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

FGU INSURANCE CORPORATION, petitioner, vs., COURT OF APPEALS, FILCAR TRANSPORT, INC., and FORTUNE INSURANCE CORPORATION,respondents.

D E C I S I O NBELLOSILLO, J.:

For damages suffered by a third party, may an action based on quasi-delict prosper against a rent-a-car company and, consequently, its insurer for fault or negligence of the car lessee in driving the rented vehicle?

This was a two-car collision at dawn. At around 3 o'clock of 21 April 1987, two (2) vehicles, both Mitsubishi Colt Lancers, cruising northward along Epifanio de los Santos Avenue, Mandaluyong City, figured in a traffic accident. The car bearing Plate No. PDG 435 owned by Lydia F. Soriano was being driven at the outer lane of the highway by Benjamin Jacildone, while the other car, with Plate No. PCT 792, owned by respondent FILCAR Transport, Inc. (FILCAR), and driven by Peter Dahl-Jensen as lessee, was at the center lane, left of the other vehicle. Upon approaching the corner of Pioneer Street, the car owned by FILCAR swerved to the right hitting the left side of the car of Soriano. At that time Dahl-Jensen, a Danish tourist, did not possess a Philippine driver's license.[1]

As a consequence, petitioner FGU Insurance Corporation, in view of its insurance contract with Soriano, paid the latter P25,382.20. By way of subrogation,[2] it sued Dahl-Jensen and respondent FILCAR as well as respondent Fortune Insurance Corporation (FORTUNE) as insurer of FILCAR for quasi-delict before the Regional Trial Court of Makati City.

Unfortunately, summons was not served on Dahl-Jensen since he was no longer staying at his given address; in fact, upon motion of petitioner, he was dropped from the complaint.

On 30 July 1991 the trial court dismissed the case for failure of petitioner to substantiate its claim of subrogation.[3]

On 31 January 1995 respondent Court of Appeals affirmed the ruling of the trial court although based on another ground, i.e., only the fault or negligence of Dahl-Jensen was sufficientlyproved but not that of respondent FILCAR.[4] In other words, petitioner failed to establish its cause of action for sum of money based on quasi-delict.

In this appeal, petitioner insists that respondents are liable on the strength of the ruling in MYC-Agro-Industrial Corporation v. Vda. de Caldo[5] that the registered owner of a vehicle is liable for damages suffered by third persons although the vehicle is leased to another.

We find no reversible error committed by respondent court in upholding the dismissal of petitioner's complaint. The pertinent provision is Art. 2176 of the Civil Code which states:"Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict x x x x"

To sustain a claim based thereon, the following requisites must concur: (a) damage suffered by the plaintiff; (b) fault or negligence of the defendant; and, (c) connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff.[6]

We agree with respondent court that petitioner failed to prove the existence of the second requisite, i.e., fault or negligence of defendant FILCAR, because only the fault or negligence of Dahl-Jensen was sufficiently established, not that of FILCAR. It should be noted that the damage caused on the vehicle of Soriano was brought about by the circumstance that Dahl-Jensen swerved to the right while the vehicle that he was driving was at the center lane. It is plain that the negligence was solely attributable to Dahl-Jensen thus making the damage suffered by the other vehicle his personal liability. Respondent FILCAR did not have any participation therein.

Article 2180 of the same Code which deals also with quasi-delict provides:The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company.Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company.

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions.Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in whichcase what is provided in article 2176 shall be applicable.Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody.The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.

The liability imposed by Art. 2180 arises by virtue of a presumption juris tantum of negligence on the part of the persons made responsible thereunder, derived from their failure toexercise due care and vigilance over the acts of subordinates to prevent them from causing damage. [7] Yet, as correctly observed by respondent court, Art. 2180 is hardly applicable because none of the circumstances mentioned therein obtains in the case under consideration. Respondent FILCAR being engaged in a rent-a-car business was only the owner of the car leased to Dahl-Jensen. As such, there was no vinculum juris between them as employer and employee. Respondent FILCAR cannot in any way be responsible for the negligent act of Dahl-Jensen, the former not being an employer of the latter.

We now correlate par. 5 of Art. 2180 with Art. 2184 of the same Code which provides: "In motor vehicle mishap, the owner is solidarily liable with his driver, if the former, who was in the vehicle, could have by the use of due diligence, prevented the misfortune x x x x If the owner was not in the motor vehicle, the provisions of article 2180 are applicable." Obviously, this provision of Art. 2184 is neither applicable because of the absence of master-driver relationship between respondent FILCAR and Dahl-Jensen. Clearly, petitioner has no cause of action against respondent FILCAR on the basis of quasi-delict; logically, its claim against respondent FORTUNE can neither prosper.

Petitioner's insistence on MYC-Agro-Industrial Corporation is rooted in a misapprehension of our ruling therein. In that case, the negligent and reckless operation of the truck owned by petitioner corporation caused injuries to several persons and damage to property. Intending to exculpate itself from liability, the corporation raised the defense that at the time of the collisionit had no more control over the vehicle as it was leased to another; and, that the driver was not its employee but of the lessee. The trial court was not persuaded as it found that the true nature of the alleged lease contract was nothing more than a disguise effected by the corporation to relieve itself of the burdens and responsibilities of an employer. We upheld this finding and affirmed the declaration of joint and several liability of the corporation with its driver.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 31 January 1995 sustaining the dismissal of petitioner's complaint by the trial court is AFFIRMED. Costs against petitioner.

SO ORDERED.Davide, Jr.,(Chairman), Vitug, Panganiban and Quisumbing, JJ., concur.

THIRD DIVISION[G.R. No. 122445. November 18, 1997]

DR. NINEVETCH CRUZ, petitioner, vs. COURT OF APPEALS and LYDIA UMALI, respondents.D E C I S I O N

FRANCISCO, J.:"Doctors are protected by a special law. They are not guarantors of care. They do not even warrant a good result. They are not insurers against mishap or unusual consequences. Furthermore they are not liable for honest mistake of judgment"[1]

The present case against petitioner is in the nature of a medical malpractice suit, which in simplest term is the type of claim which a victim has available to him or her to redress a wrong committed by a medical professional which has cause bodily harm.[2] In this jurisdiction, however, such claims are most often brought as a civil action for damages under Article 2176 of the Civil Code,[3] and in some instances, as a criminal case under Article 365 of the Revised Penal Code[4] with which the civil action for damages is impliedly instituted. It is via the latter type of action that the heirs of the deceased sought redress for the petitioner's alleged imprudence and negligence in treating the deceased thereby causing her death. The petitioner and one Dr. Lina Ercillo who was the attending anaesthesiologist during the operation of the deceased were charged with "reckless imprudence and negligence resulting to (sic) homicide" in an information which reads:"That on or about March 23, 1991, in the City of San Pablo, Republic of the Philippines and within the jurisdiction of this Honorable Court, the accused abovenamed, being then the attending anaesthesiologist and surgeon, respectively, did then and there, in a negligence (sic), careless, imprudent, and incompetent manner, and failing to supply or store sufficient provisions and facilities necessary to meet any and all exigencies apt to arise before, during and/or after a surgical operation causing by such negligence, carelessness, imprudence, and incompetence, and causing by such failure, including the lack of preparation and foresight needed to avert a tragedy, the untimely death of said Lydia Umali on the day following said surgical operation."[5]

Trial ensued after both the petitioner and Dr. Lina Ercillo pleaded not guilty to the above-mentioned charge. On March 4, 1994, the Municipal Trial Court in Cities (MTCC) of San Pablo City rendered a decision, the dispositive portion of which is hereunder quoted as follows:"WHEREFORE, the court finds the accused Dr. Lina Ercillo not guilty of the offense charged for insufficiency of evidence while her co-accused Dra. Ninevetch Cruz is hereby held responsible for the death of Lydia Umali on March 24, 1991, and therefore guilty under Art. 365 of the Revised Penal Code, and she is hereby sentenced to suffer the penalty of 2 months and 1 day imprisonment of arresto mayor with costs."[6]

The petitioner appealed her conviction to the Regional Trial Court (RTC) which affirmed in toto the decision of the MTCC[7] prompting the petitioner to file a petition for review with the Court of Appeals but to no avail. Hence this petition for review on certiorari assailing the decision promulgated by the Court of Appeals on October 24, 1995 affirming petitioner's conviction with modification that she is further directed to pay the heirs of Lydia Umali P50,000.00 as indemnity for her death.[8]

In substance, the petition brought before this Court raises the issue of whether or not petitioner's conviction of the crime of reckless imprudence resulting in homicide, arising from an alleged medical malpractice, is supported by the evidence on record.

