that the broken shaft be sent to an engineer or foundry man at Greenwich, to
serve as a model for casting or manufacturing another that would fit into the machinery. The broken
shaft could be delivered at Greenwich on the second day after its receipts by the carrier it. It was
delivered to the defendants, who were common carriers engaged in that business between these
points, and who had told plaintiffs it would be delivered at Greenwich on the second day after its
delivery to them, if delivered at a given hour. The carriers were informed that the mill was stopped,
but were not informed of the special purpose for which the broken shaft was desired to forwarded,
They were not told the mill would remain idle until the new shaft would be returned, or that the new
shaft could not be manufactured at Greenwich until the broken one arrived to serve as a model.
There was delay beyond the two days in delivering the broken shaft at Greenwich, and a
corresponding delay in starting the mill. No explanation of the delay was offered by the carriers. The
suit was brought to recover damages for the lost profits of the mill, cause by the delay in delivering
the broken shaft. It was held that the plaintiff could not recover.
The discussion contained in the opinion of the court in that case leads to the conclusion that the
damages recoverable in case of the breach of a contract are two sorts, namely, (1) the ordinary,
natural, and in a sense necessary damage; and (2) special damages.
Ordinary damages is found in all breaches of contract where the are no special circumstances to
distinguish the case specially from other contracts. The consideration paid for an unperformed
promise is an instance of this sort of damage. In all such cases the damages recoverable are such
as naturally and generally would result from such a breach, "according to the usual course of things."
In case involving only ordinary damage no discussion is ever indulged as to whether that damage
was contemplated or not. This is conclusively presumed from the immediateness and inevitableness
of the damage, and the recovery of such damage follows as a necessary legal consequence of the
breach. Ordinary damage is assumed as a matter of law to be within the contemplation of the
parties.
Special damage, on the other hand, is such as follows less directly from the breach than ordinary
damage. It is only found in case where some external condition, apart from the actual terms to the
contract exists or intervenes, as it were, to give a turn to affairs and to increase damage in a way
that the promisor, without actual notice of that external condition, could not reasonably be expected
to foresee. Concerning this sort of damage, Hadley vs.Baxendale (1854) [supra] lays down the
definite and just rule that before such damage can be recovered the plaintiff must show that the
particular condition which made the damage a possible and likely consequence of the breach was
known to the defendant at the time the contract was made.
The statement that special damages may be recovered where the likelihood of such damages
flowing from the breach of the contract is contemplated and foreseen by the parties needs to be
supplemented by a proposition which, though not enunciated in Hadley vs. Baxendale, is yet clearly
to be drawn from subsequent cases. This is that where the damage which a plaintiff seeks to recover
as special damage is so far speculative as to be in contemplation of law remote, notification of the
special conditions which make that damage possible cannot render the defendant liable therefor. To
bring damages which would ordinarily be treated as remote within the category of recoverable
special damages, it is necessary that the condition should be made the subject of contract in such
sense as to become an express or implied term of the engagement. Horne vs. Midland R. Co. (L. R.,
8 C. P., 131) is a case where the damage which was sought to be recovered as special damage was
really remote, and some of the judges rightly places the disallowance of the damage on the ground
that to make such damage recoverable, it must so far have been within the contemplation of the
parties as to form at least an implied term of the contract. But others proceeded on the idea that the
notice given to the defendant was not sufficiently full and definite. The result was the same in either
view. The facts in that case were as follows: The plaintiffs, shoe manufacturers at K, were under
contract to supply by a certain day shoes to a firm in London for the French government. They
delivered the shoes to a carrier in sufficient time for the goods to reach London at the time stipulated
in the contract and informed the railroad agent that the shoes would be thrown back upon their
hands if they did not reach the destination in time. The defendants negligently failed to forward the
good in due season. The sale was therefore lost, and the market having fallen, the plaintiffs had to
sell at a loss.
In the preceding discussion we have considered the plaintiff's right chiefly against Teodorica
Endencia; and what has been said suffices in our opinion to demonstrate that the damages laid
under the second cause of action in the complaint could not be recovered from her, first, because
the damages laid under the second cause of action in the complaint could not be recovered from
her, first, because the damages in question are special damages which were not within
contemplation of the parties when the contract was made, and secondly, because said damages are
too remote to be the subject of recovery. This conclusion is also necessarily fatal to the right of the
plaintiff to recover such damages from the defendant corporation, for, as already suggested, by
advising Teodorica not to perform the contract, said corporation could in no event render itself more
extensively liable than the principle in the contract.
Our conclusion is that the judgment of the trial court should be affirmed, and it is so ordered, with
costs against the appellant.


G.R. No. L-21438 September 28, 1966
AIR FRANCE, petitioner,
vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.
Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R. Carrascoso.

SANCHEZ, J .:
The Court of First Instance of Manila
1
sentenced petitioner to pay respondent Rafael
Carrascoso P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20
representing the difference in fare between first class and tourist class for the portion of the trip
Bangkok-Rome, these various amounts with interest at the legal rate, from the date of the filing of
the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.
On appeal,
2
the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane
ticket from P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects", with
costs against petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as " fully supported by the evidence of record",
are:
Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left
Manila for Lourdes on March 30, 1958.
On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine
Air Lines, Inc., issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome.
From Manila to Bangkok, plaintiff travelled in "first class", but at Bangkok, the Manager of the
defendant airline forced plaintiff to vacate the "first class" seat that he was occupying
because, in the words of the witness Ernesto G. Cuento, there was a "white man", who, the
Manager alleged, had a "better right" to the seat. When asked to vacate his "first class" seat,
the plaintiff, as was to be expected, refused, and told defendant's Manager that his seat
would be taken over his dead body; a commotion ensued, and, according to said Ernesto G.
Cuento, "many of the Filipino passengers got nervous in the tourist class; when they found
out that Mr. Carrascoso was having a hot discussion with the white man [manager], they
came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the white
man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his "first
class" seat in the plane.
3

1. The trust of the relief petitioner now seeks is that we review "all the findings"
4
of respondent
Court of Appeals. Petitioner charges that respondent court failed to make complete findings of fact
on all the issues properly laid before it. We are asked to consider facts favorable to petitioner, and
then, to overturn the appellate court's decision.
Coming into focus is the constitutional mandate that "No decision shall be rendered by any
court of record without expressing therein clearly and distinctly the facts and the law on which it is
based".
5
This is echoed in the statutory demand that a judgment determining the merits of the case
shall state "clearly and distinctly the facts and the law on which it is based";
6
and that "Every
decision of the Court of Appeals shall contain complete findings of fact on all issues properly raised
before it".
7

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

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

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

With these guideposts, we now face the problem of whether the findings of fact of the Court of
Appeals support its judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a
first class ticket. But petitioner asserts that said ticket did not represent the true and complete intent
and agreement of the parties; that said respondent knew that he did not have confirmed reservations
for first class on any specific flight, although he had tourist class protection; that, accordingly, the
issuance of a first class ticket was no guarantee that he would have a first class ride, but that such
would depend upon the availability of first class seats.
These are matters which petitioner has thoroughly presented and discussed in its brief before
the Court of Appeals under its third assignment of error, which reads: "The trial court erred in finding
that plaintiff had confirmed reservations for, and a right to, first class seats on the "definite" segments
of his journey, particularly that from Saigon to Beirut".
21

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

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's
contention, thus:
On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no
question. Apart from his testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1",
and defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as
follows:
Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, "first class". (Transcript, p. 169)
x x x x x x x x x
Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael
Altonaga that although plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was
subject to confirmation in Hongkong. The court cannot give credit to the testimony of said witnesses.
Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C"
and "C-1" belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and
paid for, a first class ticket without any reservation whatever.
Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that
the reservation for a "first class" accommodation for the plaintiff was confirmed. The court cannot
believe that after such confirmation defendant had a verbal understanding with plaintiff that the "first
class" ticket issued to him by defendant would be subject to confirmation in Hongkong.
23

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

If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat,
notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air
passenger is placed in the hollow of the hands of an airline. What security then can a passenger
have? It will always be an easy matter for an airline aided by its employees, to strike out the very
stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the
passenger had a schedule to fulfill? We have long learned that, as a rule, a written document speaks
a uniform language; that spoken word could be notoriously unreliable. If only to achieve stability in
the relations between passenger and air carrier, adherence to the ticket so issued is desirable. Such
is the case here. The lower courts refused to believe the oral evidence intended to defeat the
covenants in the ticket.
The foregoing are the considerations which point to the conclusion that there are facts upon
which the Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket
and was entitled to a first class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of
the flight.
27
We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of
its position", as charged by petitioner.
28
Nor do we subscribe to petitioner's accusation that
respondent Carrascoso "surreptitiously took a first class seat to provoke an issue".
29
And this
because, as petitioner states, Carrascoso went to see the Manager at his office in Bangkok "to
confirm my seat and because from Saigon I was told again to see the Manager".
30
Why, then, was
he allowed to take a first class seat in the plane at Bangkok, if he had no seat? Or, if another had a
better right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim
is that Carrascoso's action is planted upon breach of contract; that to authorize an award for moral
damages there must be an averment of fraud or bad faith;
31
and that the decision of the Court of
Appeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing on this
issue are:
3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a
valuable consideration, the latter acting as general agents for and in behalf of the defendant,
under which said contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff,
First Class passage on defendant's plane during the entire duration of plaintiff's tour of
Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, ... .
4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to
Bangkok, defendant furnished to the plaintiff First Class accommodation but only after
protestations, arguments and/or insistence were made by the plaintiff with defendant's
employees.
5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff
only TouristClass accommodations from Bangkok to Teheran and/or Casablanca, ... the
plaintiff has been compelled by defendant's employees to leave the First Class
accommodation berths at Bangkok after he was already seated.
6. That consequently, the plaintiff, desiring no repetition of the inconvenience and
embarrassments brought by defendant's breach of contract was forced to take a Pan
American World Airways plane on his return trip from Madrid to Manila.
32

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

x x x x x x x x x
The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish
plaintiff a first class passage covering, amongst others, the Bangkok-Teheran leg; Second, That said
contract was breached when petitioner failed to furnish first class transportation at Bangkok;
and Third, that there was bad faith when petitioner's employee compelled Carrascoso to leave his
first class accommodation berth "after he was already, seated" and to take a seat in the tourist class,
by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing
him mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral
damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the
inference of bad faith is there, it may be drawn from the facts and circumstances set forth
therein.
34
The contract was averred to establish the relation between the parties. But the stress of
the action is put on wrongful expulsion.
Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed
petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok,
Carrascoso wasousted by petitioner's manager who gave his seat to a white man;
35
and (b)
evidence of bad faith in the fulfillment of the contract was presented without objection on the part of
the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is sufficient averment
in the complaint to justify an award for moral damages. Deficiency in the complaint, if any, was cured
by the evidence. An amendment thereof to conform to the evidence is not even required.
36
On the
question of bad faith, the Court of Appeals declared:
That the plaintiff was forced out of his seat in the first class compartment of the plane
belonging to the defendant Air France while at Bangkok, and was transferred to the tourist
class not only without his consent but against his will, has been sufficiently established by
plaintiff in his testimony before the court, corroborated by the corresponding entry made by
the purser of the plane in his notebook which notation reads as follows:
"First-class passenger was forced to go to the tourist class against his will, and
that the captain refused to intervene",
and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger.
The captain of the plane who was asked by the manager of defendant company at Bangkok
to intervene even refused to do so. It is noteworthy that no one on behalf of defendant ever
contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to
present its manager at Bangkok to testify at the trial of the case, or yet to secure his
disposition; but defendant did neither.
37

The Court of appeals further stated
Neither is there evidence as to whether or not a prior reservation was made by the
white man. Hence, if the employees of the defendant at Bangkok sold a first-class ticket to
him when all the seats had already been taken, surely the plaintiff should not have been
picked out as the one to suffer the consequences and to be subjected to the humiliation and
indignity of being ejected from his seat in the presence of others. Instead of explaining to the
white man the improvidence committed by defendant's employees, the manager adopted the
more drastic step of ousting the plaintiff who was then safely ensconsced in his rightful seat.
We are strengthened in our belief that this probably was what happened there, by the
testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning
of the letters "O.K." appearing on the tickets of plaintiff, said "that the space is confirmed for
first class. Likewise, Zenaida Faustino, another witness for defendant, who was the chief of
the Reservation Office of defendant, testified as follows:
"Q How does the person in the ticket-issuing office know what reservation the
passenger has arranged with you?
A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19,
1959)
In this connection, we quote with approval what the trial Judge has said on this point:
Why did the, using the words of witness Ernesto G. Cuento, "white man" have
a "better right" to the seat occupied by Mr. Carrascoso? The record is silent. The
defendant airline did not prove "any better", nay, any right on the part of the "white
man" to the "First class" seat that the plaintiff was occupying and for which he paid
and was issued a corresponding "first class" ticket.
If there was a justified reason for the action of the defendant's Manager in
Bangkok, the defendant could have easily proven it by having taken the testimony of
the said Manager by deposition, but defendant did not do so; the presumption is that
evidence willfully suppressed would be adverse if produced [Sec. 69, par (e), Rules
of Court]; and, under the circumstances, the Court is constrained to find, as it does
find, that the Manager of the defendant airline in Bangkok not merely asked but
threatened the plaintiff to throw him out of the plane if he did not give up his "first
class" seat because the said Manager wanted to accommodate, using the words of
the witness Ernesto G. Cuento, the "white man".
38

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

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

5. The responsibility of an employer for the tortious act of its employees need not be essayed.
It is well settled in law.
41
For the willful malevolent act of petitioner's manager, petitioner, his
employer, must answer. Article 21 of the Civil Code says:
ART. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the
damage.
In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the
provisions of Article 2219 (10), Civil Code, moral damages are recoverable.
42

6. A contract to transport passengers is quite different in kind and degree from any other
contractual relation.
43
And this, because of the relation which an air-carrier sustains with the public.
Its business is mainly with the travelling public. It invites people to avail of the comforts and
advantages it offers. The contract of air carriage, therefore, generates a relation attended with a
public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an
action for damages.
Passengers do not contract merely for transportation. They have a right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be
protected against personal misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of employees towards a
passenger gives the latter an action for damages against the carrier.
44

Thus, "Where a steamship company
45
had accepted a passenger's check, it was a breach of
contract and a tort, giving a right of action for its agent in the presence of third persons to falsely
notify her that the check was worthless and demand payment under threat of ejection, though the
language used was not insulting and she was not ejected."
46
And this, because, although the
relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that
breaks the contract may be also a tort".
47
And in another case, "Where a passenger on a railroad
train, when the conductor came to collect his fare tendered him the cash fare to a point where the
train was scheduled not to stop, and told him that as soon as the train reached such point he would
pay the cash fare from that point to destination, there was nothing in the conduct of the passenger
which justified the conductor in using insulting language to him, as by calling him a lunatic,"
48
and
the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said
passenger.1awphl. nt
Petitioner's contract with Carrascoso is one attended with public duty. The stress of
Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a violation of
public duty by the petitioner air carrier a case of quasi-delict. Damages are proper.
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus
Q You mentioned about an attendant. Who is that attendant and purser?
A When we left already that was already in the trip I could not help it. So one of the
flight attendants approached me and requested from me my ticket and I said, What for? and
she said, "We will note that you transferred to the tourist class". I said, "Nothing of that kind.
That is tantamount to accepting my transfer." And I also said, "You are not going to note
anything there because I am protesting to this transfer".
Q Was she able to note it?
A No, because I did not give my ticket.
Q About that purser?
A Well, the seats there are so close that you feel uncomfortable and you don't have enough
leg room, I stood up and I went to the pantry that was next to me and the purser was there.
He told me, "I have recorded the incident in my notebook." He read it and translated it to me
because it was recorded in French "First class passenger was forced to go to the
tourist class against his will, and that the captain refused to intervene."
Mr. VALTE
I move to strike out the last part of the testimony of the witness because the best evidence
would be the notes. Your Honor.
COURT
I will allow that as part of his testimony.
49

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

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact
of the startling occurrence was still fresh and continued to be felt. The excitement had not as yet
died down. Statements then, in this environment, are admissible as part of the res gestae.
50
For,
they grow "out of the nervous excitement and mental and physical condition of the declarant".
51
The
utterance of the purser regarding his entry in the notebook was spontaneous, and related to the
circumstances of the ouster incident. Its trustworthiness has been guaranteed.
52
It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.
At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It
would have been an easy matter for petitioner to have contradicted Carrascoso's testimony. If it were
really true that no such entry was made, the deposition of the purser could have cleared up the
matter.
We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.
8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant
exemplary damages in contracts and quasi- contracts. The only condition is that defendant should
have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner."
53
The manner of
ejectment of respondent Carrascoso from his first class seat fits into this legal precept. And this, in
addition to moral damages.
54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a
similar judgment for attorneys' fees. The least that can be said is that the courts below felt that it is
but just and equitable that attorneys' fees be given.
55
We do not intend to break faith with the
tradition that discretion well exercised as it was here should not be disturbed.
10. Questioned as excessive are the amounts decreed by both the trial court and the Court of
Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and
P3,000.00 as attorneys' fees. The task of fixing these amounts is primarily with the trial court.
56
The
Court of Appeals did not interfere with the same. The dictates of good sense suggest that we give
our imprimatur thereto. Because, the facts and circumstances point to the reasonableness thereof.
57