First the antecedent facts.On March 22, 1991, prosecution witness, Rowena Umali De Ocampo, accompanied her mother

to the Perpetual Help Clinic and General Hospital situated in Balagtas Street, San Pablo City, Laguna. They arrived at the said hospital at around 4:30 in the afternoon of the same day.[9] Prior to March 22, 1991, Lydia was examined by the petitioner who found a "myoma" [10] in her uterus, and scheduled her for a hysterectomy operation on March 23, 1991. [11] Rowena and her mother slept in the clinic on the evening of March 22, 1991 as the latter was to be operated on the next day at 1:00 o'clock in the afternoon.[12] According to Rowena, she noticed that the clinic was untidy and the window and the floor were very dusty prompting her to ask the attendant for a rag to wipe the window and the floor with.[13] Because of the untidy state of the clinic, Rowena tried to persuade her mother not to proceed with the operation.[14] The following day, before her mother was wheeled into the operating room, Rowena asked the petitioner if the operation could be postponed. The petitioner called Lydia into her office and the two had a conversation. Lydia then informed Rowena that the petitioner told her that she must be operated on as scheduled.[15]

Rowena and her other relatives, namely her husband, her sister and two aunts waited outside the operating room while Lydia underwent operation. While they were waiting, Dr. Ercillo went out of the operating room and instructed them to buy tagamet ampules which Rowena's sister immediately bought. About one hour had passed when Dr. Ercillo came out again this time to ask them to buy blood for Lydia. They bought type "A" blood from the St. Gerald Blood Bank and the same was brought by the attendant into the operating room. After the lapse of a few hours, the petitioner informed them that the operation was finished. The operating staff then went inside the petitioner's clinic to take their snacks. Some thirty minutes after, Lydia was brought out of the operating room in a stretcher and the petitioner asked Rowena and the other relatives to buy additional blood for Lydia. Unfortunately, they were not able to comply with petitioner's order as there was no more type "A" blood available in the blood bank. Thereafter, a person arrived to donate blood which was later transfused to Lydia. Rowena then noticed her mother, who was attached to an oxygen tank, gasping for breath. Apparently the oxygen supply had run out and Rowena's husband together with the driver of the accused had to go to the San Pablo District Hospital to get oxygen. Lydia was given the fresh supply of oxygen as soon as it arrived. [16] But at around 10:00 o'clock P.M. she went into shock and her blood pressure dropped to 60/50. Lydia's unstable condition necessitated her transfer to the San Pablo District Hospital so she could be connected to a respirator and further examined.[17] The transfer to the San Pablo City District Hospital was without the prior consent of Rowena nor of the other relatives present who found out about the intended transfer only when an ambulance arrived to take Lydia to the San Pablo District Hospital. Rowena and her other relatives then boarded a tricycle and followed the ambulance.[18]

Upon Lydia's arrival at the San Pablo District Hospital, she was wheeled into the operating room and the petitioner and Dr. Ercillo re-operated on her because there was blood oozing from the abdominal incision.[19] The attending physicians summoned Dr. Bartolome Angeles, head of the Obstetrics and Gynecology Department of the San Pablo District Hospital. However, when Dr. Angeles arrived, Lydia was already in shock and possibly dead as her blood pressure was already 0/0. Dr. Angeles then informed petitioner and Dr. Ercillo that there was nothing he could do to help save the patient.[20] While petitioner was closing the abdominal wall, the patient died.[21] Thus, on March 24, 1991, at 3:00 o'clock in the morning, Lydia Umali was pronounced dead. Her death certificate states "shock" as the immediate cause of death and "Disseminated Intravascular Coagulation (DIC)" as the antecedent cause.[22]

In convicting the petitioner, the MTCC found the following circumstances as sufficient basis to conclude that she was indeed negligent in the performance of the operation:"x x x, the clinic was untidy, there was lack of provision like blood and oxygen to prepare for any contingency that might happen during the operation. The manner and the fact that the patient was brought to the San Pablo District Hospital for reoperation indicates that there was something wrong in the manner in which Dra. Cruz conducted the operation. There was no showing that before the operation, accused Dr. Cruz had conducted a cardio pulmonary clearance or any typing of the blood of the patient. It was (sic) said in medical parlance that the "abdomen of the person is a temple of surprises" because you do not know the whole thing the moment it was open (sic) and surgeon must be prepared for any eventuality thereof. The patient (sic) chart which is a public document was not presented because it is only there that we could determine the condition of the patient before the surgery. The court also noticed in Exh. "F-1" that the sister of the deceased wished to postpone the operation but the patient was prevailed upon by Dra. Cruz to proceed with the surgery. The court finds that Lydia Umali died because of the negligence and carelessness of the surgeon Dra. Ninevetch Cruz because of loss of blood during the operation of the deceased for evident unpreparedness and for lack of skill, the reason why the patient was brought for operation at the San Pablo City District Hospital. As such, the surgeon should answer for such negligence. With respect to Dra. Lina Ercillo, the anaesthesiologist, there is no evidence to indicate that she should be held jointly liable with Dra. Cruz who actually did the operation." [23]

The RTC reiterated the abovementioned findings of the MTCC and upheld the latter's declaration of "incompetency, negligence and lack of foresight and skill of appellant (herein petitioner) in handling the subject patient before and after the operation." [24] And likewise affirming the petitioner's conviction, the Court of Appeals echoed similar observations, thus:"x x x. While we may grant that the untidiness and filthiness of the clinic may not by itself indicate negligence, it nevertheless shows the absence of due care and supervision over her subordinate employees. Did this unsanitary condition permeate the operating room? Were the surgical instruments properly sterilized?

Could the conditions in the OR have contributed to the infection of the patient? Only the petitioner could answer these, but she opted not to testify. This could only give rise to the presumption that she has nothing good to testify on her defense. Anyway, the alleged "unverified statement of the prosecution witness" remains unchallenged and unrebutted.Likewise undisputed is the prosecution's version indicating the following facts: that the accused asked the patient's relatives to buy Tagamet capsules while the operation was already in progress; that after an hour, they were also asked to buy type "A" blood for the patient; that after the surgery, they were again asked to procure more type "A" blood, but such was not anymore available from the source; that the oxygen given to the patient was empty; and that the son-in-law of the patient, together with a driver of the petitioner, had to rush to the San Pablo City District Hospital to get the much-needed oxygen. All these conclusively show that the petitioner had not prepared for any unforeseen circumstances before going into the first surgery, which was not emergency in nature, but was elective or pre-scheduled; she had no ready antibiotics, no prepared blood, properly typed and cross-matched, and no sufficient oxygen supply.Moreover, there are a lot of questions that keep nagging Us. Was the patient given any cardio-pulmonary clearance, or at least a clearance by an internist, which are standard requirements before a patient is subjected to surgery. Did the petitioner determine as part of the pre-operative evaluation, the bleeding parameters of the patient, such as bleeding time and clotting time? There is no showing that these were done. The petitioner just appears to have been in a hurry to perform the operation, even as the family wanted the postponement to April 6, 1991. Obviously, she did not prepare the patient; neither did she get the family's consent to the operation. Moreover, she did not prepare a medical chart with instructions for the patient's care. If she did all these, proof thereof should have been offered. But there is none. Indeed, these are overwhelming evidence of recklessness and imprudence."[25]

This court, however, holds differently and finds the foregoing circumstances insufficient to sustain a judgment of conviction against the petitioner for the crime of reckless imprudence resulting in homicide. The elements of reckless imprudence are: (1) that the offender does or fails to do an act; (2) that the doing or the failure to do that act is voluntary; (3) that it be without malice; (4) that material damage results from the reckless imprudence; and (5) that there is inexcusable lack of precaution on the part of the offender, taking into consideration his employment or occupation, degree of intelligence, physical condition, and other circumstances regarding persons, time and place.