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











February 18, 1915
G.R. No. L-9356
C. S. GILCHRIST, plaintiff-appellee,
vs.
E. A. CUDDY, ET AL., defendants. JOSE FERNANDEZ ESPEJO and MARIANO ZALDARRIAGA,
appellants.
C. Lozano for appellants.
Bruce, Lawrence, Ross and Block for appellee.
TRENT, J .:
An appeal by the defendants, Jose Fernandez Espejo and Mariano Zaldarriaga, from a judgment of the
Court of First Instance of Iloilo, dismissing their cross-complaint upon the merits for damages against
the plaintiff for the alleged wrongful issuance of a mandatory and a preliminary injunction.
Upon the application of the appellee an ex parte mandatory injunction was issued on the 22d of May,
1913, directing the defendant, E. A. Cuddy, to send to the appellee a certain cinematograph film
called Zigomar in compliance with an alleged contract which had been entered into between these
two parties, and at the time an ex parte preliminary injunction was issued restraining the appellants
from receiving and exhibiting in their theater the Zigomar until further orders of the court. On the
26th of that month the appellants appeared and moved the court to dissolve the preliminary
injunction. When the case was called for trial on August 6, the appellee moved for the dismissal of the
complaint for the reason that there is no further necessity for the maintenance of the injunction. The
motion was granted without objection as to Cuddy and denied as to the appellants in order to give
them an opportunity to prove that the injunction were wrongfully issued and the amount of damages
suffered by reason thereof.
The pertinent part of the trial courts findings of fact in this case is as follows:
It appears in this case that Cuddy was the owner of the film Zigomar and that on the 24th of April he rented it to C. S. Gilchrist
for a week for P125, and it was to be delivered on the 26th of May, the week beginning that day. A few days prior to this Cuddy
sent the money back to Gilchrist, which he had forwarded to him in Manila, saying that he had made other arrangements with his
film. The other arrangements was the rental to these defendants Espejo and his partner for P350 for the week and the injunction
was asked by Gilchrist against these parties from showing it for the week beginning the 26th of May.
It appears from the testimony in this case, conclusively, that Cuddy willfully violated his contract, he being the owner of the
picture, with Gilchrist because the defendants had offered him more for the same period. Mr. Espejo at the trial on the permanent
injunction on the 26th of May admitted that he knew that Cuddy was the owner of the film. He was trying to get it through his
agents Pathe Brothers in Manila. He is the agent of the same concern in Iloilo. There is in evidence in this case on the trial today
as well as on the 26th of May, letters showing that the Pathe Brothers in Manila advised this man on two different occasions not
to contend for this film Zigomar because the rental price was prohibitive and assured him also that he could not get the film for
about six weeks. The last of these letters was written on the 26th of April, which showed conclusively that he knew they had to get
this film from Cuddy and from this letter that the agent in Manila could not get it, but he made Cuddy an offer himself and Cuddy
accepted it because he was paying about three times as much as he had contracted with Gilchrist for. Therefore, in the opinion of
this court, the defendants failed signally to show the injunction against the defendant was wrongfully procured.
The appellants duly excepted to the order of the court denying their motion for new trial on the
ground that the evidence was insufficient to justify the decision rendered. There is lacking from the
record before us the deposition of the defendant Cuddy, which apparently throws light upon a contract
entered into between him and the plaintiff Gilchrist. The contents of this deposition are discussed at
length in the brief of the appellants and an endeavor is made to show that no such contract was
entered into. The trial court, which had this deposition before it, found that there was a contract
between Cuddy and Gilchrist. Not having the deposition in question before us, it is impossible to say
how strongly it militates against this findings of fact. By a series of decisions we have construed
section 143 and 497 (2) of the Code of Civil Procedure to require the production of all the evidence in
this court. This is the duty of the appellant and, upon his failure to perform it, we decline to proceed
with a review of the evidence. In such cases we rely entirely upon the pleadings and the findings of
fact of the trial court and examine only such assigned errors as raise questions of law. (Ferrer vs. Neri
Abejuela, 9 Phil. Rep., 324; Valle vs. Galera, 10 Phil. Rep., 619; Salvacion vs. Salvacion, 13 Phil. Rep.,
366; Breta vs. Smith, Bell & Co., 15 Phil. Rep., 446; Arroyo vs. Yulo, 18 Phil. Rep., 236; Olsen & Co.
vs. Matson, Lord & Belser Co., 19 Phil. Rep., 102; Blum vs. Barretto, 19 Phil. Rep., 161; Cuyugan vs.
Aguas, 19 Phil. Rep., 379; Mapa vs. Chaves, 20 Phil. Rep., 147; Mans vs. Garry, 20 Phil. Rep., 134.) It
is true that some of the more recent of these cases make exceptions to the general rule. Thus, in
Olsen & Co. vs. Matson, Lord & Belser Co., (19 Phil. Rep., 102), that portion of the evidence before us
tended to show that grave injustice might result from a strict reliance upon the findings of fact
contained in the judgment appealed from. We, therefore, gave the appellant an opportunity to explain
the omission. But we required that such explanation must show a satisfactory reason for the omission,
and that the missing portion of the evidence must be submitted within sixty days or cause shown for
failing to do so. The other cases making exceptions to the rule are based upon peculiar circumstances
which will seldom arise in practice and need not here be set forth, for the reason that they are wholly
inapplicable to the present case. The appellants would be entitled to indulgence only under the
doctrine of the Olsen case. But from that portion of the record before us, we are not inclined to believe
that the missing deposition would be sufficient to justify us in reversing the findings of fact of the trial
court that the contract in question had been made. There is in the record not only the positive and
detailed testimony of Gilchrist to this effect, but there is also a letter of apology from Cuddy to
Gilchrist in which the former enters into a lengthy explanation of his reasons for leasing the film to
another party. The latter could only have been called forth by a broken contract with Gilchrist to lease
the film to him. We, therefore, fail to find any reason for overlooking the omission of the defendants
to bring up the missing portion of the evidence and, adhering to the general rule above referred to,
proceed to examine the questions of law raised by the appellants.
From the above-quoted findings of fact it is clear that Cuddy, a resident of Manila, was the owner of
the Zigomar; that Gilchrist was the owner of a cinematograph theater in Iloilo; that in accordance
with the terms of the contract entered into between Cuddy and Gilchrist the former leased to the latter
the Zigomar for exhibition in his (Gilchrists) theater for the week beginning May 26, 1913; and that
Cuddy willfully violate his contract in order that he might accept the appellants offer of P350 for the
film for the same period. Did the appellants know that they were inducing Cuddy to violate his
contract with a third party when they induced him to accept the P350? Espejo admitted that he knew
that Cuddy was the owner of the film. He received a letter from his agents in Manila dated April
26,assuring him that he could not get the film for about six weeks. The arrangement between Cuddy and the
appellants for the exhibition of the film by the latter on the 26th of May were perfected after April 26,
so that the six weeks would include and extend beyond May 26. The appellants must necessarily have
known at the time they made their offer to Cuddy that the latter had booked or contracted the film for
six weeks from April 26. Therefore, the inevitable conclusion is that the appellants knowingly induced
Cuddy to violate his contract with another person. But there is no specific finding that the appellants
knew the identity of the other party. So we must assume that they did not know that Gilchrist was the
person who had contracted for the film.
The appellants take the position that if the preliminary injunction had not been issued against them
they could have exhibited the film in their theater for a number of days beginning May 26, and could
have also subleased it to other theater owners in the nearby towns and, by so doing, could have
cleared, during the life of their contract with Cuddy, the amount claimed as damages. Taking this view
of the case, it will be unnecessary for us to inquire whether the mandatory injunction against Cuddy
was properly issued or not. No question is raised with reference to the issuance of that injunction.
The right on the part of Gilchrist to enter into a contract with Cuddy for the lease of the film must be
fully recognized and admitted by all. That Cuddy was liable in an action for damages for the breach of
that contract, there can be no doubt. Were the appellants likewise liable for interfering with the
contract between Gilchrist and Cuddy, they not knowing at the time the identity of one of the
contracting parties? The appellants claim that they had a right to do what they did. The ground upon
which the appellants base this contention is, that there was no valid and binding contract between
Cuddy and Gilchrist and that, therefore, they had a right to compete with Gilchrist for the lease of the
film, the right to compete being a justification for their acts. If there had been no contract between
Cuddy and Gilchrist this defense would be tenable, but the mere right to compete could not justify the
appellants in intentionally inducing Cuddy to take away the appellees contractual rights.
Chief Justice Wells in Walker vs. Cronin (107 Mass., 555), said: Everyone has a right to enjoy the
fruits and advantages of his own enterprise, industry, skill and credit. He has no right to be free from
malicious and wanton interference, disturbance or annoyance. If disturbance or loss come as a result
of competition, or the exercise of like rights by others, it is damnum absque injuria, unless some
superior right by contract or otherwise is interfered with.
In Read vs. Friendly Society of Operative Stonemasons ([1902] 2 K. B., 88), Darling, J., said: I think the
plaintiff has a cause of action against the defendants, unless the court is satisfied that, when they
interfered with the contractual rights of plaintiff, the defendants had a sufficient justification for their
interference; . . . for it is not a justification that `they acted bona fide in the best interests of the
society of masons, i. e., in their own interests. Nor is it enough that `they were not actuated by
improper motives. I think their sufficient justification for interference with plaintiffs right must be an
equal or superior right in themselves, and that no one can legally excuse himself to a man, of whose
contract he has procured the breach, on the ground that he acted on a wrong understanding of his
own rights, or without malice, or bona fide, or in the best interests of himself, or even that he acted as
an altruist, seeking only good of another and careless of his own advantage. (Quoted with approval in
Beekman vs. Marsters, 195 Mass., 205.)
It is said that the ground on which the liability of a third party for interfering with a contract between
others rests, is that the interference was malicious. The contrary view, however, is taken by the
Supreme Court of the United States in the case of Angle vs. Railway Co. (151 U. S., 1). The only
motive for interference by the third party in that case was the desire to make a profit to the injury of
one of the parties of the contract. There was no malice in the case beyond the desire to make an
unlawful gain to the detriment of one of the contracting parties.
In the case at bar the only motive for the interference with the Gilchrist Cuddy contract on the part
of the appellants was a desire to make a profit by exhibiting the film in their theater. There was no
malice beyond this desire; but this fact does not relieve them of the legal liability for interfering with
that contract and causing its breach. It is, therefore, clear, under the above authorities, that they
were liable to Gilchrist for the damages caused by their acts, unless they are relieved from such
liability by reason of the fact that they did not know at the time the identity of the original lessee
(Gilchrist) of the film.
The liability of the appellants arises from unlawful acts and not from contractual obligations, as they
were under no such obligations to induce Cuddy to violate his contract with Gilchrist. So that if the
action of Gilchrist had been one for damages, it would be governed by chapter 2, title 16, book 4 of
the Civil Code. Article 1902 of that code provides that a person who, by act or omission, causes
damages to another when there is fault or negligence, shall be obliged to repair the damage do done.
There is nothing in this article which requires as a condition precedent to the liability of a tort-feasor
that he must know the identity of a person to whom he causes damages. In fact, the chapter wherein
this article is found clearly shows that no such knowledge is required in order that the injured party
may recover for the damage suffered.
But the fact that the appellants interference with the Gilchrist contract was actionable did not of itself
entitle Gilchrist to sue out an injunction against them. The allowance of this remedy must be justified
under section 164 of the Code of Civil Procedure, which specifies the circumstance under which an
injunction may issue. Upon the general doctrine of injunction we said in Devesa vs. Arbes (13 Phil. Rep.,
273):
An injunction is a special remedy adopted in that code (Act No. 190) from American practice, and originally borrowed from
English legal procedure, which was there issued by the authority and under the seal of a court of equity, and limited, as in order
cases where equitable relief is sought, to cases where there is no plain, adequate, and complete remedy at law, which will not
be granted while the rights between the parties are undetermined, except in extraordinary cases where material and irreparable
injury will be done, which cannot be compensated in damages, and where there will be no adequate remedy, and which will not,
as a rule, be granted, to take property out of the possession of one party and put it into that of another whose title has not been
established by law.
We subsequently affirmed the doctrine of the Devesa case in Palafox vs. Madamba (19 Phil., Rep., 444),
and we take this occasion of again affirming it, believing, as we do, that the indiscriminate use of
injunctions should be discouraged.
Does the fact that the appellants did not know at the time the identity of the original lessee of the film
militate against Gilchrists right to a preliminary injunction, although the appellants incurred civil
liability for damages for such interference? In the examination of the adjudicated cases, where in
injunctions have been issued to restrain wrongful interference with contracts by strangers to such
contracts, we have been unable to find any case where this precise question was involved, as in all of
those cases which we have examined, the identity of both of the contracting parties was known to the
tort-feasors. We might say, however, that this fact does not seem to have a controlling feature in
those cases. There is nothing in section 164 of the Code of Civil Procedure which indicates, even
remotely, that before an injunction may issue restraining the wrongful interference with contrast by
strangers, the strangers must know the identity of both parties. It would seem that this is not
essential, as injunctions frequently issue against municipal corporations, public service corporations,
public officers, and others to restrain the commission of acts which would tend to injuriously affect the
rights of person whose identity the respondents could not possibly have known beforehand. This court
has held that in a proper case injunction will issue at the instance of a private citizen to restrain ultra
vires acts of public officials. (Severino vs. Governor-General, 16 Phil. Rep., 366.) So we proceed to the
determination of the main question of whether or not the preliminary injunction ought to have been
issued in this case.
As a rule, injunctions are denied to those who have an adequate remedy at law. Where the choice is
between the ordinary and the extraordinary processes of law, and the former are sufficient, the rule
will not permit the use of the latter. (In re Debs, 158 U. S., 564.) If the injury is irreparable, the
ordinary process is inadequate. In Wahle vs. Reinbach (76 Ill., 322), the supreme court of Illinois
approved a definition of the term irreparable injury in the following language: By `irreparable
injury is not meant such injury as is beyond the possibility of repair, or beyond possible compensation
in damages, nor necessarily great injury or great damage, but that species of injury, whether great or
small, that ought not to be submitted to on the one hand or inflicted on the other; and, because it is
so large on the one hand, or so small on the other, is of such constant and frequent recurrence that
no fair or reasonable redress can be had therefor in a court of law. (Quoted with approval in Nashville
R. R. Co. vs. McConnell, 82 Fed., 65.)
The case at bar is somewhat novel, as the only contract which was broken was that between Cuddy
and Gilchrist, and the profits of the appellee depended upon the patronage of the public, for which it is
conceded the appellants were at liberty to complete by all fair does not deter the application of
remarked in the case of the ticket scalpers (82 Fed., 65), the novelty of the facts does not deter the
application of equitable principles. This court takes judicial notice of the general character of a
cinematograph or motion-picture theater. It is a quite modern form of the play house, wherein, by
means of an apparatus known as a cinematograph or cinematograph, a series of views representing
closely successive phases of a moving object, are exhibited in rapid sequence, giving a picture which,
owing to the persistence of vision, appears to the observer to be in continuous motion. (The
Encyclopedia Britanica, vol. 6, p. 374.) The subjects which have lent themselves to the art of the
photographer in this manner have increased enormously in recent years, as well as have the places
where such exhibition are given. The attendance, and, consequently, the receipts, at one of these
cinematograph or motion-picture theaters depends in no small degree upon the excellence of the
photographs, and it is quite common for the proprietor of the theater to secure an especially attractive
exhibit as his feature film and advertise it as such in order to attract the public. This feature film is
depended upon to secure a larger attendance that if its place on the program were filled by other films
of mediocre quality. It is evident that the failure to exhibit the feature film will reduce the receipts of
the theater.
Hence, Gilchrist was facing the immediate prospect of diminished profits by reason of the fact that the
appellants had induced Cuddy to rent to them the film Gilchrist had counted upon as his feature film.
It is quite apparent that to estimate with any decree of accuracy the damages which Gilchrist would
likely suffer from such an event would be quite difficult if not impossible. If he allowed the appellants
to exhibit the film in Iloilo, it would be useless for him to exhibit it again, as the desire of the public to
witness the production would have been already satisfied. In this extremity, the appellee applied for
and was granted, as we have indicated, a mandatory injunction against Cuddy requiring him to deliver
the Zigomar to Gilchrist, and a preliminary injunction against the appellants restraining them from
exhibiting that film in their theater during the weeks he (Gilchrist) had a right to exhibit it. These
injunction saved the plaintiff harmless from damages due to the unwarranted interference of the
defendants, as well as the difficult task which would have been set for the court of estimating them in
case the appellants had been allowed to carry out their illegal plans. As to whether or not the
mandatory injunction should have been issued, we are not, as we have said, called upon to determine.
So far as the preliminary injunction issued against the appellants is concerned, which prohibited them
from exhibiting the Zigomar during the week which Gilchrist desired to exhibit it, we are of the opinion
that the circumstances justified the issuance of that injunction in the discretion of the court.
We are not lacking in authority to support our conclusion that the court was justified in issuing the
preliminary injunction against the appellants. Upon the precise question as to whether injunction will
issue to restrain wrongful interference with contracts by strangers to such contracts, it may be said
that courts in the United States have usually granted such relief where the profits of the injured
person are derived from his contractual relations with a large and indefinite number of individuals,
thus reducing him to the necessity of proving in an action against the tort-feasor that the latter was
responsible in each case for the broken contract, or else obliging him to institute individual suits
against each contracting party and so exposing him to a multiplicity of suits. Sperry & Hutchinson Co.
vs. Mechanics Clothing Co. (128 Fed., 800); Sperry & Hutchinson Co. vs. Louis Weber & Co. (161
Fed., 219); Sperry & Hutchinson Co. vs. Pommer (199 Fed., 309); were all cases wherein the
respondents were inducing retail merchants to break their contracts with the company for the sale of
the latters trading stamps. Injunction issued in each case restraining the respondents from interfering
with such contracts.
In the case of the Nashville R. R. Co. vs. McConnell (82 Fed., 65), the court, among other things, said:
One who wrongfully interferes in a contract between others, and, for the purpose of gain to himself
induces one of the parties to break it, is liable to the party injured thereby; and his continued
interference may be ground for an injunction where the injuries resulting will be irreparable.
In Hamby & Toomer vs. Georgia Iron & Coal Co. (127 Ga., 792), it appears that the respondents were
interfering in a contract for prison labor, and the result would be, if they were successful, the shutting
down of the petitioners plant for an indefinite time. The court held that although there was no
contention that the respondents were insolvent, the trial court did not abuse its discretion in granting
a preliminary injunction against the respondents.
In Beekman vs. Marsters (195 Mass., 205), the plaintiff had obtained from the Jamestown Hotel
Corporation, conducting a hotel within the grounds of the Jamestown Exposition, a contract whereby
he was made their exclusive agent for the New England States to solicit patronage for the hotel. The
defendant induced the hotel corporation to break their contract with the plaintiff in order to allow him
to act also as their agent in the New England States. The court held that an action for damages would
not have afforded the plaintiff adequate relief, and that an injunction was proper compelling the
defendant to desist from further interference with the plaintiffs exclusive contract with the hotel
company.
In Citizens Light, Heat & Power Co. vs. Montgomery Light & Water Power Co. (171 Fed., 553), the court, while
admitting that there are some authorities to the contrary, held that the current authority in the United
States and England is that:
The violation of a legal right committed knowingly is a cause of action, and that it is a violation of a legal right to interfere with
contractual relations recognized by law, if there be no sufficient justification for the interference. (Quinn vs. Leatham, supra,
510; Angle vs. Chicago, etc., Ry. Co., 151 U. S., 1; 14 Sup. Ct., 240; 38 L. Ed., 55; Martens vs. Reilly, 109 Wis., 464, 84 N. W.,
840; Rice vs. Manley, 66 N. Y., 82; 23 Am. Rep., 30; Bitterman vs. L. & N. R. R. Co., 207 U. S., 205; 28 Sup. Ct., 91; 52 L. Ed.,
171; Beekman vs. Marsters, 195 Mass., 205; 80 N. E., 817; 11 L. R. A. [N. S.] 201; 122 Am. St. Rep., 232; South Wales Miners
Fed. vs. Glamorgan Coal Co., Appeal Cases, 1905, p. 239.)
See also Nims on Unfair Business Competition, pp. 351- 371.
In 3 Elliot on Contracts, section 2511, it is said: Injunction is the proper remedy to prevent a
wrongful interference with contract by strangers to such contracts where the legal remedy is
insufficient and the resulting injury is irreparable. And where there is a malicious interference with
lawful and valid contracts a permanent injunction will ordinarily issue without proof of express malice.
So, an injunction may be issued where the complainant to break their contracts with him by agreeing
to indemnify who breaks his contracts of employment may be adjoined from including other
employees to break their contracts and enter into new contracts with a new employer of the servant
who first broke his contract. But the remedy by injunction cannot be used to restrain a legitimate
competition, though such competition would involve the violation of a contract. Nor will equity
ordinarily enjoin employees who have quit the service of their employer from attempting by proper
argument to persuade others from taking their places so long as they do not resort to force or
intimidations on obstruct the public thoroughfares.
Beekman vs. Marster, supra, is practically on all fours with the case at bar in that there was only one
contract in question and the profits of the injured person depended upon the patronage of the
public.Hamby & Toomer vs. Georgia Iron & Coal Co., supra, is also similar to the case at bar in that there was
only one contract, the interference of which was stopped by injunction.
For the foregoing reasons the judgment is affirmed, with costs, against the appellants.
Arellano, C.J., Torres, Carson and Araullo, JJ., concur.
Separate Opinions
MORELAND, J ., concurring:
The court seems to be of the opinion that the action is one for a permanent injunction; whereas,
under my view of the case, it is one for specific performance. The facts are simple. C. S. Gilchrist, the
plaintiff, proprietor of the Eagle Theater of Iloilo, contracted with E. A. Cuddy, one of the defendants,
of Manila, for a film entitled Zigomar or Eelskin, 3d series, to be exhibited in his theater in Iloilo
during the week beginning May 26, 1913. Later, the defendants Espejo and Zaldarriaga, who were
also operating a theater in Iloilo, representing Pathe Freres, also obtained from Cuddy a contract for
the exhibition of the film aforesaid in their theater in Iloilo during the same week.
The plaintiff commenced this action against Cuddy and the defendants Espejo and Zaldarriaga for the
specific performance of the contract with Cuddy. The complaint prays that the court, by a mandatory
injunction, order Cuddy to deliver, on the 24th of May, 1913, in accordance with the aforesaid
contract, the said film Zigomar, 3d series, or Eelskin, to the plaintiff Gilchrist, in accordance with the
terms of the agreement, so that plaintiff can exhibit the same during the last week beginning May 26,
1913, in the Eagle Theater, in Iloilo; that the court issue a preliminary injunction against the
defendants Espejo and Zaldarriaga prohibiting them from receiving, exhibiting, or using said film in
Iloilo during the last week of May, 1913, or at any other time prior to the delivery to the plaintiff; that,
on the trial, said injunction be made perpetual and that Cuddy be ordered and commanded to
specifically perform his contract with the plaintiff.
On the filing of the complaint the plaintiff made an application for a mandatory injunction compelling
the defendant Cuddy to deliver to plaintiff the film in question by mailing it to him from Manila on the
24th of May so that it would reach Iloilo for exhibition on the 26th; and for a preliminary restraining
order against the order two defendants prohibiting them from receiving or exhibiting the said film prior
to its exhibition by plaintiff.
The court, on this application, entered an order which provided that Cuddy should not send said film
Zigomar, 3d series, or Eelskin, to the defendants Espejo and Zaldarriaga and that he should send it
to the plaintiff, Gilchrist, on the 24th day of May, 1913, in the mail for Iloilo, This order was duly
served on the defendants, including Cuddy, in whose possession the film still was, and, in compliance
therewith Cuddy mailed the film to the plaintiff at Iloilo on the 24th of May. The latter duly received it
and exhibited it without molestation during the week beginning the 26th of May in accordance with the
contract which he claimed to have made with Cuddy.
The defendants Espejo and Zaldarriaga having received due notice of the issuance of the mandatory
injunction and restraining order of the 22d of May, appeared before the court on the 26th of May and
moved that the court vacate so much of the order as prohibited them from receiving and exhibiting
the film. In other words, while the order of the 22d of May was composed of two parts, one a
mandatory order for immediate specific performance of the plaintiffs contract with the defendant
Cuddy, and the other a preliminary restraining order directed to Espejo and Zaldarriaga prohibiting
them from receiving and exhibiting the film during the week beginning the 26th of May, their motion
of the 26th of May referred exclusively to the injunction against them and touched in no way that
portion of the order which required the immediate performance by Cuddy of his contract with Gilchrist.
Indeed, the defendants Espejo and Zaldarriaga did not even except to the order requiring Cuddy to
specifically perform his agreement with the plaintiff nor did they in any way make an objection to or
show their disapproval of it. It was not excepted to or appealed from and is not before this court for
review.
The motion of Espejo and Zaldarriaga to vacate the injunction restraining them from receiving the film
was denied on the 26th of May. After the termination of the week beginning May 26th, and after the
exhibition of the film by the plaintiff in accordance with the alleged contract with Cuddy, the plaintiff
came into court and moved that, in view of the fact that he had already obtained all that he desired to
obtain or could obtain by his action, namely, the exhibition of the film in question during the week
beginning May 26th, there was no reason for continuing it and moved for its dismissal. To this motion
Cuddy consented and the action was dismissed as to him. But the other defendants objected to the
dismissal of the action on the ground that they desired to present to the court evidence showing the
damages which they had suffered by reason of the issuance of the preliminary injunction prohibiting
them from receiving and exhibiting the film in question during the week beginning May 26. The court
sustained their objection and declined to dismiss the action as to them, and, on the 8th of August,
heard the evidence as to damages. He denied defendants the relief asked for and dismissed their
claim for damages. They thereupon took an appeal from that order, and that is the appeal which we
have now before us and which is the subject of the opinion of the court with which I am concurring.
We thus have this strange condition:
An action for specific performance of a contract to deliver a film for exhibition during a given time. A preliminary mandatory
injunction ordering the delivery of the film in accordance with the contract. The delivery of the film in accordance with the
preliminary mandatory injunction. The actual exhibition of the film during the time specified in the contract. No objection to the
issuance of the mandatory injunction, to the delivery of the film, or to the ground that the plaintiff had obtained full relief by
means of the so-called preliminary remedy by virtue of which the contract was actually specifically performed before the action
was tried. No objection or exception to the order requiring the specific performance of the contract.
Under such conditions it is possible for the defendant Espejo and Zaldarriaga to secure damages for
the wrongful issuance of the preliminary injunction directed against them even though it be admitted
that it was erroneously issued and that there was no ground therefor whatever? It seems to me that it
is not. At the time this action was begun the film, as we have seen, was in the possession of Cuddy
and, while in his possession, he complied with a command of the court to deliver it to plaintiff. In
pursuance of that command he delivered it to plaintiff, who used it during the time specified in his
contract with Cuddy; or, in other words, he made such use of it as he desired and then returned it to
Cuddy. This order and the delivery of the film under it were made in an action in which the defendants
Espejo and Zaldarriaga were parties, without objection on their part and without objection or
exception to the order. The film having been delivered to defendants competitor, the plaintiff, under a
decree of the court to which they made no objection and took no exception and from which they have
not appealed, what injury can they show by reason of the injunction restraining them from making use
of the film? If they themselves, by their conduct, permitted the plaintiff to make it impossible for them
to gain possession of the film and to use it, then the preliminary injunction produced no injury for the
reason that no harm can result from restraining a party from doing a thing which, without such
restraint, it would be impossible for him to do. Moreover, the order for the delivery of the film to
plaintiff was a complete determination of the rights of the parties to the film which, while the court
had no right to make, nevertheless, was valid and binding on all the parties, none of them objecting or
taking exception thereto. Being a complete determination of the rights of the parties to the action, it
should have been the first point attacked by the defendants, as it foreclosed them completely and, if
left in force, eliminating every defense. This order was made on May 22d and was not excepted to or
appealed from. On the 8th of August following the defendants appealed from the order dismissing
their claim to damages but the order for the delivery of the film to plaintiff was final at that time and
is now conclusive on this court.
Section 143 of the Code of Civil Procedure, providing for appeals by bill of exceptions, provides that
upon the rendition of final judgment disposing of the action, either party shall have the right to
perfect a bill of exceptions for a review by the Supreme Court of all rulings, orders, and judgment
made in the action, to which the party has duly excepted at the time of making such ruling, order, or
judgment. While the order for the delivery of the film to plaintiff was in one sense a preliminary
order, it was in reality a final determination of the rights of the parties to the film, as it ordered the
delivery thereof to plaintiff for his use. If it had been duly excepted to, its validity could have been
attacked in an appeal from the final judgment thereafter entered in the action. Not having been
excepted to as required by the section just referred to, it became final and conclusive on all the
parties to the action, and when, on the 8th day of August following, the defendants presented their
claim for damages based on the alleged wrongful issuance of a temporary restraining order, the whole
foundation of their claim had disappeared by virtue of the fact that the execution of the order of the
22d of May had left nothing for them to litigate. The trial court, on the 8th of August, would have been
fully justified in refusing to hear the defendants on their claim for damages. Their right thereto had
been adjudicated on the 22d of May and that adjudication had been duly put into execution without
protest, objection or exception, and was, therefore, final and conclusive on them on the 8th of August.
I have presented this concurring opinion in an attempt to prevent confusion, if any, which might arise
from the theory on which the court decides this case. It seems to me impossible that the action can be
one for a permanent injunction. The very nature of the case demonstrates that a permanent injunction
is out of the question. The only thing that plaintiff desired was to be permitted to use the film for the
week beginning the 26th of May. With the termination of that week his rights expired. After that time
Cuddy was perfectly free to turn the film over to the defendants Espejo and Zaldarriaga for exhibition
at any time. An injunction permanently prohibiting the defendants from exhibiting the film in Iloilo
would have been unjustifiable, as it was something that plaintiff did not ask and did not want; and
would have been an invasion of the rights of Cuddy as, after the termination of the week beginning
May 26, he was at liberty, under his contract with plaintiff, to rent the film to the defendants Espejo
and Zaldarriaga and permit its exhibition in Iloilo at any time. The plaintiff never asked to have
defendants permanently enjoined from exhibiting the film in Iloilo and no party to the action has
suggested such thing.
The action is one for specific performance purely; and while the court granted plaintiff rights which
should have been granted only after a trial of the action, nevertheless, such right having been granted
before trial and none of the defendants having made objection or taken exception thereto, and the
order granting them having become final, such order became a final determination of the action, by
reason of the nature of the action itself, the rights of the parties became thereby finally determined
and the defendants Espejo and Zaldarriaga, being parties to the action, were precluded from further
litigation relative to the subject matter of the controversy.
No damages are claimed by reason of the issuance of the mandatory injunction under which the film
was delivered to plaintiff and used by him during the week beginning the 26th of May. While the
opinion says in the first paragraph that the action is for damages against the plaintiff for the alleged
wrongful issuance of a mandatory and preliminary injunction, the opinion also says in a latter portion
that It will be unnecessary for us to inquire whether the mandatory injunction against Cuddy was
properly issued or not. No question is raised with reference to the issuance of that injunction; and
still later it is also stated that as to whether or not the mandatory injunction should have been
issued, we are not, as we have said, called upon to determine. I repeat that no objection was made
by the defendants to the issuance of the mandatory injunction, no exception was taken to the order
on which it was issued and no appeal has been taken therefrom. That order is now final and conclusive
and was at the time this appeal was taken. That being so, the rights of the defendants were foreclosed
thereby. The defendants Espejo and Zaldarriaga cannot now be heard to say that they were damaged
by the issuance of the preliminary restraining injunction issued on the same day as the mandatory
injunction.
From what has been said it is clear, it seems to me, that the question of a breach of contract by
inducement, which is substantially the only question discussed and decided, is not in the case in
reality and, in my judgment, should not be touched upon. Courts will not proceed with a litigation and
discuss and decided question which might possibly be involved in the case when it clearly appears that
there remains nothing about which to litigate, the whole subject matter of the original action having
been settled and the parties having no real controversy to present. At the time the defendants Espejo
and Zaldarriaga offered their claim for damages arising out of the wrongful issuance of the restraining
order, there was nothing between them and the plaintiff to litigate, the rightfulness of plaintiffs
demand having already been finally adjudicated and determined in the same action.

G.R. No. L-18805 August 14, 1967
THE BOARD OF LIQUIDATORS
1
representing THE GOVERNMENT OF THE REPUBLIC OF THE
PHILIPPINES,plaintiff-appellant,
vs.
HEIRS OF MAXIMO M. KALAW,
2
JUAN BOCAR, ESTATE OF THE DECEASED CASIMIRO
GARCIA,
3
and LEONOR MOLL, defendants-appellees.
Simeon M. Gopengco and Solicitor General for plaintiff-appellant.
L. H. Hernandez, Emma Quisumbing, Fernando and Quisumbing, Jr.; Ponce Enrile, Siguion Reyna,
Montecillo and Belo for defendants-appellees.
SANCHEZ, J .:
The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit governmental
organization on May 7, 1940 by Commonwealth Act 518 avowedly for the protection, preservation
and development of the coconut industry in the Philippines. On August 1, 1946, NACOCO's charter
was amended [Republic Act 5] to grant that corporation the express power "to buy, sell, barter,
export, and in any other manner deal in, coconut, copra, and dessicated coconut, as well as their by-
products, and to act as agent, broker or commission merchant of the producers, dealers or
merchants" thereof. The charter amendment was enacted to stabilize copra prices, to serve coconut
producers by securing advantageous prices for them, to cut down to a minimum, if not altogether
eliminate, the margin of middlemen, mostly aliens.
4

General manager and board chairman was Maximo M. Kalaw; defendants Juan Bocar and Casimiro
Garcia were members of the Board; defendant Leonor Moll became director only on December 22,
1947.
NACOCO, after the passage of Republic Act 5, embarked on copra trading activities. Amongst the
scores of contracts executed by general manager Kalaw are the disputed contracts, for the delivery
of copra, viz:
(a) July 30, 1947: Alexander Adamson & Co., for 2,000 long tons, $167.00: per ton, f. o. b.,
delivery: August and September, 1947. This contract was later assigned to Louis Dreyfus &
Co. (Overseas) Ltd.
(b) August 14, 1947: Alexander Adamson & Co., for 2,000 long tons $145.00 per long ton,
f.o.b., Philippine ports, to be shipped: September-October, 1947. This contract was also
assigned to Louis Dreyfus & Co. (Overseas) Ltd.
(c) August 22, 1947: Pacific Vegetable Co., for 3,000 tons, $137.50 per ton, delivery:
September, 1947.
(d) September 5, 1947: Spencer Kellog & Sons, for 1,000 long tons, $160.00 per ton, c.i.f.,
Los Angeles, California, delivery: November, 1947.
(e) September 9, 1947: Franklin Baker Division of General Foods Corporation, for 1,500 long
tons, $164,00 per ton, c.i.f., New York, to be shipped in November, 1947.
(f) September 12, 1947: Louis Dreyfus & Co. (Overseas) Ltd., for 3,000 long tons, $154.00
per ton, f.o.b., 3 Philippine ports, delivery: November, 1947.
(g) September 13, 1947: Juan Cojuangco, for 2,000 tons, $175.00 per ton, delivery:
November and December, 1947. This contract was assigned to Pacific Vegetable Co.
(h) October 27, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific
ports, delivery: December, 1947 and January, 1948. This contract was assigned to Pacific
Vegetable Co.
(i) October 28, 1947: Fairwood & Co., for 1,000 tons, $210.00 per short ton, c.i.f., Pacific
ports, delivery: January, 1948. This contract was assigned to Pacific Vegetable Co.
An unhappy chain of events conspired to deter NACOCO from fulfilling these contracts. Nature
supervened. Four devastating typhoons visited the Philippines: the first in October, the second and
third in November, and the fourth in December, 1947. Coconut trees throughout the country suffered
extensive damage. Copra production decreased. Prices spiralled. Warehouses were destroyed.
Cash requirements doubled. Deprivation of export facilities increased the time necessary to
accumulate shiploads of copra. Quick turnovers became impossible, financing a problem.
When it became clear that the contracts would be unprofitable, Kalaw submitted them to the board
for approval. It was not until December 22, 1947 when the membership was completed. Defendant
Moll took her oath on that date. A meeting was then held. Kalaw made a full disclosure of the
situation, apprised the board of the impending heavy losses. No action was taken on the contracts.
Neither did the board vote thereon at the meeting of January 7, 1948 following. Then, on January 11,
1948, President Roxas made a statement that the NACOCO head did his best to avert the losses,
emphasized that government concerns faced the same risks that confronted private companies, that
NACOCO was recouping its losses, and that Kalaw was to remain in his post. Not long thereafter,
that is, on January 30, 1948, the board met again with Kalaw, Bocar, Garcia and Moll in attendance.
They unanimously approved the contracts hereinbefore enumerated.
As was to be expected, NACOCO but partially performed the contracts, as follows:
Buyers Tons Delivered Undelivered
Pacific Vegetable Oil 2,386.45 4,613.55
Spencer Kellog None 1,000
Franklin Baker 1,000 500
Louis Dreyfus 800 2,200
Louis Dreyfus (Adamson contract of July 30, 1947) 1,150 850
Louis Dreyfus (Adamson Contract of August 14, 1947) 1,755 245
T O T A L S