Whether or not a physician has committed an "inexcusable lack of precaution" in the treatment of his patient is to be determined according to the standard of care observed by other members of the profession in good standing under similar circumstances bearing in mind the advanced state of the profession at the time of treatment or the present state of medical science.[26] In the recent case of Leonila Garcia-Rueda v. Wilfred L. Pacasio, et. al.,[27] this Court stated that in accepting a case, a doctor in effect represents that, having the needed training and skill possessed by physicians and surgeons practicing in the same field, he will employ such training, care and skill in the treatment of his patients. He therefore has a duty to use at least the same level of care that any other reasonably competent doctor would use to treat a condition under the same circumstances. It is in this aspect of medical malpractice that expert testimony is essential to establish not only the standard of care of the profession but also that the physician's conduct in the treatment and care falls below such standard.[28] Further, inasmuch as the causes of the injuries involved in malpractice actions are determinable only in the light of scientific knowledge, it has been recognized that expert testimony is usually necessary to support the conclusion as to causation.[29]

Immediately apparent from a review of the records of this case is the absence of any expert testimony on the matter of the standard of care employed by other physicians of good standing in the conduct of similar operations. The prosecution's expert witnesses in the persons of Dr. Floresto Arizala and Dr. Nieto Salvador, Jr. of the National Bureau of Investigation (NBI) only testified as to the possible cause of death but did not venture to illuminate the court on the matter of the standard of care that petitioner should have exercised.

All three courts below bewail the inadequacy of the facilities of the clinic and its untidiness; the lack of provisions such as blood, oxygen, and certain medicines; the failure to subject the patient to a cardio-pulmonary test prior to the operation; the omission of any form of blood typing before transfusion; and even the subsequent transfer of Lydia to the San Pablo Hospital and the reoperation performed on her by the petitioner. But while it may be true that the circumstances

pointed out by the courts below seemed beyond cavil to constitute reckless imprudence on the part of the surgeon, this conclusion is still best arrived at not through the educated surmises nor conjectures of laymen, including judges, but by the unquestionable knowledge of expert witnesses. For whether a physician or surgeon has exercised the requisite degree of skill and care in the treatment of his patient is, in the generality of cases, a matter of expert opinion. [30] The deference of courts to the expert opinion of qualified physicians stems from its realization that the latter possess unusual technical skills which laymen in most instances are incapable of intelligently evaluating.[31] Expert testimony should have been offered to prove that the circumstances cited by the courts below are constitutive of conduct falling below the standard of care employed by other physicians in good standing when performing the same operation. It must be remembered that when the qualifications of a physician are admitted, as in the instant case, there is an inevitable presumption that in proper cases he takes the necessary precaution and employs the best of his knowledge and skill in attending to his clients, unless the contrary is sufficiently established. [32] This presumption is rebuttable by expert opinion which is so sadly lacking in the case at bench.

Even granting arguendo that the inadequacy of the facilities and untidiness of the clinic; the lack of provisions; the failure to conduct pre-operation tests on the patient; and the subsequent transfer of Lydia to the San Pablo Hospital and the reoperation performed on her by the petitioner do indicate, even without expert testimony, that petitioner was recklessly imprudent in the exercise of her duties as a surgeon, no cogent proof exists that any of these circumstances caused petitioner's death. Thus, the absence of the fourth element of reckless imprudence: that the injury to the person or property was a consequence of the reckless imprudence.

In litigations involving medical negligence, the plaintiff has the burden of establishing appellant's negligence and for a reasonable conclusion of negligence, there must be proof of breach of duty on the part of the surgeon as well as a casual connection of such breach and the resulting death of his patient. [33]  In Chan Lugay v. St Luke's Hospital, Inc.,[34] where the attending physician was absolved of liability for the death of the complainant's wife and newborn baby, this court held that:"In order that there may be a recovery for an injury, however, it must be shown that the 'injury for which recovery is sought must be the legitimate consequence of the wrong done; the connection between the negligence and the injury must be a direct and natural sequence of events, unbroken by intervening efficient causes.' In other words, the negligence must be the proximate cause of the injury. For, 'negligence, no matter in what it consists, cannot create a right of action unless it is the proximate cause of the injury complained of.' And 'the proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.'''[35] (Underscoring supplied.)

Dr. Arizala who conducted an autopsy on the body of the deceased summarized his findings as follows:

"Atty. Cachero:Q. You mentioned about your Autopsy Report which has been marked as Exh. "A-1-b".

There appears here a signature above the typewritten name Floresto Arizala, Jr., whose signature is that?

A. That is my signature, sir.Q. Do you affirm the truth of all the contents of Exh. "A-1-b"?A. Only as to the autopsy report no. 91-09, the time and place and everything after the post

mortem findings, sir.Q. You mentioned on your "Post Mortem Findings" about surgical incision, 14:0 cm.,

infraumbilical area, anterior abdominal area, midline, will you please explain that in your own language?

A. There was incision wound (sic) the area just below the navel, sir.Q. And the last paragraph of the postmortem findings which I read: Uterus, pear-shaped

and pale measuring 7.5 x 5.5 x 5.0 cm, with some surface nodulation of the fundic area posteriorly. Cut-section shows diffusely pale myometrium with areas of streak induration. The ovaries and adnexal structures are missing with the raw surfaces patched with clotted blood. Surgical sutures were noted on the operative site.

Intestines and mesenteries are pale with blood clots noted between the mesentric folds.

Hemoperitonium: 300 s.s.,right paracolic gutter,50 c.c., left paracolic gutter200 c.c., mesentric area,100 c.c., right pelvic gutterstomach empty.Other visceral organs, pale.',

will you please explain that on (sic) your own language or in ordinaryA. There was a uterus which was not attached to the adnexal structures namely ovaries

which were not present and also sign of previous surgical operation and there were (sic) clotted blood, sir.

Q. How about the ovaries and adnexal structures?A. They are missing, sir.Q. You mean to say there are no ovaries?A. During that time there are no ovaries, sir.Q. And there were likewise sign of surgical sutures?A. Yes, sir.Q. How about the intestines and mesenteries are place (sic) with blood clots noted

between the mesenteric folds, will you please explain on (sic) this?A. In the peritoneal cavity, they are mostly perritonial blood.Q. And what could have caused this blood?A. Well, ordinarily blood is found inside the blood vessel. Blood were (sic) outside as a

result of the injuries which destroyed the integrity of the vessel allowing blood to sip (sic) out, sir.

Q. By the nature of the postmortem findings indicated in Exh. A-1-B, can you tell the court the cause of death?

A. Yes, sir. The cause of death is: Gross findings are compatible with hemorrhagic shock.Q. Can you tell the us what could have caused this hemorrhagic shock?A. Well hemorrhagic shock is the result of blood loss.Q. What could have the effect of that loss of blood?A.   Unattended hemorrhage, sir. [36]  (Underscoring supplied.)The foregoing was corroborated by Dr. Nieto Salvador:"Q. And were you able to determine the cause of death by virtue of the examination of the

specimen submitted by Dr. Arizala?A. Without knowledge of the autopsy findings it would be difficult for me to determine the

cause of death, sir.Q. Have you examined the post mortem of Dr. Arizala?A. Yes, sir, and by virtue of the autopsy report in connection with your pathology report.Q. What could have caused the death of the victim?A. This pathologic examination are (sic) compatible with the person who died, sir.Q. Will you explain to us the meaning of hemorrhagic compatible?A. It means that a person died of blood loss. Meaning a person died of non-replacement of

blood and so the victim before she died there was shock of diminish of blood of the circulation. She died most probably before the actual complete blood loss, sir.

Court: Is it possible doctor that the loss of the blood was due on (sic) operation?A. Based on my pathology findings, sir.Q. What could have caused this loss of blood?A. Many, sir. A patient who have undergone surgery. Another may be a blood vessel may

be cut while on operation and this cause (sic) bleeding, or may be set in the course of the operation, or may be (sic) he died after the operation. Of course there are other cause (sic).