7,091.45

9,408.55
The buyers threatened damage suits. Some of the claims were settled, viz: Pacific Vegetable Oil
Co., in copra delivered by NACOCO, P539,000.00; Franklin Baker Corporation, P78,210.00;
Spencer Kellog & Sons, P159,040.00.
But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue before the Court of First Instance
of Manila, upon claims as follows: For the undelivered copra under the July 30 contract (Civil Case
4459); P287,028.00; for the balance on the August 14 contract (Civil Case 4398), P75,098.63; for
that per the September 12 contract reduced to judgment (Civil Case 4322, appealed to this Court in
L-2829), P447,908.40. These cases culminated in an out-of-court amicable settlement when the
Kalaw management was already out. The corporation thereunder paid Dreyfus P567,024.52
representing 70% of the total claims. With particular reference to the Dreyfus claims, NACOCO put
up the defenses that: (1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did
not have license to do business here; and (2) failure to deliver was due to force majeure, the
typhoons. To project the utter unreasonableness of this compromise, we reproduce in haec
verba this finding below:
x x x However, in similar cases brought by the same claimant [Louis Dreyfus & Co.
(Overseas) Ltd.] against Santiago Syjuco for non-delivery of copra also involving a claim of
P345,654.68 wherein defendant set upsame defenses as above, plaintiff accepted
a promise of P5,000.00 only (Exhs. 31 & 32 Heirs.) Following the same proportion, the claim
of Dreyfus against NACOCO should have been compromised for only P10,000.00, if at all.
Now, why should defendants be held liable for the large sum paid as compromise by the
Board of Liquidators? This is just a sample to show how unjust it would be to hold
defendants liable for the readiness with which the Board of Liquidators disposed of the
NACOCO funds, although there was much possibility of successfully resisting the claims, or
at least settlement for nominal sums like what happened in the Syjuco case.
5

All the settlements sum up to P1,343,274.52.
In this suit started in February, 1949, NACOCO seeks to recover the above sum of P1,343,274.52
from general manager and board chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro
Garcia and Leonor Moll. It charges Kalaw with negligence under Article 1902 of the old Civil Code
(now Article 2176, new Civil Code); and defendant board members, including Kalaw, with bad faith
and/or breach of trust for having approved the contracts. The fifth amended complaint, on which this
case was tried, was filed on July 2, 1959. Defendants resisted the action upon defenses hereinafter
in this opinion to be discussed.
The lower court came out with a judgment dismissing the complaint without costs as well as
defendants' counterclaims, except that plaintiff was ordered to pay the heirs of Maximo Kalaw the
sum of P2,601.94 for unpaid salaries and cash deposit due the deceased Kalaw from NACOCO.
Plaintiff appealed direct to this Court.
Plaintiff's brief did not, question the judgment on Kalaw's counterclaim for the sum of P2,601.94.
Right at the outset, two preliminary questions raised before, but adversely decided by, the court
below, arrest our attention. On appeal, defendants renew their bid. And this, upon established
jurisprudence that an appellate court may base its decision of affirmance of the judgment below on a
point or points ignored by the trial court or in which said court was in error.
6

1. First of the threshold questions is that advanced by defendants that plaintiff Board of Liquidators
has lost its legal personality to continue with this suit.
Accepted in this jurisdiction are three methods by which a corporation may wind up its affairs: (1)
under Section 3, Rule 104, of the Rules of Court [which superseded Section 66 of the Corporation
Law]
7
whereby, upon voluntary dissolution of a corporation, the court may direct "such disposition of
its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of
the corporation;" (2) under Section 77 of the Corporation Law, whereby a corporation whose
corporate existence is terminated, "shall nevertheless be continued as a body corporate for three
years after the time when it would have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose
of and convey its property and to divide its capital stock, but not for the purpose of continuing the
business for which it was established;" and (3) under Section 78 of the Corporation Law, by virtue of
which the corporation, within the three year period just mentioned, "is authorized and empowered to
convey all of its property to trustees for the benefit of members, stockholders, creditors, and others
interested."
8

It is defendants' pose that their case comes within the coverage of the second method. They reason
out that suit was commenced in February, 1949; that by Executive Order 372, dated November 24,
1950, NACOCO, together with other government-owned corporations, was abolished, and the Board
of Liquidators was entrusted with the function of settling and closing its affairs; and that, since the
three year period has elapsed, the Board of Liquidators may not now continue with, and prosecute,
the present case to its conclusion, because Executive Order 372 provides in Section 1 thereof that

Sec.1. The National Abaca and Other Fibers Corporation, the National Coconut Corporation,
the National Tobacco Corporation, the National Food Producer Corporation and the former
enemy-owned or controlled corporations or associations, . . . are hereby abolished. The said
corporations shall be liquidated in accordance with law, the provisions of this Order, and/or in
such manner as the President of the Philippines may direct; Provided, however, That each of
the said corporations shall nevertheless be continued as a body corporate for a period of
three (3) years from the effective date of this Executive Order for the purpose of prosecuting
and defending suits by or against it and of enabling the Board of Liquidators gradually to
settle and close its affairs, to dispose of and, convey its property in the manner hereinafter
provided.
Citing Mr. Justice Fisher, defendants proceed to argue that even where it may be found impossible
within the 3 year period to reduce disputed claims to judgment, nonetheless, "suits by or against a
corporation abate when it ceases to be an entity capable of suing or being sued" (Fisher, The
Philippine Law of Stock Corporations, pp. 390-391). Corpus Juris Secundum likewise is authority for
the statement that "[t]he dissolution of a corporation ends its existence so that there must be
statutory authority for prolongation of its life even for purposes of pending litigation"
9
and that suit
"cannot be continued or revived; nor can a valid judgment be rendered therein, and a judgment, if
rendered, is not only erroneous, but void and subject to collateral attack."
10
So it is, that abatement
of pending actions follows as a matter of course upon the expiration of the legal period for
liquidation,
11
unless the statute merely requires a commencement of suit within the added
time.
12
For, the court cannot extend the time alloted by statute.
13

We, however, express the view that the executive order abolishing NACOCO and creating the Board
of Liquidators should be examined in context. The proviso in Section 1 of Executive Order 372,
whereby the corporate existence of NACOCO was continued for a period of three years from the
effectivity of the order for "the purpose of prosecuting and defending suits by or against it and of
enabling the Board of Liquidators gradually to settle and close its affairs, to dispose of and convey its
property in the manner hereinafter provided", is to be read not as an isolated provision but in
conjunction with the whole. So reading, it will be readily observed that no time limit has been tacked
to the existence of the Board of Liquidators and its function of closing the affairs of the various
government owned corporations, including NACOCO.
By Section 2 of the executive order, while the boards of directors of the various corporations were
abolished, their powers and functions and duties under existing laws were to be assumed and
exercised by the Board of Liquidators. The President thought it best to do away with the boards of
directors of the defunct corporations; at the same time, however, the President had chosen to see to
it that the Board of Liquidators step into the vacuum. And nowhere in the executive order was there
any mention of the lifespan of the Board of Liquidators. A glance at the other provisions of the
executive order buttresses our conclusion. Thus, liquidation by the Board of Liquidators may, under
section 1, proceed in accordance with law, the provisions of the executive order, "and/or in such
manner as the President of the Philippines may direct." By Section 4, when any property, fund, or
project is transferred to any governmental instrumentality "for administration or continuance of any
project," the necessary funds therefor shall be taken from the corresponding special fund created in
Section 5. Section 5, in turn, talks of special funds established from the "net proceeds of the
liquidation" of the various corporations abolished. And by Section, 7, fifty per centum of the fees
collected from the copra standardization and inspection service shall accrue "to the special fund
created in section 5 hereof for the rehabilitation and development of the coconut industry." Implicit in
all these, is that the term of life of the Board of Liquidators is without time limit. Contemporary history
gives us the fact that the Board of Liquidators still exists as an office with officials and numerous
employees continuing the job of liquidation and prosecution of several court actions.
Not that our views on the power of the Board of Liquidators to proceed to the final determination of
the present case is without jurisprudential support. The first judicial test before this Court is National
Abaca and Other Fibers Corporation vs. Pore, L-16779, August 16, 1961. In that case, the
corporation, already dissolved, commenced suit within the three-year extended period for liquidation.
That suit was for recovery of money advanced to defendant for the purchase of hemp in behalf of the
corporation. She failed to account for that money. Defendant moved to dismiss, questioned the
corporation's capacity to sue. The lower court ordered plaintiff to include as co-party plaintiff, The
Board of Liquidators, to which the corporation's liquidation was entrusted by Executive Order 372.
Plaintiff failed to effect inclusion. The lower court dismissed the suit. Plaintiff moved to reconsider.
Ground: excusable negligence, in that its counsel prepared the amended complaint, as directed, and
instructed the board's incoming and outgoing correspondence clerk, Mrs. Receda Vda. de Ocampo,
to mail the original thereof to the court and a copy of the same to defendant's counsel. She mailed
the copy to the latter but failed to send the original to the court. This motion was rejected below.
Plaintiff came to this Court on appeal. We there said that "the rule appears to be well settled that, in
the absence of statutory provision to the contrary, pending actions by or against a corporation are
abated upon expiration of the period allowed by law for the liquidation of its affairs." We there said
that "[o]ur Corporation Law contains no provision authorizing a corporation, after three (3) years from
the expiration of its lifetime, to continue in its corporate name actions instituted by it within said
period of three (3) years."
14
However, these precepts notwithstanding, we, in effect, held in that case
that the Board of Liquidators escapes from the operation thereof for the reason that "[o]bviously, the
complete loss of plaintiff's corporate existence after the expiration of the period of three (3) years for
the settlement of its affairs is what impelled the President to create a Board of Liquidators, to
continue the management of such matters as may then be pending."
15
We accordingly directed the
record of said case to be returned to the lower court, with instructions to admit plaintiff's amended
complaint to include, as party plaintiff, the Board of Liquidators.
Defendants' position is vulnerable to attack from another direction.
By Executive Order 372, the government, the sole stockholder, abolished NACOCO, and placed its
assets in the hands of the Board of Liquidators. The Board of Liquidators thus became the trustee on
behalf of the government. It was an express trust. The legal interest became vested in the trustee
the Board of Liquidators. The beneficial interest remained with the sole stockholder the
government. At no time had the government withdrawn the property, or the authority to continue the
present suit, from the Board of Liquidators. If for this reason alone, we cannot stay the hand of the
Board of Liquidators from prosecuting this case to its final conclusion.
16
The provisions of Section 78
of the Corporation Law the third method of winding up corporate affairs find application.
We, accordingly, rule that the Board of Liquidators has personality to proceed as: party-plaintiff in
this case.
2. Defendants' second poser is that the action is unenforceable against the heirs of Kalaw.
Appellee heirs of Kalaw raised in their motion to dismiss,
17
which was overruled, and in their
nineteenth special defense, that plaintiff's action is personal to the deceased Maximo M. Kalaw, and
may not be deemed to have survived after his death.
18
They say that the controlling statute is
Section 5, Rule 87, of the 1940 Rules of Court.
19
which provides that "[a]ll claims for money against
the decedent, arising from contract, express or implied", must be filed in the estate proceedings of
the deceased. We disagree.
The suit here revolves around the alleged negligent acts of Kalaw for having entered into the
questioned contracts without prior approval of the board of directors, to the damage and prejudice of
plaintiff; and is against Kalaw and the other directors for having subsequently approved the said
contracts in bad faith and/or breach of trust." Clearly then, the present case is not a mere action for
the recovery of money nor a claim for money arising from contract. The suit involves alleged tortious
acts. And the action is embraced in suits filed "to recover damages for an injury to person or
property, real or personal", which survive.
20

The leading expositor of the law on this point is Aguas vs. Llemos, L-18107, August 30, 1962. There,
plaintiffs sought to recover damages from defendant Llemos. The complaint averred that Llemos had
served plaintiff by registered mail with a copy of a petition for a writ of possession in Civil Case 4824
of the Court of First Instance at Catbalogan, Samar, with notice that the same would be submitted to
the Samar court on February 23, 1960 at 8:00 a.m.; that in view of the copy and notice served,
plaintiffs proceeded to the said court of Samar from their residence in Manila accompanied by their
lawyers, only to discover that no such petition had been filed; and that defendant Llemos maliciously
failed to appear in court, so that plaintiffs' expenditure and trouble turned out to be in vain, causing
them mental anguish and undue embarrassment. Defendant died before he could answer the
complaint. Upon leave of court, plaintiffs amended their complaint to include the heirs of the
deceased. The heirs moved to dismiss. The court dismissed the complaint on the ground that the
legal representative, and not the heirs, should have been made the party defendant; and that,
anyway, the action being for recovery of money, testate or intestate proceedings should be initiated
and the claim filed therein. This Court, thru Mr. Justice Jose B. L. Reyes, there declared:
Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the
Rules of Court, those concerning claims that are barred if not filed in the estate settlement
proceedings (Rule 87, sec. 5) and those defining actions that survive and may be prosecuted
against the executor or administrator (Rule 88, sec. 1), it is apparent that actions for
damages caused by tortious conduct of a defendant (as in the case at bar) survive the death
of the latter. Under Rule 87, section 5, the actions that are abated by death are: (1) claims for
funeral expenses and those for the last sickness of the decedent; (2) judgments for money;
and (3) "all claims for money against the decedent, arising from contract express or implied."
None of these includes that of the plaintiffs-appellants; for it is not enough that the claim
against the deceased party be for money, but it must arise from "contract express or
implied", and these words (also used by the Rules in connection with attachments and
derived from the common law) were construed in Leung Ben vs. O'Brien, 38 Phil. 182, 189-
194,
"to include all purely personal obligations other than those which have their source
in delict or tort."
Upon the other hand, Rule 88, section 1, enumerates actions that survive against a
decedent's executors or administrators, and they are: (1) actions to recover real and
personal property from the estate; (2) actions to enforce a lien thereon; and (3) actions to
recover damages for an injury to person or property. The present suit is one for damages
under the last class, it having been held that "injury to property" is not limited to injuries to
specific property, but extends to other wrongs by which personal estate is injured or
diminished (Baker vs. Crandall, 47 Am. Rep. 126; also 171 A.L.R., 1395). To maliciously
cause a party to incur unnecessary expenses, as charged in this case, is certainly injury to
that party's property (Javier vs. Araneta, L-4369, Aug. 31, 1953).
The ruling in the preceding case was hammered out of facts comparable to those of the present. No
cogent reason exists why we should break away from the views just expressed. And, the conclusion
remains: Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro Garcia
survives.
The preliminaries out of the way, we now go to the core of the controversy.
3. Plaintiff levelled a major attack on the lower court's holding that Kalaw justifiedly entered into the
controverted contracts without the prior approval of the corporation's directorate. Plaintiff leans
heavily on NACOCO's corporate by-laws. Article IV (b), Chapter III thereof, recites, as amongst the
duties of the general manager, the obligation: "(b) To perform or execute on behalf of the
Corporation upon prior approval of the Board, all contracts necessary and essential to the proper
accomplishment for which the Corporation was organized."
Not of de minimis importance in a proper approach to the problem at hand, is the nature of a general
manager's position in the corporate structure. A rule that has gained acceptance through the years is
that a corporate officer "intrusted with the general management and control of its business, has
implied authority to make any contract or do any other act which is necessary or appropriate to the
conduct of the ordinary business of the corporation.
21
As such officer, "he may, without any special
authority from the Board of Directors perform all acts of an ordinary nature, which by usage or
necessity are incident to his office, and may bind the corporation by contracts in matters arising in
the usual course of business.
22

The problem, therefore, is whether the case at bar is to be taken out of the general concept of the
powers of a general manager, given the cited provision of the NACOCO by-laws requiring prior
directorate approval of NACOCO contracts.
The peculiar nature of copra trading, at this point, deserves express articulation. Ordinary in this
enterprise are copra sales for future delivery. The movement of the market requires that sales
agreements be entered into, even though the goods are not yet in the hands of the seller. Known in
business parlance as forward sales, it is concededly the practice of the trade. A certain amount of
speculation is inherent in the undertaking. NACOCO was much more conservative than the
exporters with big capital. This short-selling was inevitable at the time in the light of other factors
such as availability of vessels, the quantity required before being accepted for loading, the labor
needed to prepare and sack the copra for market. To NACOCO, forward sales were a necessity.
Copra could not stay long in its hands; it would lose weight, its value decrease. Above all,
NACOCO's limited funds necessitated a quick turnover. Copra contracts then had to be executed on
short notice at times within twenty-four hours. To be appreciated then is the difficulty of calling a
formal meeting of the board.
Such were the environmental circumstances when Kalaw went into copra trading.
Long before the disputed contracts came into being, Kalaw contracted by himself alone as
general manager for forward sales of copra. For the fiscal year ending June 30, 1947, Kalaw
signed some 60 such contracts for the sale of copra to divers parties. During that period, from those
copra sales, NACOCO reaped a gross profit of P3,631,181.48. So pleased was NACOCO's board of
directors that, on December 5, 1946, in Kalaw's absence, it voted to grant him a special bonus "in
recognition of the signal achievement rendered by him in putting the Corporation's business on a
self-sufficient basis within a few months after assuming office, despite numerous handicaps and
difficulties."
These previous contract it should be stressed, were signed by Kalaw without prior authority from the
board. Said contracts were known all along to the board members. Nothing was said by them. The
aforesaid contracts stand to prove one thing: Obviously, NACOCO board met the difficulties
attendant to forward sales by leaving the adoption of means to end, to the sound discretion of
NACOCO's general manager Maximo M. Kalaw.
Liberally spread on the record are instances of contracts executed by NACOCO's general manager
and submitted to the board after their consummation, not before. These agreements were not
Kalaw's alone. One at least was executed by a predecessor way back in 1940, soon after NACOCO
was chartered. It was a contract of lease executed on November 16, 1940 by the then general
manager and board chairman, Maximo Rodriguez, and A. Soriano y Cia., for the lease of a space in
Soriano Building On November 14, 1946, NACOCO, thru its general manager Kalaw, sold 3,000
tons of copra to the Food Ministry, London, thru Sebastian Palanca. On December 22, 1947, when
the controversy over the present contract cropped up, the board voted to approve a lease contract
previously executed between Kalaw and Fidel Isberto and Ulpiana Isberto covering a warehouse of
the latter. On the same date, the board gave its nod to a contract for renewal of the services of Dr.
Manuel L. Roxas. In fact, also on that date, the board requested Kalaw to report for action all copra
contracts signed by him "at the meeting immediately following the signing of the contracts." This
practice was observed in a later instance when, on January 7, 1948, the board approved two
previous contracts for the sale of 1,000 tons of copra each to a certain "SCAP" and a certain
"GNAPO".
And more. On December 19, 1946, the board resolved to ratify the brokerage commission of 2% of
Smith, Bell and Co., Ltd., in the sale of 4,300 long tons of copra to the French Government. Such
ratification was necessary because, as stated by Kalaw in that same meeting, "under an existing
resolution he is authorized to give a brokerage fee of only 1% on sales of copra made through
brokers." On January 15, 1947, the brokerage fee agreements of 1-1/2% on three export contracts,
and 2% on three others, for the sale of copra were approved by the board with a proviso authorizing
the general manager to pay a commission up to the amount of 1-1/2% "without further action by the
Board." On February 5, 1947, the brokerage fee of 2% of J. Cojuangco & Co. on the sale of 2,000
tons of copra was favorably acted upon by the board. On March 19, 1947, a 2% brokerage
commission was similarly approved by the board for Pacific Trading Corporation on the sale of 2,000
tons of copra.
It is to be noted in the foregoing cases that only the brokerage fee agreements were passed upon by
the board,not the sales contracts themselves. And even those fee agreements were
submitted only when the commission exceeded the ceiling fixed by the board.
Knowledge by the board is also discernible from other recorded instances.1wph1.t
When the board met on May 10, 1947, the directors discussed the copra situation: There was a slow
downward trend but belief was entertained that the nadir might have already been reached and an
improvement in prices was expected. In view thereof, Kalaw informed the board that "he intends to
wait until he has signed contracts to sell before starting to buy copra."
23