Atty. Cachero:Q. Especially so doctor when there was no blood replacement?A. Yes, sir." [37]  (Underscoring supplied.)

The testimonies of both doctors establish hemorrhage or hemorrhagic shock as the cause of death. However, as likewise testified to by the expert witnesses in open court, hemorrhage or hemorrhagic shock during surgery may be caused by several different factors. Thus, Dr. Salvador's elaboration on the matter:

"Atty. Pascual:Q. Doctor, among the causes of hemorrhage that you mentioned you said that it could be

at the moment of operation when one losses (sic) control of the presence, is that correct? During the operation there is lost (sic) of control of the cut vessel?

A. Yes, sir.Q. Or there is a failure to ligate a vessel of considerable size?A. Yes, sir.Q. Or even if the vessel were ligated the knot may have slipped later on?A. Yes, sir.Q. And you also mentioned that it may be possible also to some clotting defect, is

that   correct? A. May be (sic)."[38] (Underscoring supplied).

Defense witness, Dr. Bu C. Castro also gave the following expert opinion:"Q. Doctor even a patient after an operations (sic) would suffer hemorrage what would be

the possible causes of such hemorrage (sic)?A. Among those would be what we call Intravascular Coagulation and this is the reason for

the bleeding, sir, which cannot be prevented by anyone, it will happen to anyone, anytime and to any persons (sic), sir.

COURT:What do you think of the cause of the bleeding, the cutting or the operations done in the

body?A. Not related to this one, the bleeding here is not related to any cutting or operation that I

(sic) have done.Q. Aside from the DIC what could another causes (sic) that could be the cause for the

hemorrhage or bleeding in a patient by an operations (sic)?A. In general sir, if there was an operations (sic) and it is possible that the ligature in the

suture was (sic) become (sic) loose, it is (sic) becomes loose if proven.x x x x x x x x x

Q. If the person who performed an autopsy does not find any untight (sic) clot (sic) blood vessel or any suture that become (sic) loose the cause of the bleeding could not be attributed to the fault of the subject?

A. Definitely, sir."[39] (Underscoring supplied.)According to both doctors, the possible causes of hemorrhage during an operation are: (1) the

failure of the surgeon to tie or suture a cut blood vessel; (2) allowing a cut blood vessel to get out of control; (3) the subsequent loosening of the tie or suture applied to a cut blood vessel; and (4) and a clotting defect known as DIC. It is significant to state at this juncture that the autopsy conducted by Dr. Arizala on the body of Lydia did not reveal any untied or unsutured cut blood vessel nor was there any indication that the tie or suture of a cut blood vessel had become loose thereby causing the hemorrhage.[40] Hence the following pertinent portion of Dr. Arizala's testimony:

"Q: Doctor, in examining these structures did you know whether these were sutured ligature or plain ligature

A: Ligature, sir.Q: We will explain that later on. Did you recall if the cut structures were tied by first suturing

it and then tying a knot or the tie was merely placed around the cut structure and tied?A: I cannot recall, sir.Q: As a matter of fact, you cannot recall because you did not even bothered (sic) to

examine, is that correct?A: Well, I bothered enough to know that they were sutured, sir.Q: So, therefore, Doctor, you would not know whether any of the cut structures were not

sutured or tied neither were you able to determine whether any loose suture was found in the peritoneal cavity?

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

On the other hand, the findings of all three doctors do not preclude the probability that DIC caused the hemorrhage and consequently, Lydia's death. DIC which is a clotting defect creates a serious bleeding tendency and when massive DIC occurs as a complication of surgery leaving raw surface, major hemorrhage occurs.[42] And as testified to by defense witness, Dr. Bu C. Castro, hemorrhage due to DIC "cannot be prevented, it will happen to anyone, anytime." [43] He testified further:

"Q. Now, under the circumstance one of the possibility as you mentioned in (sic) DIC?A. Yes, sir.Q. And you mentioned that it cannot be prevented?A. Yes, sir.Q. Can you even predict if it really happen (sic)?A. Possible, sir.Q. Are there any specific findings of autopsy that will tell you whether this patient suffered

among such things as DIC?A. Well, I did reserve because of the condition of the patient.Q. Now, Doctor you said that you went through the record of the deceased Lydia Umali

looking for the chart, the operated (sic) records, the post mortem findings on the histophanic (sic) examination based on your examination of record, doctor, can you more or less says (sic) what part are (sic) concerned could have been the caused (sic) of death of this Lydia Umali?

A. As far as the medical record is concern (sic) the caused (sic) of death is dessimulated (sic) Intra Vascular Coagulation or the DIC which resulted to hemorrhage or bleedings, sir.

Q. Doctor based on your findings then there is knowing (sic) the doctor would say whether the doctor her (sic) has been (sic) fault?

ATTY. MALVEDA:We will moved (sic) to strike out the (sic) based on finding they just read the chart as well

as the other record.ATTY. PASCUAL:Precisely based on this examination.ATTY. MALVEDA:Not finding, there was no finding made.COURT:He is only reading the record.ATTY. PASCUAL:Yes, sir.A.   No, sir, there is no fault on the part of the surgeon, sir ." [44]

This court has no recourse but to rely on the expert testimonies rendered by both prosecution and defense witnesses that substantiate rather than contradict petitioner's allegation that the cause of Lydia's death was DIC which, as attested to by an expert witness, cannot be attributed to the petitioner's fault or negligence. The probability that Lydia's death was caused by DIC was unrebutted during trial and has engendered in the mind of this Court a reasonable doubt as to the petitioner's guilt. Thus, her acquittal of the crime of reckless imprudence resulting in homicide. While we condole with the family of Lydia Umali, our hands are bound by the dictates of justice and fair dealing which hold inviolable the right of an accused to be presumed innocent until proven guilty beyond reasonable doubt. Nevertheless, this Court finds the petitioner civilly liable for the death of Lydia Umali, for while a conviction of a crime requires proof beyond reasonable doubt, only a preponderance of evidence is required to establish civil liability.[45]

The petitioner is a doctor in whose hands a patient puts his life and limb. For insufficiency of evidence this Court was not able to render a sentence of conviction but it is not blind to the reckless and imprudent manner in which the petitioner carried out her duties. A precious life has been lost and the circumstances leading thereto exacerbated the grief of those left behind. The heirs of the deceased continue to feel the loss of their mother up to the present time [46] and this Court is aware that no amount of compassion and commiseration nor words of bereavement can suffice to assuage

the sorrow felt for the loss of a loved one. Certainly, the award of moral and exemplary damages in favor of the heirs of Lydia Umali are proper in the instant case.

WHEREFORE, premises considered, petitioner DR. NINEVETCH CRUZ is hereby ACQUITTED of the crime of reckless imprudence resulting in homicide but is ordered to pay the heirs of the deceased Lydia Umali the amount of FIFTY THOUSAND PESOS (P50,000.00) as civil liability, ONE HUNDRED THOUSAND PESOS (P100,000.00) as moral damages, and FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages.

Let the copy of this decision be furnished to the Professional Regulation Commission (PRC) for appropriate action.

SO ORDERED.Romero, Melo, and Panganiban, JJ., concur.Narvasa, C.J., (Chairman), on leave.

Republic of the PhilippinesSupreme Court

Manila

  

FIRST DIVISION  SPOUSES ERLINDA BATAL AND FRANK BATAL,

G.R. No. 164601

Petitioners ,  Present:

   - versus  - PANGANIBAN, C.J. ,

(Chairperson)  YNARES-SANTIAGO,  AUSTRIA-MARTINEZ, SPOUSES LUZ SAN PEDRO AND KENICHIRO TOMINAGA,

CALLEJO, SR. andCHICO-NAZARIO, JJ .

Respondents .     Promulgated:

 September 27, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x  

D E C I S I O N  AUSTRIA-MARTINEZ, J .:

 Before the Court is a Petition for Review on  Certiorari  under Rule 45 of the

Rules of Court questioning the Decision [ 1 ]  dated September 29, 2003 promulgated by the Court of Appeals (CA) in CA-G.R. CV No. 71758, which affirmed the Decision dated May 31, 2004 of the Regional Trial Court, Branch 7, Malolos, Bulacan (RTC); and the CA Resolution [ 2 ]  dated July 19, 2004.

 This case originated from an action for damages filed with the RTC by

Spouses Luz San Pedro and Kenichiro Tominaga (respondents) against Spouses Erlinda Batal and Frank Batal (peti tioners) for failure to exercise due care and diligence by the latter in the preparation of a survey which formed the basis for the construction of a perimeter fence that was later discovered to have encroached on a right of way.

 The facts of the case, as found by the RTC and summarized by the CA, are as

follows: 

The spouses Luz San Pedro (Luz) and Kenichiro Tominaga (Kenichiro) are the owners of a parcel of land, on which their house was erected, described asLot  1509-C-3 with an area of 700 square meters si tuated in Barangay Malis, Guiguinto,  Bulacan.  Said property

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

  On May 31, 2001, the RTC rendered i ts Decision, the disposit ive portion of which reads: 

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendants, as follows:

 1. Ordering the defendants [petit ioners] to pay to plaintiffs [respondents] the sum of  P 6,500.00 as refund for their professional fees

by reason of the erroneous relocation survey of the property in question;

 2. Ordering the defendants to pay to plaintiffs the sum of Three Hundred Thousand Pesos (P 300,000.00) as actual damages;

 3. Ordering the defendants to pay to plaintiffs the sum of  P 50,000.00 as attorneys fees; and

 4. Ordering the defendants to pay to plaintiffs the costs of this suit .

 SO ORDERED. [ 4 ]

  Regarding the issue whether the petitioners failed to exercise due care and

diligence in the conduct of the resurvey which eventually caused damage to the respondents, the RTC held:

 As against the bare and self-serving denials of the [peti tioners],

the testimony of [respondent] Luz San Pedro that she constructed the encroaching perimeter fence in question using as guide the cyclone concrete monuments marked P.S. that were installed by [petitioner] Frank Batal and his survey team, is more credible.  As testified to by [respondent] Luz San Pedro, she proceeded with the construction of the perimeter fence in question upon assurance given by [petitioner] Frank Batal that she could already do so as there were already concrete monuments placed on the boundaries of her property x  x x.

 x x x x It does not matter that the location plan dated May 3, 1992

(Exhibit B) was later approved by the DENR, as it is quite apparent that the mistake committed by [peti tioner] Frank  Batal pertains to the wrong locations of the concrete monuments that he placed on the subject property and which were used or relied upon by the [respondents] in putting up the fence in question.  Such mistake or negligence happened because quite obviously the installation of said concrete monuments was without the needed supervision of [respondent]  Erlinda Batal, the one truly qualified to supervise the same. x x x x

 x x x x [ 5 ]

 The RTC found that indeed the perimeter fence constructed by the

respondents encroached on the right-of-way in question; that the preponderance of evidence supports the finding that the encroachment was caused by the negligence of the petit ioners; that, in particular, respondents constructed the fence based on the concrete cyclone monuments that were installed by petitioner Frank Batal and after he gave his assurance that they can proceed accordingly; that the negligence in the installation of the monuments was due to the fact that petitioner Erlinda Batal, the

one truly qualified, did not provide the needed supervision over the work; and, lastly, that the testimonies of the petit ioners on the whole were not credible. 

The petitioners appealed to the CA.  On September 29, 2003, the CA rendered its Decision affirming the RTC decision in its entirety. [ 6 ]

In concurring with the findings of the RTC, the CA in addition held that the peti tioners cannot claim that the error of the construction of the fence was due to the unilateral act of respondents in building the same without their consent, since the former gave their word that the arrangement of the monuments of tit le accurately reflected the boundaries of the lot; and that, as a result, the northern portion of the fence had to be demolished and rebuilt in order to correct the error.

 Hence, the instant Petit ion assigning the following errors:

 I.

 The Court of Appeals erred in ruling for the Respondents and basing its decision [o]n the following jurisprudence:

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

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

 (b)      Findings of fact made by the trial court [are] entit led to great

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

II. 

The Court of Appeals erred in ruling in favor of Respondents by premising i ts Decision on [a] misapprehension of facts amounting to grave abuse of discretion . . . which is also a ground for a Petit ion for Review. [ 7 ]

  The petit ion must fail. The petit ioners insist that there had been no error in their resurvey, but rather, the error occurred in respondents fencing; that the proximate cause of the damage had been respondents own negligence such that the fencing was done unilaterally and solely by them without the prior approval and supervision of the petit ioners.  And to justify their case, the petit ioners argue that the courts  a quo  misapprehended the facts.  Accordingly, they ask this Court to review findings of fact. 

A review of the factual findings of the CA and the RTC are matters not ordinarily reviewable in a petition for review on  certiorari . [ 8 ]  Well-established is the rule that factual findings of the trial court and the CA are entit led to great weight and respect [ 9 ]  and will not be disturbed on appeal save in exceptional circumstances, [ 1 0 ]  none of which obtains in the present case.  This Court must stress that the findings of fact of the CA are conclusive on the parties and carry even more

weight when these coincide with the factual findings of the trial court , [ 1 1 ]  as in this case.

 The Court will not weigh the evidence all over again unless there is a

showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion. [ 1 2 ]  The petit ioners failed to demonstrate this point.  On the contrary, the finding of the courts  a quo   that the damage caused to the respondents was due to petitioners negligence is sufficiently supported by the evidence on record.  For these reasons, the petit ioner's contentions bear no import. Culpa , or negligence, may be understood in two different senses: either as culpa aquiliana,  which is the wrongful or negligent act or omission which creates a  vinculum juris  and gives  rise to an obligation between two persons not formally bound by any other obligation, or as  culpa contractual,  which is the fault or negligence incident in the performance of an obligation which already existed, and which increases the liability from such already existing obligation.[ 1 3 ]  Culpa aquiliana  is governed by Article 2176 of the Civil Code and the immediately following Articles; while  culpa contractual   is governed by Articles 1170 to 1174 of the same Code. [ 1 4 ]

 Articles 1170 and 1173 provide:

 ART. 1170. Those who in the performance of their obligations

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

 ART. 1173. The fault or negligence of the obligor consists in the

omission of that dil igence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the t ime and of the place.  When negligence shows bad faith, the provisions of articles 1171 and 2202, paragraph 2, shall apply.

 If the law or contract does not state the diligence which is to be

observed in the performance, that which is expected of a good father of a family shall be required.

 In the present case, i t is clear that the petit ioners, in carrying out their

contractual obligations, failed to exercise the requisite diligence in the placement of the markings for the concrete perimeter fence that was later constructed.  The placement of the markings had been done solely by petit ioner Frank Batal who is not a geodetic engineer.  It was later discovered that it was not he but his wife, peti tioner Erlinda Batal, who is the l icensed geodetic engineer and who is, therefore, the one qualified to do the work.  Petit ioner Frank Batals installation of the concrete cyclone monuments had been done without the adequate supervision of his wife, Erlinda.  As a result, the placement of the monuments did not accurately reflect the dimensions of the lot.  The respondents, upon assurance given by petitioner Frank Batal that they could proceed with the construction of the perimeter fence by relying on the purported accuracy of the placement of the monuments, erected their fence which turned out to encroach on an adjacent

easement.  Because of the encroachment, the respondents had to demolish and reconstruct the fence and, thus, suffered damages. 

The Court affirms and adopts the findings of the CA, to wit: Records show that the services of the [peti tioners] Frank and Erlinda were initially contracted to segregate Luz and Kenichiros property from its adjoining lots.When the [respondent] spouses Luz and Kenichiro planned to fence the segregated lot, they again commissioned [peti tioners] Frank and Erlinda to conduct a resurvey in order to determine the precise boundaries of their property upon which they will base the construction of their fence.  It was also shown that in the course of the resurvey, Frank caused the installation of monuments of tit le on the four (4) corners of Luz and Kenichiros property and that he instructed them to just follow the same in building their fence. [Petit ioners] Frank and Erlinda cannot thus validly claim that the error in the construction of the northern portion of the fence was due to the spouses Luz and Kenichiros act of building the same without their consent.  This is considering that the former led the latter to believe the purported accuracy of the resurvey and exactness of the lots boundaries based on the monuments of t itle which they installed.It has been ruled that [A] party, having performed affirmative acts upon which another person based his subsequent actions, cannot thereafter refute his acts or renege on the effects of the same, to the prejudice of the latter.  (Pureza v. Court of Appeals, 290 SCRA 110) The foregoing clearly supports the findings of the RTC that the spouses Batal committed a mistake in the conduct of their business that led to the encroachment of plaintiffs-appellees fence on the adjoining alley-lot.  As a result, the northern portion ha[d] to be torn down and rebuilt in order to correct the error in i ts original construction.  The defendants-appellants cannot be excused from the effects of their actions in the survey of plaintiffs-appellees lot . 