In the board meeting of July 29, 1947, Kalaw reported on the copra price conditions then current:
The copra market appeared to have become fairly steady; it was not expected that copra prices
would again rise very high as in the unprecedented boom during January-April, 1947; the prices
seemed to oscillate between $140 to $150 per ton; a radical rise or decrease was not indicated by
the trends. Kalaw continued to say that "the Corporation has been closing contracts for the sale of
copra generally with a margin of P5.00 to P7.00 per hundred kilos."
24

We now lift the following excerpts from the minutes of that same board meeting of July 29, 1947:
521. In connection with the buying and selling of copra the Board inquired whether it is the
practice of the management to close contracts of sale first before buying. The General
Manager replied that this practice is generally followed but that it is not always possible to do
so for two reasons:
(1) The role of the Nacoco to stabilize the prices of copra requires that it should not cease
buying even when it does not have actual contracts of sale since the suspension of buying
by the Nacoco will result in middlemen taking advantage of the temporary inactivity of the
Corporation to lower the prices to the detriment of the producers.
(2) The movement of the market is such that it may not be practical always to wait for the
consummation of contracts of sale before beginning to buy copra.
The General Manager explained that in this connection a certain amount of speculation is
unavoidable. However, he said that the Nacoco is much more conservative than the other
big exporters in this respect.
25

Settled jurisprudence has it that where similar acts have been approved by the directors as a matter
of general practice, custom, and policy, the general manager may bind the company without formal
authorization of the board of directors.
26
In varying language, existence of such authority is
established, by proof of the course of business, the usage and practices of the company and by
the knowledge which the board of directors has, or must bepresumed to have, of acts and doings of
its subordinates in and about the affairs of the corporation.
27
So also,
x x x authority to act for and bind a corporation may be presumed from acts of recognition in
other instances where the power was in fact exercised.
28

x x x Thus, when, in the usual course of business of a corporation, an officer has been
allowed in his official capacity to manage its affairs, his authority to represent the corporation
may be implied from the manner in which he has been permitted by the directors to manage
its business.
29

In the case at bar, the practice of the corporation has been to allow its general manager to negotiate
and execute contracts in its copra trading activities for and in NACOCO's behalf without prior board
approval. If the by-laws were to be literally followed, the board should give its stamp of prior approval
on all corporate contracts. But that board itself, by its acts and through acquiescence, practically laid
aside the by-law requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid corporate acts.
4. But if more were required, we need but turn to the board's ratification of the contracts in dispute on
January 30, 1948, though it is our (and the lower court's) belief that ratification here is nothing more
than a mere formality.
Authorities, great in number, are one in the idea that "ratification by a corporation of an unauthorized
act or contract by its officers or others relates back to the time of the act or contract ratified, and is
equivalent to original authority;" and that " [t]he corporation and the other party to the transaction are
in precisely the same position as if the act or contract had been authorized at the time."
30
The
language of one case is expressive: "The adoption or ratification of a contract by a corporation is
nothing more or less than the making of an original contract. The theory of corporate ratification
is predicated on the right of a corporation to contract, and any ratification or adoption is equivalent to
a grant of prior authority."
31

Indeed, our law pronounces that "[r]atification cleanses the contract from all its defects from the
moment it was constituted."
32
By corporate confirmation, the contracts executed by Kalaw are thus
purged of whatever vice or defect they may have.
33

In sum, a case is here presented whereunder, even in the face of an express by-law requirement of
prior approval, the law on corporations is not to be held so rigid and inflexible as to fail to recognize
equitable considerations. And, the conclusion inevitably is that the embattled contracts remain valid.
5. It would be difficult, even with hostile eyes, to read the record in terms of "bad faith and/or breach
of trust" in the board's ratification of the contracts without prior approval of the board. For, in reality,
all that we have on the government's side of the scale is that the board knew that the contracts so
confirmed would cause heavy losses.
As we have earlier expressed, Kalaw had authority to execute the contracts without need of prior
approval. Everybody, including Kalaw himself, thought so, and for a long time. Doubts were first
thrown on the way only when the contracts turned out to be unprofitable for NACOCO.
Rightfully had it been said that bad faith does not simply connote bad judgment or negligence; it
imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach
of a known duty thru some motive or interest or ill will; it partakes of the nature of fraud.
34
Applying
this precept to the given facts herein, we find that there was no "dishonest purpose," or "some moral
obliquity," or "conscious doing of wrong," or "breach of a known duty," or "Some motive or interest or
ill will" that "partakes of the nature of fraud."
Nor was it even intimated here that the NACOCO directors acted for personal reasons, or to serve
their own private interests, or to pocket money at the expense of the corporation.
35
We have had
occasion to affirm that bad faith contemplates a "state of mind affirmatively operating with furtive
design or with some motive of self-interest or ill will or for ulterior purposes."
36
Briggs vs. Spaulding,
141 U.S. 132, 148-149, 35 L. ed. 662, 669, quotes with approval from Judge Sharswood (in
Spering's App., 71 Pa. 11), the following: "Upon a close examination of all the reported cases,
although there are many dicta not easily reconcilable, yet I have found no judgment or decree which
has held directors to account, except when they have themselves been personally guilty of some
fraud on the corporation, or have known and connived at some fraud in others, or where such fraud
might have been prevented had they given ordinary attention to their duties. . . ." Plaintiff did not
even dare charge its defendant-directors with any of these malevolent acts.
Obviously, the board thought that to jettison Kalaw's contracts would contravene basic dictates of
fairness. They did not think of raising their voice in protest against past contracts which brought in
enormous profits to the corporation. By the same token, fair dealing disagrees with the idea that
similar contracts, when unprofitable, should not merit the same treatment. Profit or loss resulting
from business ventures is no justification for turning one's back on contracts entered into. The truth,
then, of the matter is that in the words of the trial court the ratification of the contracts was "an
act of simple justice and fairness to the general manager and the best interest of the corporation
whose prestige would have been seriously impaired by a rejection by the board of those contracts
which proved disadvantageous."
37

The directors are not liable."
38

6. To what then may we trace the damage suffered by NACOCO.
The facts yield the answer. Four typhoons wreaked havoc then on our copra-producing regions.
Result: Copra production was impaired, prices spiralled, warehouses destroyed. Quick turnovers
could not be expected. NACOCO was not alone in this misfortune. The record discloses that private
traders, old, experienced, with bigger facilities, were not spared; also suffered tremendous losses.
Roughly estimated, eleven principal trading concerns did run losses to about P10,300,000.00.
Plaintiff's witness Sisenando Barretto, head of the copra marketing department of NACOCO,
observed that from late 1947 to early 1948 "there were many who lost money in the
trade."
39
NACOCO was not immune from such usual business risk.
The typhoons were known to plaintiff. In fact, NACOCO resisted the suits filed by Louis Dreyfus &
Co. by pleading in its answers force majeure as an affirmative defense and there vehemently
asserted that "as a result of the said typhoons, extensive damage was caused to the coconut trees
in the copra producing regions of the Philippines and according to estimates of competent
authorities, it will take about one year until the coconut producing regions will be able to produce
their normal coconut yield and it will take some time until the price of copra will reach normal levels;"
and that "it had never been the intention of the contracting parties in entering into the contract in
question that, in the event of a sharp rise in the price of copra in the Philippine market produce
by force majeureor by caused beyond defendant's control, the defendant should buy the copra
contracted for at exorbitant prices far beyond the buying price of the plaintiff under the contract."
40

A high regard for formal judicial admissions made in court pleadings would suffice to deter us from
permitting plaintiff to stray away therefrom, to charge now that the damage suffered was because of
Kalaw's negligence, or for that matter, by reason of the board's ratification of the contracts.
41

Indeed, were it not for the typhoons,
42
NACOCO could have, with ease, met its contractual
obligations. Stock accessibility was no problem. NACOCO had 90 buying agencies spread
throughout the islands. It could purchase 2,000 tons of copra a day. The various contracts involved
delivery of but 16,500 tons over a five-month period. Despite the typhoons, NACOCO was still able
to deliver a little short of 50% of the tonnage required under the contracts.
As the trial court correctly observed, this is a case of damnum absque injuria. Conjunction of
damage and wrong is here absent. There cannot be an actionable wrong if either one or the other is
wanting.
43

7. On top of all these, is that no assertion is made and no proof is presented which would link
Kalaw's acts ratified by the board to a matrix for defraudation of the government. Kalaw is clear
of the stigma of bad faith. Plaintiff's corporate counsel
44
concedes that Kalaw all along thought that
he had authority to enter into the contracts, that he did so in the best interests of the corporation; that
he entered into the contracts in pursuance of an overall policy to stabilize prices, to free the
producers from the clutches of the middlemen. The prices for which NACOCO contracted in the
disputed agreements, were at a level calculated to produce profits and higher than those prevailing
in the local market. Plaintiff's witness, Barretto, categorically stated that "it would be foolish to think
that one would sign (a) contract when you are going to lose money" and that no contract was
executed "at a price unsafe for the Nacoco."
45
Really, on the basis of prices then prevailing,
NACOCO envisioned a profit of around P752,440.00.
46

Kalaw's acts were not the result of haphazard decisions either. Kalaw invariably consulted with
NACOCO's Chief Buyer, Sisenando Barretto, or the Assistant General Manager. The dailies and
quotations from abroad were guideposts to him.
Of course, Kalaw could not have been an insurer of profits. He could not be expected to predict the
coming of unpredictable typhoons. And even as typhoons supervened Kalaw was not remissed in
his duty. He exerted efforts to stave off losses. He asked the Philippine National Bank to implement
its commitment to extend a P400,000.00 loan. The bank did not release the loan, not even the sum
of P200,000.00, which, in October, 1947, was approved by the bank's board of directors. In
frustration, on December 12, 1947, Kalaw turned to the President, complained about the bank's
short-sighted policy. In the end, nothing came out of the negotiations with the bank. NACOCO
eventually faltered in its contractual obligations.
That Kalaw cannot be tagged with crassa negligentia or as much as simple negligence, would seem
to be supported by the fact that even as the contracts were being questioned in Congress and in the
NACOCO board itself, President Roxas defended the actuations of Kalaw. On December 27, 1947,
President Roxas expressed his desire "that the Board of Directors should reelect Hon. Maximo M.
Kalaw as General Manager of the National Coconut Corporation."
47
And, on January 7, 1948, at a
time when the contracts had already been openly disputed, the board, at its regular meeting,
appointed Maximo M. Kalaw as acting general manager of the corporation.
Well may we profit from the following passage from Montelibano vs. Bacolod-Murcia Milling Co., Inc.,
L-15092, May 18, 1962:
"They (the directors) hold such office charged with the duty to act for the corporation according to
their best judgment, and in so doing they cannot be controlled in the reasonable exercise and
performance of such duty. Whether the business of a corporation should be operated at a loss
during a business depression, or closed down at a smaller loss, is a purely business and economic
problem to be determined by the directors of the corporation, and not by the court. It is a well known
rule of law that questions of policy of management are left solely to the honest decision of officers
and directors of a corporation, and the court is without authority to substitute its judgment for the
judgment of the board of directors; the board is the business manager of the corporation, and solong
as it acts in good faith its orders are not reviewable by the courts." (Fletcher on Corporations, Vol. 2,
p. 390.)
48

Kalaw's good faith, and that of the other directors, clinch the case for defendants.
49

Viewed in the light of the entire record, the judgment under review must be, as it is hereby, affirmed.
Without costs. So ordered.



G.R. No. 83589 March 13, 1991
RAMON FAROLAN as ACTING COMMISSIONER OF CUSTOMS, and GUILLERMO PARAYNO,
as CHIEF OF CUSTOM INTELLIGENCE and INVESTIGATION DIVISION, petitioners,
vs.
SOLMAC MARKETING CORPORATION and COURT OF APPEALS, respondents.
Dakila F. Castro & Associates for private respondent.

SARMIENTO, J .:p
This petition for review on certiorari, instituted by the Solicitor General on behalf of the public
officers-petitioners, seek the nullification and setting aside of the Resolution
1
dated May 25, 1988 of
the Court of Appeals in CA-G.R. No. SP-10509, entitled "Solmac Marketing Corporation vs. Ramon
Farolan, Acting Commissioner of Customs, and Guillermo Parayno, Chief of Customs Intelligence
and Investigation Division," which adjudged these public officers to pay solidarily and in their private
personal capacities respondent Solmac Marketing Corporation temperate damages in the sum of
P100,000.00, exemplary damages in the sum of P50,000.00, and P25,000.00, as attorney's fees and
expenses of litigation. This challenged resolution of the respondent court modified its decision
2
of
July 27, 1987 by reducing into halves the original awards of P100,000.00 and P50,000.00 for
exemplary damages and attorney's fees and litigation expenses, respectively, keeping intact the
original grant of P100,000.00 in the concept of temperate damages. (Strangely, the first name of
petitioner Farolan stated in the assailed resolution, as well as in the decision, of the respondent court
is "Damian" when it should be "Ramon", his correct given name. Strictly speaking, petitioner Ramon
Farolan could not be held liable under these decision and resolution for he is not the one adjudged
to pay the huge damages but a different person. Nonetheless, that is of no moment now considering
the disposition of this ponencia.)
The relevant facts, as culled from the records, are as follows:
At the time of the commission of the acts complained of by the private respondent, which was the
subject of the latter's petition for mandamus and injunction filed with the Regional Trial Court (RTC)
of Manila in Civil Case No. 84-23537, petitioner Ramon Farolan was then the Acting Commissioner
of Customs while petitioner Guillermo Parayno was then the Acting Chief, Customs Intelligence and
Investigation Division. They were thus sued in their official capacities as officers in the government
as clearly indicated in the title of the case in the lower courts and even here in this Court.
Nevertheless, they were both held personally liable for the awarded damages "(s)ince the detention
of the goods by the defendants (petitioners herein) was irregular and devoid of legal basis, hence,
not done in the regular performance of official duty . . . ."
3
However, as adverted to at the outset, in
the dispositive portion of the challenged resolution, the one held personally liable is a "Damian
Farolan" and not the petitioner, Ramon Farolan. Also as earlier mentioned, we will ignore that gross
error.
Private respondent Solmac Marketing Corporation is a corporation organized and existing under the
laws of the Philippines. It was the assignee, transferee, and owner of an importation of Clojus
Recycling Plastic Products of 202,204 kilograms of what is technically known as polypropylene
film, valued at US$69,250.05.
Polypropylene is a substance resembling polyethelyne which is one of a group of partially crystalline
lightweight thermoplastics used chiefly in making fibers, films, and molded and extruded
products.
4
Without defect, polypropylene film is sold at a much higher price as prime quality film.
Once rejected as defective due to blemishes, discoloration, defective winding, holes, etc.,
polypropylene film is sold at a relatively cheap price without guarantee or return, and the buyer takes
the risk as to whether he can recover an average 30% to 50% usable matter.
5
This latter kind of
polypropylene is known as OPP film waste/scrap and this is what respondent SOLMAC claimed the
Clojus shipment to be.
The subject importation, consisting of seventeen (17) containers, arrived in December, 1981. Upon
application for entry, the Bureau of Customs asked respondent SOLMAC for its authority from any
government agency to import the goods described in the bill of lading. Respondent SOLMAC
presented a Board of Investment (BOI) authority for polypropylene film scrap. However, upon
examination of the shipment by the National Institute of Science and Technology (NIST), it turned
out that the fibers of the importation were oriented in such a way that the materials were stronger
than OPP film scrap.
6
In other words, the Clojus shipment was not OPP film scrap, as declared by
the assignee respondent SOLMAC to the Bureau of Customs and BOI Governor Lilia R. Bautista,
but oriented polypropylene the importation of which is restricted, if not prohibited, under Letter of
Instructions (LOI) No. 658-B. Specifically, Sections 1 and 2 of LOI No. 658-B provide that:
xxx xxx xxx
1. The importation of cellophane shall be allowed only for quantities and types of
cellophane that cannot be produced by Philippine Cellophane Film Corporation. The
Board of Investments shall issue guidelines regulating such importations.
2. The Collector of Customs shall see to the apprehension of all illegal importations
of cellophane and oriented polypropylene (OPP) and the dumping of imported stock
lots of cellophane and OPP.
xxx xxx xxx
Considering that the shipment was different from what had been authorized by the BOI and
by law, petitioners Parayno and Farolan withheld the release of the subject importation.
On June 7, 1982, petitioner Parayno, then Chief of Customs Intelligence and Investigation Division,
wrote the BOI asking for the latter's advice on whether or no t the subject importation may be
released
7
A series of exchange of correspondence between the BOI and the Bureau of Customs, on
one hand, and between the late Dakila Castro, counsel for the private respondent, and the BOI and
the Bureau of Customs, on the other, ensued, to wit:
xxx xxx xxx
4. In a letter dated August 17, 1982, the BOI agreed that the subject imports may be
released but that holes may be drilled on them by the Bureau of Customs prior to
their release.
5. On January 20, 1983, (the late) Atty. Dakila Castro, (then) counsel of private
respondent wrote to petitioner Commissioner Farolan of Customs asking for the
release of the importation. The importation was not released, however, on the ground
that holes had to be drilled on them first.
6. Atty. Dakila Castro then wrote a letter dated October 6, 1983, to BOI Governor
Hermenigildo Zayco stressing the reasons why the subject importation should be
released without drilling of holes.
7. On November 8, 1983, BOI Governor H. Zayco wrote a letter to the Bureau of
Customs stating that the subject goods may be released without drilling of holes
inasmuch as the goods arrived prior to the endorsement on August 17, 1982 to the
drilling of holes on all importations of waste/scrap films.
8. On February 1, 1984, petitioner Commissioner Farolan wrote the BOI requesting
for definite guidelines regarding the disposition of importations of Oriented
Polypropylene (OPP) and Polypropylene (PP) then being held at the Bureau of
Customs.
9. On March 12, 1984, Minister Roberto Ongpin of Trade, the BOI Chairman, wrote his
reply to petitioner Farolan . . . .
8
(This reply of Minister Ongpin is copied in full infra.)
On March 26, 1984, respondent Solmac filed the action for mandamus and injunction with the RTC
as above mentioned. It prayed for the unconditional release of the subject importation. It also prayed
for actual damages, exemplary damages, and attorney's fees. As prayed for, the trial court issued a
writ of preliminary injunction.
After hearing on the merits, the RTC rendered a decision on February 5, 1985, the dispositive
portion of which reads as follows:
Premises considered, judgment is hereby rendered ordering defendants to release
the subject importation immediately without drilling of holes, subject only to the
normal requirements of the customs processing for such release to be done with
utmost dispatch as time is of the essence; and the preliminary injunction hereto
issued is hereby made permanent until actual physical release of the merchandise
and without pronouncement as to costs.
SO ORDERED.
9