We therefore concur with the findings of the RTC holding defendants-appellants l iable for damages in the case at bar.  Findings of fact made by the trial court  is enti tled to great weight and respect.  (Lopez v. Court of Appeals, 322 SCRA 686) [ 1 5 ]

  

Being guilty of a breach of their contract, peti tioners are liable for damages suffered by the respondents in accordance with Articles 1170 and 2201 of the Civil Code, [ 1 6 ]  which state:

 Art. 1170.  Those who in the performance of their obligations are

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

 

Art. 2201.  In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is l iable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was consti tuted.

 In case of fraud, bad faith, malice or wanton att itude, the obligor

shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.

 Thus, the Court agrees with the CAs  affirmance of the findings of the RTC on

the matter of damages, to wit: 

Going now to the claims for damages,  Engr. Arnold Martin testified on his computation and estimate (Exhibits G and G-1) that the total cost for the demolition and reconstruction of the perimeter fence in question would be in the total amount of  P 428,163.90, and this was not at all disputed by the defendants, whose counsel waived cross-examination.  This estimate is practically double the amount of the cost of constructing said fence as testified to by plaintiff Luz San Pedro as she was told that it is much costlier to demolish and reconstruct a fence than to simply erect one because of the added expense involved in tearing i t down and hauling its debris.  On the other hand, said plaintiff stated that the iron decorative gril ls of the fence, which is re-usable, cost her  P 50,000.00, and it is only proper to deduct said amount from the total cost of reconstructing the fence in question.  At the same time, some figures in the said estimate appear to be quite excessive, such as the estimated cost for demolition which was quoted at  P 25,000.00 in addition to the amount of excavation priced at  P 30,000.00 and the cost of hauling of scrap materials at  P 10,000.00.  The court believes that the sum of P 300,000.00 for the demolition and reconstruction of the fence in question would be reasonable considering that the original cost for its construction was only about  P 200,000.00, and considering further that its iron grills are re-usable.

 The plaintiffs are likewise entitled to recover attorneys fees

considering that they were compelled by the defendants to resort to court action in order to protect their rights and interest, as defendants, particularly defendant Frank  Batal, failed and refused repeatedly to even attend the confrontation of conciliation meetings arranged between him and the plaintiffs by the  barangay  authorities concerned, and to honor his promise to help in shouldering the cost of reconstructing the fence in question.

 On the other hand, there  is no legal or factual bases  for the claim

of the plaintiffs for moral or exemplary damages as there was no showing at all that defendants acted with malice or in bad faith.

 In a long line of cases, we have consistently ruled

that in the absence of a wrongful act or omission or of

fraud or bad faith, moral damages cannot be awarded.  (R & B Surety Insurance Co. v. Intermediate Court of Appeals, 129 SCRA 736;  Guita v. Court of Appeals, 139 SCRA 576). [ 1 7 ]

 WHEREFORE, the instant petition is  DENIED  and the assailed Decision and

Resolution of the Court of Appeals are  AFFIRMED . Costs against petit ioners.SO ORDERED .

Baguio CityTHIRD DIVISION

  JOSEPH SALUDAGA, G.R. No. 179337Petitioner,Present:

Ynares-Santiago, J. (Chairperson),- versus -  Austria-Martinez,

Chico-Nazario,Nachura, andReyes, JJ.

FAR EASTERN UNIVERSITY andEDILBERTO C. DE JESUS in his Promulgated:capacity as President of FEU,Respondents. April 30, 2008 x ---------------------------------------------------------------------------------------- x 

DECISION  YNARES-SANTIAGO, J.: 

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the June 29, 2007 Decision[2] of the Court of Appeals in CA-G.R. CV No. 87050, nullifying and setting aside the November 10, 2004 Decision[3] of the Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483 and dismissing the complaint filed by petitioner; as well as its August 23, 2007 Resolution[4] denying the Motion for Reconsideration.[5]

 The antecedent facts are as follows: Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern

University (FEU) when he was shot by Alejandro Rosete (Rosete), one of the security guards on duty at the school premises on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical Foundation (FEU-NRMF) due to the wound he sustained.[6]Meanwhile, Rosete was brought to the police station where he explained that the shooting was accidental. He was eventually released considering that no formal complaint was filed against him.

 Petitioner thereafter filed a complaint for damages against respondents on the ground that

they breached their obligation to provide students with a safe and secure environment and an atmosphere conducive to learning. Respondents, in turn, filed a Third-Party Complaint[7] against Galaxy Development and Management Corporation (Galaxy), the agency contracted by respondent FEU to provide security services within its premises and Mariano D. Imperial (Imperial), Galaxys President, to indemnify them for whatever would be adjudged in favor of petitioner, if any; and to pay attorneys fees and cost of the suit. On the other hand, Galaxy and Imperial filed a Fourth-Party Complaint against AFP General Insurance.[8]

 On November 10, 2004, the trial court rendered a decision in favor of petitioner, the

dispositive portion of which reads: 

WHEREFORE, from the foregoing, judgment is hereby rendered ordering: 1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay

jointly and severally Joseph Saludaga the amount of P35,298.25 for actual damages with 12% interest per annum from the filing of the complaint until fully paid; moral damages of P300,000.00, exemplary damages of P500,000.00, attorneys fees of P100,000.00 and cost of the suit;

  

2. Galaxy Management and Development Corp. and its president, Col. Mariano Imperial to indemnify jointly and severally 3rd party plaintiffs (FEU and Edilberto de Jesus in his capacity as President of FEU) for the above-mentioned amounts;

 3. And the 4th party complaint is dismissed for lack of cause of action. No

pronouncement as to costs. 

SO ORDERED.[9]

 Respondents appealed to the Court of Appeals which rendered the assailed Decision, the

decretal portion of which provides, viz: 

WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 10, 2004 is hereby REVERSED and SET ASIDE. The complaint filed by Joseph Saludaga against appellant Far Eastern University and its President in Civil Case No. 98-89483 is DISMISSED. 

SO ORDERED.[10]

 Petitioner filed a Motion for Reconsideration which was denied; hence, the instant petition

based on the following grounds: THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER CONTRARY TO LAW AND JURISPRUDENCE IN RULING THAT:

 5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;

 5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE INJURY RESULTING FROM A GUNSHOT WOUND SUFFERED BY THE PETITIONER FROM THE HANDS OF NO LESS THAN THEIR OWN SECURITY GUARD IN VIOLATION OF THEIR BUILT-IN CONTRACTUAL OBLIGATION TO PETITIONER, BEING THEIR LAW STUDENT AT THAT TIME, TO PROVIDE HIM WITH A SAFE AND SECURE EDUCATIONAL ENVIRONMENT; 5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT PETITIONER WHILE HE WAS WALKING ON HIS WAY TO THE LAW LIBRARY OF RESPONDENT FEU IS NOT THEIR EMPLOYEE BY VIRTUE OF THE CONTRACT FOR SECURITY SERVICES BETWEEN GALAXY AND FEU NOTWITHSTANDING THE FACT THAT PETITIONER, NOT BEING A PARTY TO IT, IS NOT BOUND BY THE SAME UNDER THE PRINCIPLE OF RELATIVITY OF CONTRACTS; and 5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING GALAXY AS THE AGENCY WHICH WOULD PROVIDE SECURITY SERVICES WITHIN THE PREMISES OF RESPONDENT FEU.[11]

Petitioner is suing respondents for damages based on the alleged breach of student-school contract for a safe learning environment. The pertinent portions of petitioners Complaint read: 