From the decision of the trial court, Solmac, the plaintiff below and the private respondent herein,
appealed to the Court of Appeals only insofar as to the denial of the award of damages is
concerned. On the other hand, the petitioners did not appeal from this decision. They did not see
any need to appeal because as far as they were concerned, they had already complied with their
duty. They had already ordered the release of the importation "without drilling of holes," as in fact it
was so released, in compliance with the advice to effect such immediate release contained in a letter
of BOI dated October 9, 1984, to Commissioner Farolan. Thus, to stress, even before the RTC
rendered its decision on February 5, 1984, the Clojus shipment of OPP was released
10
to the private
respondent in its capacity as assignee of the same. Be that it may, the private respondent filed its
appeal demanding that the petitioners be held, in their personal and private capacities, liable for
damages despite the finding of lack of bad faith on the part of the public officers.
After due proceeding, the Court of Appeals rendered a decision
11
on July 27, 1987, the dispositive
portion which reads as follows:
WHEREFORE, the appealed judgment is modified by ordering the defendants
Ramon Farolan and Guillermo Parayno solidarity, in their personal capacity, to pay
the plaintiff temperate damages in the sum of P100,000, exemplary damages in the
sum of P100,000 and P50,000 as attorney's fees and expenses of litigation. Costs
against the defendants.
SO ORDERED.
On August 14, 1987, the petitioners filed a motion for reconsideration of the decision of the Court of
Appeals.
On May 25, 1988, the Court of Appeals issued its resolution modifying the award of damages, to wit:
temperate damages in the sum of P100,000,00, exemplary damages in the sum of P50,000.00, and
P25,000.00 as attorney's fees and expenses of litigation. The respondent court explained the
reduction of the awards for exemplary damages and attorney's fees and expenses of litigation in this
wise:
3. In our decision of July 27, 1987, We awarded to plaintiff-appellant Pl00,000 as
temperate damages, Pl00,000.00 as exemplary damages, and P50,000.00 as attorney's
fees and expenses of litigation. Under Art. 2233 of the Civil Code, recovery of exemplary
damages is not a matter of right but depends upon the discretion of the court. Under
Article 2208 of the Civil Code, attorney's fees and expenses of litigation must always be
reasonable. In view of these provisions of the law, and since the award of temperate
damages is only P100,000.00, the amount of exemplary damages may not be at par as
temperate damages. An award of P50,000.00, as exemplary damages may already serve
the purpose, i.e., as an example for the public good. Likewise, the attorney's fees and
expenses of litigation have to be reduced to 25% of the amount of temperate damages,
or P25,000.00, if the same have to be reasonable. The reduction in the amount of
exemplary damages, and attorney's fees and expenses of litigation would be in accord
with justice and fairness.
12

The petitioners now come to this Court, again by the Solicitor General, assigning the following errors
allegedly committed by the respondent court:
I
The Court of Appeals erred in disregarding the finding of the trial court that the
defense of good faith of petitioners (defendants) cannot be discredited.
II
The Court of Appeals erred in adjudging petitioners liable to pay temperate damages,
exemplary damages, attorney's fees and expenses of litigation.
13

These two issues boil down to a single question, i.e., whether or not the petitioners acted in good
faith in not immediately releasing the questioned importation, or, simply, can they be held liable, in
their personal and private capacities, for damages to the private respondent.
We rule for the petitioners.
The respondent court committed a reversible error in overruling the trial court's finding that:
. . . with reference to the claim of plaintiff to damages, actual and exemplary, and
attorney's fees, the Court finds it difficult to discredit or disregard totally the defendants'
defense of good faith premised on the excuse that they were all the time awaiting
clarification of the Board of Investments on the matter.
14

We hold that this finding of the trial court is correct for good faith is always presumed and it is upon
him who alleges the contrary that the burden of proof lies.
15
In Abando v. Lozada,
16
we defined
good faith as "refer[ring] to a state of the mind which is manifested by the acts of the individual
concerned. It consists of the honest intention to abstain from taking an unconscionable and
unscrupulous advantage of another. It is the opposite of fraud, and its absence should be
established by convincing evidence."
We had reviewed the evidence on record carefully and we did not see any clear and convincing
proof showing the alleged bad faith of the petitioners. On the contrary, the record is replete with
evidence bolstering the petitioners' claim of good faith. First, there was the report of the National
Institute of Science and Technology (NIST) dated January 25, 1982 that, contrary to what the
respondent claimed, the subject importation was not OPP film scraps but oriented polypropylene, a
plastic product of stronger material, whose importation to the Philippines was restricted, if not
prohibited, under LOI
658-B.
17
It was on the strength of this finding that the petitioners withheld the release of the subject
importation for being contrary to law. Second, the petitioners testified that, on many occasions, the
Bureau of Customs sought the advice of the BOI on whether the subject importation might be
released.
18
Third, petitioner Parayno also testified during the trial that up to that time (of the trial)
there was no clear-cut policy on the part of the BOI regarding the entry into the Philippines of
oriented polypropylene (OPP), as the letters of BOI Governors Tordesillas and Zayco of November
8, 1983 and September 24, 1982, respectively, ordering the release of the subject importation did
not clarify the BOI policy on the matter. He then testified on the letter of the BOI Chairman Roberto
Ongpin dated March 12, 1984, which states in full:
Thank you for your letter of 1 February 1984, on the subject of various importations
of Oriented Polypropylene (OPP) and Polypropylene (PP) withheld by Customs and
the confusion over the disposition of such imports.
I have discussed the matter with Vice-Chairman Tordesillas and Governor Zayco of
the Board of Investments and the following is their explanation:
1. On 22 June 1982, the BOI ruled that importation of OPP/PP film scraps intended
for recycling or repelletizing did not fall within the purview of LOI 658-B.
2. On 17 August l982, the BOI agreed that holes could be drilled on subject film
imports to prevent their use for other purposes.
3. For importations authorized prior to 22 June 1982, the drilling of holes should
depend on purpose for which the importations was approved by the BOI that is, for
direct packaging use or for recycling/repelletizing into raw material. The exemption
from drilling of holes on Solmac Marketing's importation under Certificates of
Authority issued on 1 April 1982 and 5 May 1982 and on Clojus' importation
authorized in 1982 were endorsed by the BOI on the premise that these were not
intended for recycling/repelletizing.
Should your office have any doubts as to the authorized intended use of any
imported lots of OPP/PP film scraps that you have confiscated, we have no objection
to the drilling of holes to ensure that these are indeed recycled.
I have requested Governor Zayco to contact your office in order to offer any further
assistance which you may require.
19

It can be seen from all the foregoing that even the highest officers (Chairman Ongpin, Vice-
Chairman Tordesillas, and Governor Zayco) of the BOI themselves were not in agreement as to
what proper course to take on the subject of the various importations of Oriented Polypropylene
(OPP) and Polypropylene (PP) withheld by the Bureau of Customs. The conflicting
recommendations of the BOI on this score prompted the petitioners to seek final clarification from
the former with regard to its policy on these importations. This resulted in the inevitable delay in the
release of the Clojus shipment, one of the several of such importations. The confusion over the
disposition of this particular importation obviates bad faith. Thus the trial court's finding that the
petitioners acted in good faith in not immediately releasing the Clojus shipment pending a definitive
policy of the BOI on this matter is correct. It is supported by substantial evidence on record,
independent of the presumption of good faith, which as stated earlier, was not successfully rebutted.
When a public officer takes his oath of office, he binds himself to perform the duties of his office
faithfully and to use reasonable skill and diligence, and to act primarily for the benefit of the public.
Thus, in the discharge of his duties, he is to use that prudence, caution, and attention which careful
men use in the management of their affairs. In the case at bar, prudence dictated that petitioners first
obtain from the BOI the latter's definite guidelines regarding the disposition of the various
importations of oriented polypropylene (OPP) and polypropylene (PP) then being withheld at the
Bureau of Customs. These cellophane/film products were competing with locally manufactured
polypropylene and oriented polypropylene as raw materials which were then already sufficient to
meet local demands, hence, their importation was restricted, if not prohibited under LOI 658-B.
Consequently, the petitioners can not be said to have acted in bad faith in not immediately releasing
the import goods without first obtaining the necessary clarificatory guidelines from the BOI. As public
officers, the petitioners had the duty to see to it that the law they were tasked to implement, i.e., LOI
658-B, was faithfully complied with.
But even granting that the petitioners committed a mistake in withholding the release of the subject
importation because indeed it was composed of OPP film scraps,
20
contrary to the evidence
submitted by the National Institute of Science and Technology that the same was pure oriented
OPP, nonetheless, it is the duty of the Court to see to it that public officers are not hampered in the
performance of their duties or in making decisions for fear of personal liability for damages due to
honest mistake. Whatever damage they may have caused as a result of such an erroneous
interpretation, if any at all, is in the nature of a damnum absque injuria. Mistakes concededly
committed by public officers are not actionable absent any clear showing that they were motivated
by malice or gross negligence amounting to bad faith.
21
After all, "even under the law of public
officers, the acts of the petitioners are protected by the presumption of good faith.
22

In the same vein, the presumption, disputable though it may be, that an official duty has been
regularly performed
23
applies in favor of the petitioners. Omnia praesumuntur rite et solemniter esse
acta. (All things are presumed to be correctly and solemnly done.) It was private respondent's
burden to overcome this juris tantum presumption. We are not persuaded that it has been able to do
so.
WHEREFORE, the petition is hereby GRANTED, the assailed Resolution of the respondent court, in
CA-G.R. SP No. 10509, dated May 25, 1988, is SET ASIDE and ANNULLED. No costs.
SO ORDERED.

G.R. No. L-41423 February 23, 1989
LUIS JOSEPH, petitioner
vs.
HON. CRISPIN V. BAUTISTA, PATROCINIO PEREZ, ANTONIO SIOSON, JACINTO
PAGARIGAN, ALBERTO CARDENO and LAZARO VILLANUEVA, respondents.
Jose M. Castillo for petitioner.
Arturo Z. Sioson for private respondent, Patrocinio Perez.
Cipriano B. Farrales for private respondents except P. Perez.

REGALAD0, J .:
Petitioner prays in this appeal by certiorari for the annulment and setting aside of the order, dated
July 8, 1975, dismissing petitioner's complaint, as well as the order, dated August 22, 1975, denying
his motion for reconsideration of said dismissal, both issued by respondent Judge Crispin V. Bautista
of the former Court of First Instance of Bulacan, Branch III.
Petitioner herein is the plaintiff in Civil Case No. 50-V-73 entitled "Luis Joseph vs. Patrocinio Perez,
Domingo Villa y de Jesus, Rosario Vargas, Antonio Sioson, Lazaro Villanueva and Jacinto
Pagarigan", filed before the Court of First Instance of Bulacan, Branch III, and presided over by
respondent Judge Crispin V. Bautista; while private respondents Patrocinio Perez, Antonio Sioson,
Jacinto Pagarigan and Lazaro Villanueva are four of the defendants in said case. Defendant
Domingo Villa y de Jesus did not answer either the original or the amended complaint, while
defendant Rosario Vargas could not be served with summons; and respondent Alberto Cardeno is
included herein as he was impleaded by defendant Patrocinio Perez, one of respondents herein, in
her cross-claim.
The generative facts of this case, as culled from the written submission of the parties, are as follows:
Respondent Patrocinio Perez is the owner of a cargo truck with Plate No. 25-2 YT Phil. '73 for
conveying cargoes and passengers for a consideration from Dagupan City to Manila. On January
12, 1973, said cargo truck driven by defendant Domingo Villa was on its way to Valenzuela, Bulacan
from Pangasinan. Petitioner, with a cargo of livestock, boarded the cargo truck at Dagupan City after
paying the sum of P 9.00 as one way fare to Valenzuela, Bulacan. While said cargo truck was
negotiating the National Highway proceeding towards Manila, defendant Domingo Villa tried to
overtake a tricycle likewise proceeding in the same direction. At about the same time, a pick-up truck
with Plate No. 45-95 B, supposedly owned by respondents Antonio Sioson and Jacinto Pagarigan,
then driven by respondent Lazaro Villanueva, tried to overtake the cargo truck which was then in the
process of overtaking the tricycle, thereby forcing the cargo truck to veer towards the shoulder of the
road and to ram a mango tree. As a result, petitioner sustained a bone fracture in one of his legs.
1

The following proceedings thereafter took place:
2

Petitioner filed a complaint for damages against respondent Patrocinio Perez, as owner of the cargo
truck, based on a breach of contract of carriage and against respondents Antonio Sioson and Lazaro
Villanueva, as owner and driver, respectively, of the pick-up truck, based on quasi-delict.
Respondent Sioson filed his answer alleging that he is not and never was an owner of the pick-up
truck and neither would he acquire ownership thereof in the future.
On September 24, 1973, petitioner, with prior leave of court, filed his amended complaint impleading
respondents Jacinto Pagarigan and a certain Rosario Vargas as additional alternative defendants.
Petitioner apparently could not ascertain who the real owner of said cargo truck was, whether
respondents Patrocinio Perez or Rosario Vargas, and who was the real owner of said pick-up truck,
whether respondents Antonio Sioson or Jacinto Pagarigan.
Respondent Perez filed her amended answer with crossclaim against her co-defendants for
indemnity and subrogation in the event she is ordered to pay petitioner's claim, and therein
impleaded cross-defendant Alberto Cardeno as additional alternative defendant.
On September 27, 1974, respondents Lazaro Villanueva, Alberto Cardeno, Antonio Sioson and
Jacinto Pagarigan, thru their insurer, Insurance Corporation of the Philippines, paid petitioner's claim
for injuries sustained in the amount of P 1,300.00. By reason thereof, petitioner executed a release
of claim releasing from liability the following parties, viz: Insurance Corporation of the Philippines,
Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto Pagarigan.
On December 2, 1974, respondents Lazaro Villanueva, Alberto Cardeno and their insurer, the
Insurance Corporation of the Philippines, paid respondent Patrocinio Perez' claim for damages to
her cargo truck in the amount of P 7,420.61.
Consequently, respondents Sioson, Pagarigan, Cardeno and Villanueva filed a "Motion to Exonerate
and Exclude Defs/ Cross defs. Alberto Cardeno, Lazaro Villanueva, Antonio Sioson and Jacinto
Pagarigan on the Instant Case", alleging that respondents Cardeno and Villanueva already paid P
7,420.61 by way of damages to respondent Perez, and alleging further that respondents Cardeno,
Villanueva, Sioson and Pagarigan paid P 1,300.00 to petitioner by way of amicable settlement.
Thereafter, respondent Perez filed her "Opposition to Cross-defs.' motion dated Dec. 2, 1974 and
Counter Motion" to dismiss. The so-called counter motion to dismiss was premised on the fact that
the release of claim executed by petitioner in favor of the other respondents inured to the benefit of
respondent Perez, considering that all the respondents are solidarity liable to herein petitioner.
On July 8, 1975, respondent judge issued the questioned order dismissing the case, and a motion
for the reconsideration thereof was denied. Hence, this appeal, petitioner contending that
respondent judge erred in declaring that the release of claim executed by petitioner in favor of
respondents Sioson, Villanueva and Pagarigan inured to the benefit of respondent Perez; ergo, it
likewise erred in dismissing the case.
We find the present recourse devoid of merit.
The argument that there are two causes of action embodied in petitioner's complaint, hence the
judgment on the compromise agreement under the cause of action based on quasi-delict is not a bar
to the cause of action for breach of contract of carriage, is untenable.
A cause of action is understood to be the delict or wrongful act or omission committed by the
defendant in violation of the primary rights of the plaintiff.
3
It is true that a single act or omission can
be violative of various rights at the same time, as when the act constitutes juridically a violation of
several separate and distinct legal obligations. However where there is only one delict or wrong,
there is but a single cause of action regardless of the number of rights that may have been violated
belonging to one person.
4

The singleness of a cause of action lies in the singleness of the- delict or wrong violating the rights of
one person. Nevertheless, if only one injury resulted from several wrongful acts, only one cause of
action arises.
5
In the case at bar, there is no question that the petitioner sustained a single injury on
his person. That vested in him a single cause of action, albeit with the correlative rights of action
against the different respondents through the appropriate remedies allowed by law.
The trial court was, therefore, correct in holding that there was only one cause of action involved
although the bases of recovery invoked by petitioner against the defendants therein were not
necessarily Identical since the respondents were not identically circumstanced. However, a recovery
by the petitioner under one remedy necessarily bars recovery under the other. This, in essence, is
the rationale for the proscription in our law against double recovery for the same act or omission
which, obviously, stems from the fundamental rule against unjust enrichment.
There is no question that the respondents herein are solidarily liable to petitioner. On the evidence
presented in the court below, the trial court found them to be so liable. It is undisputed that petitioner,
in his amended complaint, prayed that the trial court hold respondents jointly and severally liable.
Furthermore, the allegations in the amended complaint clearly impleaded respondents as solidary
debtors. We cannot accept the vacuous contention of petitioner that said allegations are intended to
apply only in the event that execution be issued in his favor. There is nothing in law or jurisprudence
which would countenance such a procedure.
The respondents having been found to be solidarity liable to petitioner, the full payment made by
some of the solidary debtors and their subsequent release from any and all liability to petitioner
inevitably resulted in the extinguishment and release from liability of the other solidary debtors,
including herein respondent Patrocinio Perez.
The claim that there was an agreement entered into between the parties during the pre-trial
conference that, after such payment made by the other respondents, the case shall proceed as
against respondent Perez is both incredible and unsubstantiated. There is nothing in the records to
show, either by way of a pre-trial order, minutes or a transcript of the notes of the alleged pre-trial
hearing, that there was indeed such as agreement.
WHEREFORE, the challenged orders of the respondent judge are hereby AFFIRMED.
SO ORDERED.