6.0. At the time of plaintiffs confinement, the defendants or any of their representative did not bother to visit and inquire about his condition. This abject indifference on the part of the defendants continued even after plaintiff was discharged from the hospital when not even a word of consolation was heard from them. Plaintiff waited for more than one (1) year for the defendants to perform their moral obligation but the wait was fruitless. This indifference and total lack of concern of defendants served to exacerbate plaintiffs miserable condition.

 x x x x

 11.0. Defendants are responsible for ensuring the safety of its students while the latter are within the University premises. And that should anything untoward happens to any of its students while they are within the Universitys premises shall be the responsibility of the defendants. In this case, defendants, despite being legally and morally bound, miserably failed to protect plaintiff from injury and thereafter, to mitigate and compensate plaintiff for said injury; 12.0. When plaintiff enrolled with defendant FEU, a contract was entered into between them. Under this contract, defendants are supposed to ensure that adequate steps are taken to provide an atmosphere conducive to study and ensure the safety of the plaintiff while inside defendant FEUs premises. In the instant case, the latter breached this contract when defendant allowed harm to befall upon the plaintiff when he was shot at by, of all people, their security guard who was tasked to maintain peace inside the campus.[12]

 In Philippine School of Business Administration v. Court of Appeals,[13] we held that:

 When an academic institution accepts students for enrollment, there is

established a contract between them, resulting in bilateral obligations which both parties are bound to comply with. For its part, the school undertakes to provide the student with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or a profession. On the other hand, the student covenants to abide by the school's academic requirements and observe its rules and regulations. 

Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the realm of the arts and other sciences when bullets are flying or grenades exploding in the air or where there looms around the school premises a constant threat to life and limb. Necessarily, the school must ensure that adequate steps are taken to maintain peace and order within the campus premises and to prevent the breakdown thereof.[14]

 It is undisputed that petitioner was enrolled as a sophomore law student in respondent

FEU. As such, there was created a contractual obligation between the two parties. On petitioners part, he was obliged to comply with the rules and regulations of the school. On the other hand, respondent FEU, as a learning institution is mandated to impart knowledge and equip its students with the necessary skills to pursue higher education or a profession. At the same time, it is obliged to ensure and take adequate steps to maintain peace and order within the campus.

 It is settled that in culpa contractual, the mere proof of the existence of the contract and the

failure of its compliance justify, prima facie, a corresponding right of relief. [15]In the instant case, we find that, when petitioner was shot inside the campus by no less the security guard who was hired to maintain peace and secure the premises, there is a prima facie showing that respondents failed to comply with its obligation to provide a safe and secure environment to its students.

 In order to avoid liability, however, respondents aver that the shooting incident was a

fortuitous event because they could not have reasonably foreseen nor avoided the accident caused by Rosete as he was not their employee;[16] and that they complied with their obligation to ensure a safe learning environment for their students by having exercised due diligence in selecting the security services of Galaxy.

 After a thorough review of the records, we find that respondents failed to discharge the

burden of proving that they exercised due diligence in providing a safe learning environment for their students. They failed to prove that they ensured that the guards assigned in the campus met the requirements stipulated in the Security Service Agreement.Indeed, certain documents about Galaxy were presented during trial; however, no evidence as to the qualifications of Rosete as a security guard for the university was offered.

 Respondents also failed to show that they undertook steps to ascertain and confirm that the

security guards assigned to them actually possess the qualifications required in the Security Service Agreement. It was not proven that they examined the clearances, psychiatric test results, 201 files, and other vital documents enumerated in its contract with Galaxy. Total reliance on the security agency about these matters or failure to check the papers stating the qualifications of the guards is negligence on the part of respondents. A learning institution should not be allowed to completely relinquish or abdicate security matters in its premises to the security agency it hired. To do so would result to contracting away its inherent obligation to ensure a safe learning environment for its students.

 Consequently, respondents defense of force majeure must fail. In order for force majeure to

be considered, respondents must show that no negligence or misconduct was committed that may have occasioned the loss.  An act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss.  Ones negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event would not exempt one from liability.  When the effect is found to be partly the result of a persons participation whether by active intervention, neglect or failure to act the whole occurrence is humanized and removed from the rules applicable to acts of God.[17] 

 Article 1170 of the Civil Code provides that those who are negligent in the performance of

their obligations are liable for damages. Accordingly, for breach of contract due to negligence in providing a safe learning environment, respondent FEU is liable to petitioner for damages. It is essential in the award of damages that the claimant must have satisfactorily proven during the trial the existence of the factual basis of the damages and its causal connection to defendants acts.[18]

 In the instant case, it was established that petitioner spent P35,298.25 for his hospitalization

and other medical expenses.[19] While the trial court correctly imposed interest on said amount, however, the case at bar involves an obligation arising from a contract and not a loan or forbearance of money. As such, the proper rate of legal interest is six percent (6%) per annum of the amount demanded. Such interest shall continue to run from the filing of the complaint until the finality of this Decision.[20] After this Decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction.

 The other expenses being claimed by petitioner, such as transportation expenses and those

incurred in hiring a personal assistant while recuperating were however not duly supported by receipts.[21] In the absence thereof, no actual damages may be awarded. Nonetheless, temperate damages under Art. 2224 of the Civil Code may be recovered where it has been shown that the claimant suffered some pecuniary loss but the amount thereof cannot be proved with certainty. Hence, the amount of P20,000.00 as temperate damages is awarded to petitioner.

 As regards the award of moral damages, there is no hard and fast rule in the determination

of what would be a fair amount of moral damages since each case must be governed by its own peculiar circumstances.[22] The testimony of petitioner about his physical suffering, mental anguish, fright, serious anxiety, and moral shock resulting from the shooting incident[23] justify the award of moral damages. However, moral damages are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. The award is

not meant to enrich the complainant at the expense of the defendant, but to enable the injured party to obtain means, diversion, or amusements that will serve to obviate the moral suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and should be proportionate to the suffering inflicted. Trial courts must then guard against the award of exorbitant damages; they should exercise balanced restrained and measured objectivity to avoid suspicion that it was due to passion, prejudice, or corruption on the part of the trial court.[24] We deem it just and reasonable under the circumstances to award petitioner moral damages in the amount of P100,000.00.

 Likewise, attorneys fees and litigation expenses in the amount of P50,000.00 as part of

damages is reasonable in view of Article 2208 of the Civil Code. [25] However, the award of exemplary damages is deleted considering the absence of proof that respondents acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

 We note that the trial court held respondent De Jesus solidarily liable with respondent

FEU. In Powton Conglomerate, Inc. v. Agcolicol,[26] we held that: [A] corporation is invested by law with a personality separate and distinct from those of the persons composing it, such that, save for certain exceptions, corporate officers who entered into contracts in behalf of the corporation cannot be held personally liable for the liabilities of the latter. Personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so validly attach, as a rule, only when (1) he assents to a patently unlawful act of the corporation, or when he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders or other persons; (2) he consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto; (3) he agrees to hold himself personally and solidarily liable with the corporation; or (4) he is made by a specific provision of law personally answerable for his corporate action.[27]

None of the foregoing exceptions was established in the instant case; hence, respondent De Jesus should not be held solidarily liable with respondent FEU.

 Incidentally, although the main cause of action in the instant case is the breach of the

school-student contract, petitioner, in the alternative, also holds respondents vicariously liable under Article 2180 of the Civil Code, which provides:

 Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones

own acts or omissions, but also for those of persons for whom one is responsible. x x x x Employers shall be liable for the damages caused by their employees and

household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

 x x x x The responsibility treated of in this article shall cease when the persons

herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.