G.R. No. L-32055 February 26, 1988
REYNALDO BERMUDEZ, SR., and, ADONITA YABUT BERMUDEZ petitioners-appellants,
vs.
HON. JUDGE A. MELENCIO-HERRERA, DOMINGO PONTINO y TACORDA and CORDOVA NG
SUN KWAN,respondents-appellees.

YAP, J .:
This is a direct appeal on pure questions of law from the Order of March 10, 1970 of the Honorable
Judge (now Supreme Court Justice) Ameurfina Melencio-Herrera of the defunct Court of First
Instance of Manila, Branch XVII, dismissing plaintiffs-appellants' complaint in Civil Case No. 77188
entitled "Reynaldo Bermudez, Sr. and Adonita Yabut Bermudez, plaintiffs, versus Domingo Pontino y
Tacorda and Cordova Ng Sun Kwan, defendants," and from the Order of May 7, 1970 denying
plaintiffs-appellants' Motion for Reconsideration.
The background facts of the case are as follows:
A cargo truck, driven by Domingo Pontino and owned by Cordova Ng Sun Kwan, bumped a jeep on
which Rogelio, a six-year old son of plaintiffs-appellants, was riding. The boy sustained injuries
which caused his death. As a result, Criminal Case No.92944 for Homicide Through Reckless
Imprudence was filed against Domingo Pontino by the Manila City Fiscal's Office. Plaintiffs-
appellants filed on July 27,1969 in the said criminal case "A Reservation to File Separate Civil
Action."
On July 28,1969, the plaintiffs-appellants filed a civil case for damages with the Court of First
Instance of Manila docketed as Civil Case No. 77188, entitled "Reynaldo Bermudez, Sr. et al.,
Plaintiffs vs. Domingo Pontino y Tacorda and Cordova Ng Sun Kwan, Defendants." Finding that the
plaintiffs instituted the action "on the assumption that defendant Pontino's negligence in the accident
of May 10, 1969 constituted a quasi-delict," the trial court stated that plaintiffs had already elected to
treat the accident as a "crime" by reserving in the criminal case their right to file a separate civil
action. That being so, the trial court decided to order the dismissal of the complaint against
defendant Cordova Ng Sun Kwan and to suspend the hearing of the case against Domingo Pontino
until after the criminal case for Homicide Through Reckless Imprudence is finally terminated. From
said order, plaintiffs filed the present appeal, stating as their main reasons the following:
I. The main issue brought before this Honorable Court is whether the present action
is based on quasi-delict under the Civil Code and therefore could proceed
independently of the criminal case for homicide thru reckless imprudence.
II. The second question of law is whether the lower court could properly suspend the
hearing of the civil action against Domingo Pontino and dismiss the civil case against
his employer Cordova Ng Sun Kwan by reason of the fact that a criminal case for
homicide thru reckless imprudence is pending in the lower court against Domingo
Pontino
III. The last question of law is whether the suspension of the civil action against
Domingo Pontino and the dismissal of the civil case against his employer Cordova
Ng Sun Kwan by reason of the pending criminal case against Domingo Pontino for
homicide thru reckless imprudence in the lower court could be validly done
considering that the civil case against said defendants-appellees also sought to
recover actual damages to the jeep of plaintiffs-appellants."
We find the appeal meritorious.
The heart of the issue involved in the present case is whether the civil action filed by the plaintiffs-
appellants is founded on crime or on quasi-delict. The trial court treated the case as an action based
on a crime in view of the reservation made by the offended party in the criminal case (Criminal Case
No. 92944), also pending before the court, to file a separate civil action. Said the trial court:
It would appear that plaintiffs instituted this action on the assumption that defendant
Pontino's negligence in the accident of May 10, l969 constituted a quasi-delict. The
Court cannot accept the validity of that assumption. In Criminal Case No. 92944 of
this Court, plaintiffs had already appeared as complainants. While that case was
pending, the offended parties reserved the right to institute a separate civil action. If,
in a criminal case, the right to file a separate civil action for damages is reserved,
such civil action is to be based on crime and not on tort. That was the ruling in
Joaquin vs. Aniceto, L-18719, Oct. 31, 1964."
We do not agree. The doctrine in the case cited by the trial court is inapplicable to the instant case.
In Joaquin vs. Aniceto, the Court held:
The issue in this case is: May an employee's primary civil liability for crime and his
employer's subsidiary liability therefor be proved in a separate civil action even while
the criminal case against the employee is still pending?
To begin with, obligations arise from law, contract, quasi-contract, crime and quasi-
delict. According to appellant, her action is one to enforce the civil liability arising
from crime. With respect to obligations arising from crimes, Article 1161 of the New
Civil Code provides:
Civil obligations arising from criminal offenses shall be governed by
the penal laws, subject to the provisions of article 21 77, and of the
pertinent provisions of Chapter 2, Preliminary, Title, on Human
Relations, and of Title XVIII of this book, regulating damages.
xxx xxx xxx
It is now settled that for an employer to be subsidiarily liable, the following requisites
must be present: (1) that an employee has committed a crime in the discharge of his
duties; (2) that said employee is insolvent and has not satisfied his civil liability; (3)
that the employer is engaged in some kind of industry. (1 Padilla, Criminal Law,
Revised Penal Code 794 [1964])
Without the conviction of the employee, the employer cannot be subsidiarily liable.
In cases of negligence, the injured party or his heirs has the choice between an action to enforce the
civil liability arising from crime under Article 100 of the Revised Penal Code and an action for quasi-
delict under Article 2176-2194 of the Civil Code. If a party chooses the latter, he may hold the
employer solidarity liable for the negligent act of his employee, subject to the employer's defense of
exercise of the diligence of a good father of the family.
In the case at bar, the action filed b appellant was an action for damages based on quasi-
delict.
1
The fact that appellants reserved their right in the criminal case to file an independent civil
action did not preclude them from choosing to file a civil action for quasi-delict.
The appellants invoke the provisions of Sections 1 and 2 of Rule 111 of the Rules of Court, which
provide:
Section 1. Institution of criminal and civil action. When a criminal action is
instituted, the civil action for recovery of civil liability arising from the offense charged
is impliedly instituted with the criminal action, unless the offended party expressly
waives the civil action or reserves his right to institute it separately.
Section 2. Independent civil action.-In the cases provided for in Articles 31, 32, 33,
34 and 2177 of the Civil Code of the Philippines, an independent civil action entirely
separate and distinct from the criminal action, may be brought by the injured party
during the pendency of the criminal case,provided the right is reserved as required in
the preceding section. Such civil action shall proceed independently of the criminal
prosecution, and shall require only a preponderance of evidence.
Article 2177 of the Civil Code, cited in Section 2, of Rule 111, provides that
Article 2177. Responsibility for fault or negligence under the preceding article is
entirely separate and distinct from the civil liability arising from negligence under the
Penal Code. But the plaintiff cannot recover damages twice for the same act or
omission of the defendant.
The appellant precisely made a reservation to file an independent civil action in accordance with the
provisions of Section 2 of Rule 111, Rules of Court. In fact, even without such a reservation, we
have allowed the injured party in the criminal 1 case which resulted in the acquittal of the accused to
recover damages based on quasi-delict. In People vs. Ligon, G.R. No. 74041, we held:
However, it does not follow that a person who is not criminally liable is also free from
civil liability. While the guilt of the accused in a criminal prosecution must be
established beyond reasonable doubt, only a preponderance of evidence is required
in a civil action for damages (Article 29, Civil Code). The judgment of acquittal
extinguishes the civil liability of the accused only when it includes a declaration that
the facts from which the civil liability might arise did not exist (Padilla vs. Court of
Appeals, 129 SCRA 559).
WHEREFORE, we grant the petition and annul and set aside the appealed orders of the trial court,
dated March 10, 1970 and May 7, 1970, and remand the case for further proceedings. No costs.
SO ORDERED.




G.R. No. L-24837 June 27, 1968
JULIAN C. SINGSON and RAMONA DEL CASTILLO, plaintiffs,
vs.
BANK OF THE PHILIPPINE ISLANDS and SANTIAGO FREIXAS, in his capacity as President of
the said Bank, defendants.
Gil B. Galang for plaintiffs.
Aviado and Aranda for defendants.
CONCEPCION, C.J .:
Appeal by plaintiffs, Julian Singson and his wife, Ramona del Castillo, from a decision of the Court of
First Instance of Manila dismissing their complaint against defendants herein, the Bank of the
Philippine Islands and Santiago Freixas.
It appears that Singson, was one of the defendants in civil case No. 23906 of the Court of First
Instance, Manila, in which judgment had been rendered sentencing him and his co-defendants
therein, namely, Celso Lobregat and Villa-Abrille & Co., to pay the sum of P105,539.56 to the
plaintiff therein, Philippine Milling Co. Singson and Lobregat had seasonably appealed from said
judgment, but not Villa-Abrille & Co., as against which said judgment, accordingly, became final and
executory. In due course, a writ of garnishment was subsequently served upon the Bank of the
Philippine Islands in which the Singsons had a current account insofar as Villa-Abrille's credits
against the Bank were concerned. What happened thereafter is set forth in the decision appealed
from, from which we quote:
Upon receipt of the said Writ of Garnishment, a clerk of the bank in charge of all matters of
execution and garnishment, upon reading the name of the plaintiff herein in the title of the
Writ of Garnishment as a party defendants, without further reading the body of the said
garnishment and informing himself that said garnishment was merely intended for the
deposits of defendant Villa-Abrille & Co., Valentin Teus, Fernando F. de Villa-Abrille and
Joaquin Bona, prepared a letter for the signature of the President of the Bank informing the
plaintiff Julian C. Singson of the garnishment of his deposits by the plaintiff in that case.
Another letter was also prepared and signed by the said President of the Bank for the
Special Sheriff dated April 17, 1963.
Subsequently, two checks issued by the plaintiff Julian C. Singson, one for the amount of
P383 in favor of B. M. Glass Service dated April 16, 1963 and bearing No. C-424852, and
check No. C-394996 for the amount of P100 in favor of the Lega Corporation, and drawn
against the said Bank, were deposited by the said drawers with the said bank. Believing that
the plaintiff Singson, the drawer of the check, had no more control over the balance of his
deposits in the said bank, the checks were dishonored and were refused payment by the
said bank. After the first check was returned by the bank to the B. M. Glass Service, the
latter wrote plaintiff Julian C. Singson a letter, dated April 19, 1963, advising him that his
check for P383.00 bearing No. C-424852 was not honored by the bank for the reason that
his account therein had already been garnished. The said B. M. Glass Service further stated
in the said letter that they were constrained to close his credit account with them. In view
thereof, plaintiff Julian C. Singson wrote the defendant bank a letter on April 19, 1963,
claiming that his name was not included in the Writ of Execution and Notice of Garnishment,
which was served upon the bank. The defendant President Santiago Freixas of the said bank
took steps to verify this information and after having confirmed the same, apologized to the
plaintiff Julian C. Singson and wrote him a letter dated April 22, 1963, requesting him to
disregard their letter of April 17, 1963, and that the action of garnishment from his account
had already been removed. A similar letter was written by the said official of the bank on
April 22, 1963 to the Special Sheriff informing him that his letter dated April 17, 1963 to the
said Special Sheriff was considered cancelled and that they had already removed the Notice
of Garnishment from plaintiff Singson's account. Thus, the defendants lost no time to rectify
the mistake that had been inadvertently committed, resulting in the temporary freezing of the
account of the plaintiff with the said bank for a short time.
x x x x x x x x x
On May 8, 1963, the Singsong commenced the present action against the Bank and its president,
Santiago Freixas, for damages
1
in consequence of said illegal freezing of plaintiffs' account.1wph1.t
After appropriate proceedings, the Court of First Instance of Manila rendered judgment dismissing
the complaint upon the ground that plaintiffs cannot recover from the defendants upon the basis of a
quasi-delict, because the relation between the parties is contractual in nature; because this case
does not fall under Article 2219 of our Civil Code, upon which plaintiffs rely; and because plaintiffs
have not established the amount of damages allegedly sustained by them.
The lower court held that plaintiffs' claim for damages cannot be based upon a tort or quasi-delict,
their relation with the defendants being contractual in nature. We have repeatedly held, however,
that the existence of a contract between the parties does not bar the commission of a tort by the one
against the order and the consequent recovery of damages therefor.
2
Indeed, this view has been, in
effect, reiterated in a comparatively recent case. Thus, in Air France vs. Carrascoso,
3
involving an
airplane passenger who, despite his first-class ticket, had been illegally ousted from his first-class
accommodation and compelled to take a seat in the tourist compartment, was held entitled to
recover damages from the air-carrier, upon the ground of tort on the latter's part, for, although the
relation between a passenger and a carrier is "contractual both in origin and nature ... the act that
breaks the contract may also be a tort".
In view, however, of the facts obtaining in the case at bar, and considering, particularly, the
circumstance, that the wrong done to the plaintiff was remedied as soon as the President of the bank
realized the mistake he and his subordinate employee had committed, the Court finds that an award
of nominal damages the amount of which need not be proven
4
in the sum of P1,000, in addition
to attorney's fees in the sum of P500, would suffice to vindicate plaintiff's rights.
5

WHEREFORE, the judgment appealed from is hereby reversed, and another one shall be entered
sentencing the defendant Bank of the Philippine Islands to pay to the plaintiffs said sums of P1,000,
as nominal damages, and P500, as attorney's fees, apart from the costs. It is so ordered.







[G.R. No. 129029. April 3, 2000]
RAFAEL REYES TRUCKING CORPORATION, petitioner, vs. PEOPLE OF
THE PHILIPPINES and ROSARIO P. DY (for herself and on behalf of the
minors Maria Luisa, Francis Edward, Francis Mark and Francis Rafael,
all surnamed Dy), respondents.
D E C I S I O N
PARDO, J .:
The case is an appeal via certiorari from the amended decision
[1]
of the Court
of Appeals
[2]
affirming the decision and supplemental decision of the trial
court,
[3]
as follows:
"IN VIEW OF THE FOREGOING, judgment is hereby rendered
dismissing the appeals interposed by both accused and Reyes
Trucking Corporation and affirming the Decision and
Supplemental Decision dated June 6, 1992 and October 26, 1992
respectively.
"SO ORDERED."
[4]

The facts are as follows:
On October 10, 1989, Provincial Prosecutor Patricio T. Durian of Isabela filed
with the Regional Trial Court, Isabela, Branch 19, Cauayan an amended
information charging Romeo Dunca y de Tumol with reckless imprudence
resulting in double homicide and damage to property, reading as follows:
"That on or about the 20th day of June, 1989, in the Municipality
of Cauayan, Province of Isabela, Philippines, and within the
jurisdiction of this Honorable Court, the said accused being the
driver and person-in-charge of a Trailer Truck Tractor bearing
Plate No. N2A-867 registered in the name of Rafael Reyes
Trucking Corporation, with a load of 2,000 cases of empty bottles
of beer grande, willfully, unlawfully and feloniously drove and
operated the same while along the National Highway of Barangay
Tagaran, in said Municipality, in a negligent, careless and
imprudent manner, without due regard to traffic laws, rules and
ordinances and without taking the necessary precautions to
prevent injuries to persons and damage to property, causing by
such negligence, carelessness and imprudence the said trailer
truck to hit and bump a Nissan Pick-up bearing Plate No. BBG-
957 driven by Feliciano Balcita and Francisco Dy, Jr., @
Pacquing, due to irreversible shock, internal and external
hemorrhage and multiple injuries, open wounds, abrasions, and
further causing damages to the heirs of Feliciano Balcita in the
amount of P100,000.00 and to the death of Francisco Dy, Jr.; @
Pacquing and damages to his Nissan Pick-Up bearing Plate No.
BBG-957 in the total amount of P2,000,000.00.
"CONTRARY TO LAW.
"Cauayan, Isabela, October 10, 1989.
"(Sgd.) FAUSTO C. CABANTAC
"Third Assistant Provincial Prosecutor"
Upon arraignment on October 23, 1989, the accused entered a plea of not
guilty. On the same occasion, the offended parties (Rosario P. Dy and minor
children and Angelina M. Balcita and minor son Paolo) made a reservation to
file a separate civil action against the accused arising from the offense
charged.
[5]
On November 29, 1989, the offended parties actually filed with the
Regional Trial Court, Isabela, Branch 19, Cauayan a complaint against
petitioner Rafael Reyes Trucking Corporation, as employer of driver Romeo
Dunca y de Tumol, based on quasi delict. The petitioner settled the claim of
the heirs of Feliciano Balcita (the driver of the other vehicle involved in the
accident). The private respondents opted to pursue the criminal action but did
not withdraw the civil case quasi ex delicto they filed against petitioner. On
December 15, 1989, private respondents withdrew the reservation to file a
separate civil action against the accused and manifested that they would
prosecute the civil aspect ex delicto in the criminal action.
[6]
However, they did
not withdraw the separate civil action based on quasi delict against petitioner
as employer arising from the same act or omission of the accused driver.
[7]

Upon agreement of the parties, the trial court consolidated both criminal and
civil cases and conducted a joint trial of the same.
The facts, as found by the trial court, which appear to be undisputed, are as
follows:
"The defendant Rafael Reyes Trucking Corporation is a domestic
corporation engaged in the business of transporting beer products
for the San Miguel Corporation (SMC for short) from the latters
San Fernando, Pampanga plant to its various sales outlets in
Luzon. Among its fleets of vehicles for hire is the white truck trailer
described above driven by Romeo Dunca y Tumol, a duly
licensed driver. Aside from the Corporations memorandum to all
its drivers and helpers to physically inspect their vehicles before
each trip (Exh. 15, pars. 4 & 5), the SMCs Traffic Investigator-
Inspector certified the roadworthiness of this White Truck trailer
prior to June 20, 1989 (Exh. 17). In addition to a professional
drivers license, it also conducts a rigid examination of all driver
applicants before they are hired.
"In the early morning of June 20, 1989, the White Truck driven by
Dunca left Tuguegarao, Cagayan bound to San Fernando,
Pampanga loaded with 2,000 cases of empty beer "Grande"
bottles. Seated at the front right seat beside him was Ferdinand
Domingo, his truck helper ("pahinante" in Pilipino). At around 4:00
oclock that same morning while the truck was descending at a
slight downgrade along the national road at Tagaran, Cauayan,
Isabela, it approached a damaged portion of the road covering the
full width of the trucks right lane going south and about six meters
in length. These made the surface of the road uneven because
the potholes were about five to six inches deep. The left lane
parallel to this damaged portion is smooth. As narrated by
Ferdinand Domingo, before approaching the potholes, he and
Dunca saw the Nissan with its headlights on coming from the
opposite direction. They used to evade this damaged road by
taking the left lance but at that particular moment, because of the
incoming vehicle, they had to run over it. This caused the truck to
bounce wildly. Dunca lost control of the wheels and the truck
swerved to the left invading the lane of the Nissan. As a result,
Duncas vehicle rammed the incoming Nissan dragging it to the
left shoulder of the road and climbed a ridge above said shoulder
where it finally stopped. (see Exh. A-5, p. 8, record). The Nissan
was severely damaged (Exhs. A-7, A-8, A-9 and A-14, pp. 9-11,
record), and its two passengers, namely: Feliciano Balcita and
Francisco Dy, Jr. died instantly (Exh. A-19) from external and
internal hemorrhage and multiple fractures (pp. 15 and 16,
record).
"For the funeral expenses of Francisco Dy, Jr. her widow spent
P651,360.00 (Exh. I-3). At the time of his death he was 45 years
old. He was the President and Chairman of the Board of the
Dynamic Wood Products and Development Corporation (DWPC),
a wood processing establishment, from which he was receiving an
income of P10,000.00 a month (Exh. D). In the Articles of
Incorporation of the DWPC, the spouses Francisco Dy, Jr. and
Rosario Perez Dy appear to be stockholders of 10,000 shares
each with par value of P100.00 per share out of its outstanding
and subscribed capital stock of 60,000 shares valued at
P6,000,000.00 (Exhs. K-1 & 10-B). Under its 1988 Income Tax
Returns (Exh. J) the DWPC had a taxable net income of
P78,499.30 (Exh. J). Francisco Dy, Jr. was a La Salle University
graduate in Business Administration, past president of the Pasay
Jaycees, National Treasurer and President of the Philippine
Jaycees in 1971 and 1976, respectively, and World Vice-
President of Jaycees International in 1979. He was also the
recipient of numerous awards as a civic leader (Exh. C). His
children were all studying in prestigious schools and spent about
P180,000.00 for their education in 1988 alone (Exh. H-4).
"As stated earlier, the plaintiffs procurement of a writ of
attachment of the properties of the Corporation was declared
illegal by the Court of Appeals. It was shown that on December
26, 1989, Deputy Sheriff Edgardo Zabat of the RTC at San
Fernando, Pampanga, attached six units of Truck Tractors and
trailers of the Corporation at its garage at San Fernando,
Pampanga. These vehicles were kept under PC guard by the
plaintiffs in said garage thus preventing the Corporation to operate
them. However, on December 28, 1989, the Court of Appeals
dissolved the writ (p. 30, record) and on December 29, 1989, said
Sheriff reported to this Court that the attached vehicles were
taken by the defendants representative, Melita Manapil (Exh. O,
p. 31, record). The defendants general Manager declared that it
lost P21,000.00 per day for the non-operation of the six units
during their attachment (p. 31, t.s.n., Natividad C. Babaran,
proceedings on December 10, 1990)."
[8]

On June 6, 1992, the trial court rendered a joint decision, the dispositive
portion of which reads as follows:
"WHEREFORE, in view of the foregoing considerations judgment
is hereby rendered:
"1. Finding the accused Romeo Dunca y de Tumol guilty beyond
reasonable doubt of the crime of Double Homicide through
Reckless Imprudence with violation of the Motor Vehicle Law
(Rep. Act No. 4136), and appreciating in his favor the mitigating
circumstance of voluntary surrender without any aggravating
circumstance to offset the same, the Court hereby sentences him
to suffer two (2) indeterminate penalties of four months and one
day of arresto mayor as minimum to three years, six months and
twenty days as maximum; to indemnify the Heirs of Francisco Dy.
Jr. in the amount of P3,000,000.00 as compensatory damages,
P1,000,000.00 as moral damages, and P1,030,000.00 as funeral
expenses;
"2. Ordering the plaintiff in Civil Case No. Br. 19-424 to pay the
defendant therein actual damages in the amount of P84,000.00;
and
"3. Ordering the dismissal of the complaint in Civil Case No. Br.
19-424.
"No pronouncement as to costs.
"SO ORDERED.
"Cauayan, Isabela, June 6, 1992.
"(Sgd.) ARTEMIO R. ALIVIA
"Regional Trial Judge"
[9]

On September 3, 1992, petitioner and the accused filed a notice of appeal
from the joint decision.
[10]

On the other hand, private respondents moved for amendment of the
dispositive portion of the joint decision so as to hold petitioner subsidiarily
liable for the damages awarded to the private respondents in the event of
insolvency of the accused.
[11]

On October 26, 1992, the trial court rendered a supplemental decision
amending the dispositive portion by inserting an additional paragraph reading
as follows:
"2:A Ordering the defendant Reyes Trucking Corporation
subsidiarily liable for all the damages awarded to the heirs of
Francisco Dy, Jr., in the event of insolvency of the accused but
deducting therefrom the damages of P84,000.00 awarded to said
defendant in the next preceding paragraph; and x x x"
[12]

On November 12, 1992, petitioner filed with the trial court a supplemental
notice of appeal from the supplemental decision.
[13]

During the pendency of the appeal, the accused jumped bail and fled to a
foreign country. By resolution dated December 29, 1994, the Court of Appeals
dismissed the appeal of the accused in the criminal case.
[14]

On January 6, 1997, the Court of Appeals rendered an amended decision
affirming that of the trial court, as set out in the opening paragraph of this
decision.
[15]

On January 31, 1997, petitioner filed a motion for reconsideration of the
amended decision.
[16]

On April 21, 1997, the Court of Appeals denied petitioners motion for
reconsideration for lack of merit.
[17]

Hence, this petition for review.
[18]

On July 21, 1997, the Court required respondents to comment on the petition
within ten (10) days from notice.
[19]

On January 27, 1998, the Solicitor General filed his comment.
[20]
On April 13,
1998, the Court granted leave to petitioner to file a reply and noted the reply it
filed on March 11, 1998.
[21]

We now resolve to give due course to the petition and decide the case.
Petitioner raises three (3) grounds for allowance of the petition, which,
however, boil down to two (2) basic issues, namely:
1.....May petitioner as owner of the truck involved in the accident
be held subsidiarily liable for the damages awarded to the
offended parties in the criminal action against the truck driver
despite the filing of a separate civil action by the offended parties
against the employer of the truck driver?
2.....May the Court award damages to the offended parties in the
criminal case despite the filing of a civil action against the
employer of the truck driver; and in amounts exceeding that
alleged in the information for reckless imprudence resulting in
homicide and damage to property?
[22]

We grant the petition, resolving under the circumstances pro hac vice to
remand the cases to the trial court for determination of the civil liability of
petitioner as employer of the accused driver in the civil action quasi ex
delicto re-opened for the purpose.
In negligence cases, the aggrieved party has the choice between (1) an action
to enforce civil liability arising from crime under Article 100 of the Revised
Penal Code; and (2) a separate action for quasi delict under Article 2176 of
the Civil Code of the Philippines. Once the choice is made, the injured party
can not avail himself of any other remedy because he may not recover
damages twice for the same negligent act or omission of the accused.
[23]
This
is the rule against double recovery.
In other words, "the same act or omission can create two kinds of liability on
the part of the offender, that is, civil liability ex delicto, and civil liability quasi
delicto" either of which "may be enforced against the culprit, subject to the
caveat under Article 2177 of the Civil Code that the offended party can not
recover damages under both types of liability."
[24]

In the instant case, the offended parties elected to file a separate civil action
for damages against petitioner as employer of the accused, based on quasi
delict, under Article 2176 of the Civil Code of the Philippines. Private
respondents sued petitioner Rafael Reyes Trucking Corporation, as the
employer of the accused, to be vicariously liable for the fault or negligence of
the latter. Under the law, this vicarious liability of the employer is founded on
at least two specific provisions of law.
The first is expressed in Article 2176 in relation to Article 2180 of the Civil
Code, which would allow an action predicated on quasi-delict to be instituted
by the injured party against the employer for an act or omission of the
employee and would necessitate only a preponderance of evidence to prevail.
Here, the liability of the employer for the negligent conduct of the subordinate
is direct and primary, subject to the defense of due diligence in the selection
and supervision of the employee. The enforcement of the judgment against
the employer in an action based on Article 2176 does not require the
employee to be insolvent since the nature of the liability of the employer with
that of the employee, the two being statutorily considered joint tortfeasors, is
solidary.
[25]
The second, predicated on Article 103 of the Revised Penal Code,
provides that an employer may be held subsidiarily civilly liable for a felony
committed by his employee in the discharge of his duty. This liability attaches
when the employee is convicted of a crime done in the performance of his
work and is found to be insolvent that renders him unable to properly respond
to the civil liability adjudged.
[26]

As regards the first issue, the answer is in the negative. Rafael Reyes
Trucking Corporation, as employer of the accused who has been adjudged
guilty in the criminal case for reckless imprudence, can not be held
subsidiarily liable because of the filing of the separate civil action based
on quasi delict against it. In view of the reservation to file, and the subsequent
filing of the civil action for recovery of civil liability, the same was not instituted
with the criminal action. Such separate civil action was for recovery of
damages under Article 2176 of the Civil Code, arising from the same act or
omission of the accused.
[27]

Pursuant to the provision of Rule 111, Section 1, paragraph 3 of the 1985
Rules of Criminal Procedure, when private respondents, as complainants in
the criminal action, reserved the right to file the separate civil action, they
waived other available civil actions predicated on the same act or omission of
the accused-driver. Such civil action includes the recovery of indemnity under
the Revised Penal Code, and damages under Articles 32, 33, and 34 of the
Civil Code of the Philippines arising from the same act or omission of the
accused.
[28]

The intention of private respondents to proceed primarily and directly against
petitioner as employer of accused truck driver became clearer when they did
not ask for the dismissal of the civil action against the latter based on quasi
delict.
Consequently, the Court of Appeals and the trial court erred in holding the
accused civilly liable, and petitioner-employer of the accused subsidiarily
liable for damages arising from crime (ex delicto) in the criminal action as the
offended parties in fact filed a separate civil action against the employer
based on quasi delict resulting in the waiver of the civil action ex delicto.
It might be argued that private respondents as complainants in the criminal
case withdrew the reservation to file a civil action against the driver (accused)
and manifested that they would pursue the civil liability of the driver in the
criminal action. However, the withdrawal is ineffective to reverse the effect of
the reservation earlier made because private respondents did not withdraw
the civil action against petitioner based on quasi delict. In such a case, the
provision of Rule 111, Section 1, paragraph 3 of the 1985 Rules on Criminal
Procedure is clear that the reservation to file or the filing of a separate civil
action results in a waiver of other available civil actions arising from the same
act or omission of the accused. Rule 111, Section 1, paragraph 2 enumerated
what are the civil actions deemed waived upon such reservation or filing, and
one of which is the civil indemnity under the Revised Penal Code. Rule 111,
Section 1, paragraph 3 of the 1985 Rules on Criminal Procedure specifically
provides:
"A waiver of any of the civil actions extinguishes the others. The
institution of, or the reservation of the right to file, any of said civil
actions separately waives the others."
The rationale behind this rule is the avoidance of multiple suits between the
same litigants arising out of the same act or omission of the offender. The
restrictive phraseology of the section under consideration is meant to cover all
kinds of civil actions, regardless of their source in law, provided that the action
has for its basis the same act or omission of the offender.
[29]

However, petitioner as defendant in the separate civil action for damages filed
against it, based on quasi delict, may be held liable thereon. Thus, the trial
court grievously erred in dismissing plaintiffs civil complaint. And the Court of
Appeals erred in affirming the trial courts decision. Unfortunately private
respondents did not appeal from such dismissal and could not be granted
affirmative relief.
[30]

The Court, however, in exceptional cases has relaxed the rules "in order to
promote their objectives and assist the parties in obtaining just, speedy, and
inexpensive determination of every action or proceeding"
[31]
or exempted "a
particular case from the operation of the rules."
[32]

Invoking this principle, we rule that the trial court erred in awarding civil
damages in the criminal case and in dismissing the civil action. Apparently
satisfied with such award, private respondent did not appeal from the
dismissal of the civil case. However, petitioner did appeal. Hence, this case
should be remanded to the trial court so that it may render decision in the civil
case awarding damages as may be warranted by the evidence.
[33]

With regard to the second issue, the award of damages in the criminal case
was improper because the civil action for the recovery of civil liability was
waived in the criminal action by the filing of a separate civil action against the
employer. As enunciated in Ramos vs. Gonong,
[34]
"civil indemnity is not part of
the penalty for the crime committed." The only issue brought before the trial
court in the criminal action is whether accused Romeo Dunca y de Tumol is
guilty of reckless imprudence resulting in homicide and damage to property.
The action for recovery of civil liability is not included therein, but is covered
by the separate civil action filed against the petitioner as employer of the
accused truck-driver.
In this case, accused-driver jumped bail pending his appeal from his
conviction. Thus, the judgment convicting the accused became final and
executory, but only insofar as the penalty in the criminal action is concerned.
The damages awarded in the criminal action was invalid because of its
effective waiver. The pronouncement was void because the action for
recovery of the civil liability arising from the crime has been waived in said
criminal action.
With respect to the issue that the award of damages in the criminal action
exceeded the amount of damages alleged in the amended information, the
issue is de minimis. At any rate, the trial court erred in awarding damages in
the criminal case because by virtue of the reservation of the right to bring a
separate civil action or the filing thereof, "there would be no possibility that the
employer would be held liable because in such a case there would be no
pronouncement as to the civil liability of the accused.
[35]

As a final note, we reiterate that "the policy against double recovery requires
that only one action be maintained for the same act or omission whether the
action is brought against the employee or against his employer.
[36]
The injured
party must choose which of the available causes of action for damages he will
bring.
[37]

Parenthetically, the trial court found the accused "guilty beyond reasonable
doubt of the crime of Double Homicide Through Reckless Imprudence with
violation of the Motor Vehicle Law (Rep. Act No. 4136)." There is no such
nomenclature of an offense under the Revised Penal Code. Thus, the trial
court was misled to sentence the accused "to suffer two (2) indeterminate
penalties of four (4) months and one (1) day of arresto mayor, as minimum, to
three (3) years, six (6) months and twenty (20) days of prision correccional, as
maximum." This is erroneous because in reckless imprudence cases, the
actual penalty for criminal negligence bears no relation to the individual willful
crime or crimes committed, but is set in relation to a whole class, or series of
crimes.
[38]

Unfortunately, we can no longer correct this judgment even if erroneous, as it
is, because it has become final and executory.
Under Article 365 of the Revised Penal Code, criminal negligence "is treated
as a mere quasi offense, and dealt with separately from willful offenses. It is
not a question of classification or terminology. In intentional crimes, the act
itself is punished; in negligence or imprudence, what is principally penalized is
the mental attitude or condition behind the act, the dangerous recklessness,
lack of care or foresight, the imprudencia punible. Much of the confusion has
arisen from the common use of such descriptive phrase as homicide through
reckless imprudence, and the like; when the strict technical sense is, more
accurately, reckless imprudence resulting in homicide; or simple imprudence
causing damages to property."
[39]

There is need, therefore, to rectify the designation of the offense without
disturbing the imposed penalty for the guidance of bench and bar in strict
adherence to precedent.
WHEREFORE, the Court GRANTS the petition and SETS ASIDE the
amended decision and resolution of the Court of Appeals in CA-G. R. CR No.
14448, promulgated on January 6, 1997, and the joint decision of the
Regional Trial Court, Isabela, Branch 19, Cauayan, in Criminal Case No. Br.
19-311 and Civil Case No. Br. 19-424, dated June 6, 1992.
IN LIEU THEREOF, the Court renders judgment as follows:
(1) In Criminal Case No. Br. 19-311, the Court declares the accused Romeo
Dunca y de Tumol guilty beyond reasonable doubt of reckless imprudence
resulting in homicide and damage to property, defined and penalized under
Article 365, paragraph 2 of the Revised Penal Code, with violation of the
automobile law (R. A. No. 4136, as amended), and sentences him to suffer
two (2) indeterminate penalties of four (4) months and one (1) day of arresto
mayor, as minimum, to three (3) years, six (6) months and twenty (20) days
of prision correccional, as maximum,
[40]
without indemnity, and to pay the costs,
and
(2) In Civil Case No. Br. 19-424, the Court orders the case re-opened to
determine the liability of the defendant Rafael Reyes Trucking Corporation to
plaintiffs and that of plaintiffs on defendants counterclaim.
No costs in this instance.