 We agree with the findings of the Court of Appeals that respondents cannot be held liable for

damages under Art. 2180 of the Civil Code because respondents are not the employers of Rosete. The latter was employed by Galaxy. The instructions issued by respondents Security

Consultant to Galaxy and its security guards are ordinarily no more than requests commonly envisaged in the contract for services entered into by a principal and a security agency. They cannot be construed as the element of control as to treat respondents as the employers of Rosete.[28]

 As held in Mercury Drug Corporation v. Libunao:[29]

 In Soliman, Jr. v. Tuazon,[30] we held that where the security agency recruits,

hires and assigns the works of its watchmen or security guards to a client, the employer of such guards or watchmen is such agency, and not the client, since the latter has no hand in selecting the security guards. Thus, the duty to observe the diligence of a good father of a family cannot be demanded from the said client:

 [I]t is settled in our jurisdiction that where the security agency,

as here, recruits, hires and assigns the work of its watchmen or security guards, the agency is the employer of such guards or watchmen. Liability for illegal or harmful acts committed by the security guards attaches to the employer agency, and not to the clients or customers of such agency. As a general rule, a client or customer of a security agency has no hand in selecting who among the pool of security guards or watchmen employed by the agency shall be assigned to it; the duty to observe the diligence of a good father of a family in the selection of the guards cannot, in the ordinary course of events, be demanded from the client whose premises or property are protected by the security guards. x x x x

 The fact that a client company may give instructions or directions to the

security guards assigned to it, does not, by itself, render the client responsible as an employer of the security guards concerned and liable for their wrongful acts or omissions.[31]

 We now come to respondents Third Party Claim against Galaxy. In Firestone Tire and

Rubber Company of the Philippines v. Tempengko,[32] we held that: 

The third-party complaint is, therefore, a procedural device whereby a third party who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs claim. The third-party complaint is actually independent of and separate and distinct from the plaintiffs complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiffs claim against a third-party in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts.[33]

 Respondents and Galaxy were able to litigate their respective claims and defenses in the

course of the trial of petitioners complaint. Evidence duly supports the findings of the trial court that Galaxy is negligent not only in the selection of its employees but also in their supervision. Indeed, no administrative sanction was imposed against Rosete despite the shooting incident; moreover, he

was even allowed to go on leave of absence which led eventually to his disappearance. [34] Galaxy also failed to monitor petitioners condition or extend the necessary assistance, other than the P5,000.00 initially given to petitioner. Galaxy and Imperial failed to make good their pledge to reimburse petitioners medical expenses.

 For these acts of negligence and for having supplied respondent FEU with an unqualified

security guard, which resulted to the latters breach of obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned amounts awarded to petitioner.

 Unlike respondent De Jesus, we deem Imperial to be solidarily liable with Galaxy for being

grossly negligent in directing the affairs of the security agency. It was Imperial who assured petitioner that his medical expenses will be shouldered by Galaxy but said representations were not fulfilled because they presumed that petitioner and his family were no longer interested in filing a formal complaint against them.[35]

 WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the Court of

Appeals in CA-G.R. CV No. 87050 nullifying the Decision of the trial court and dismissing the complaint as well as the August 23, 2007 Resolution denying the Motion for Reconsideration are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483 finding respondent FEU liable for damages for breach of its obligation to provide students with a safe and secure learning atmosphere, is AFFIRMED with the following MODIFICATIONS:

 a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner actual

damages in the amount of P35,298.25, plus 6% interest per annum from the filing of the complaint until the finality of this Decision. After this decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction;

 b. respondent FEU is also ORDERED to pay petitioner temperate damages in the

amount of P20,000.00; moral damages in the amount of P100,000.00; andattorneys fees and litigation expenses in the amount of P50,000.00;

 c. the award of exemplary damages is DELETED.

 The Complaint against respondent Edilberto C. De Jesus is DISMISSED. The counterclaims

of respondents are likewise DISMISSED. Galaxy Development and Management Corporation (Galaxy) and its president, Mariano D.

Imperial are ORDERED to jointly and severally pay respondent FEU damages equivalent to the above-mentioned amounts awarded to petitioner.

SO ORDERED.

Republic of the PhilippinesSupreme Court

Manila

SECOND DIVISION

SPOUSES FERNANDO G.R. No. 188288

and LOURDES VILORIA,Petitioners,

- versus -

CONTINENTAL AIRLINES, INC.,Respondent.

Present:

CARPIO, J.,Chairperson,PEREZ,SERENO,REYES, andBERNABE, JJ. 

Promulgated:

January 16, 2012

x------------------------------------------------------------------------------------x

DECISION

REYES, J.:

This is a petition for review under Rule 45 of the Rules of Court from the January 30, 2009 Decision1 of the Special Thirteenth Division of the Court of Appeals (CA) in CA-G.R. CV No. 88586 entitled “Spouses Fernando and Lourdes Viloria v. Continental Airlines, Inc.,” the dispositive portion of which states:

WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03 April 2006, awarding US$800.00 or its peso equivalent at the time of payment, plus legal rate of interest from 21 July 1997 until fully paid, [P]100,000.00 as moral damages, [P]50,000.00 as exemplary damages, [P]40,000.00 as attorney’s fees and costs of suit to plaintiffs-appellees is herebyREVERSED and SET ASIDE.

Defendant-appellant’s counterclaim is DENIED.

Costs against plaintiffs-appellees.

SO ORDERED.2

On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC) rendered a Decision, giving due course to the complaint for sum of money and damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria (Lourdes), collectively called Spouses Viloria, against respondent Continental Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to such complaint.

On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his wife, Lourdes, two (2) round trip airline tickets from San Diego, California to Newark, New Jersey on board Continental Airlines. Fernando purchased the tickets at US$400.00 each from a travel agency called “Holiday Travel” and was attended to by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak, an intercity passenger train service provider in the United States. Per the tickets, Spouses Viloria were scheduled to leave for Newark on August 13, 1997 and return to San Diego on August 21, 1997.

Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or August 6, 1997. Mager informed him that flights to Newark via Continental Airlines were already fully booked and offered the alternative of a round trip flight via Frontier Air. Since flying with Frontier Air called

for a higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for a refund. Mager, however, denied his request as the subject tickets are non-refundable and the only option that Continental Airlines can offer is the re-issuance of new tickets within one (1) year from the date the subject tickets were issued. Fernando decided to reserve two (2) seats with Frontier Air.

As he was having second thoughts on traveling via Frontier Air, Fernando went to the Greyhound Station where he saw an Amtrak station nearby. Fernando made inquiries and was told that there are seats available and he can travel on Amtrak anytime and any day he pleased. Fernando then purchased two (2) tickets for Washington, D.C.

From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling her that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was already fully booked. Fernando reiterated his demand for a refund but Mager was firm in her position that the subject tickets are non-refundable.

Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a refund and alleging that Mager had deluded them into purchasing the subject tickets.3

In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his complaint had been referred to the Customer Refund Services of Continental Airlines at Houston, Texas.4

In a letter dated March 24, 1998, Continental Micronesia denied Fernando’s request for a refund and advised him that he may take the subject tickets to any Continental ticketing location for the re-issuance of new tickets within two (2) years from the date they were issued. Continental Micronesia informed Fernando that the subject tickets may be used as a form of payment for the purchase of another Continental ticket, albeit with a re-issuance fee.5

On June 17, 1999, Fernando went to Continental’s ticketing office at Ayala Avenue, Makati City to have the subject tickets replaced by a single round trip ticket to Los Angeles, California under his name. Therein, Fernando was informed that Lourdes’ ticket was non-transferable, thus, cannot be used for the purchase of a ticket in his favor. He was also informed that a round trip ticket to Los Angeles was US$1,867.40 so he would have to pay what will not be covered by the value of his San Diego to Newark round trip ticket.

In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no longer wished to have them replaced. In addition to the dubious circumstances under which the subject tickets were issued, Fernando claimed that CAI’s act of charging him with US$1,867.40 for a round trip ticket to Los Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes’ ticket, breached its undertaking under its March 24, 1998 letter.6

On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to refund the money they used in the purchase of the subject tickets with legal interest from July 21, 1997 and to pay P1,000,000.00 as moral damages, P500,000.00 as exemplary damages and P250,000.00 as attorney’s fees.7

CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the subject tickets are non-refundable; (b) Fernando cannot insist on using the ticket in Lourdes’ name for the purchase of a round trip ticket to Los Angeles since the same is non-transferable; (c) as Mager is not a CAI employee, CAI is not liable for any of her acts; (d) CAI, its employees and agents did not act in bad faith as to entitle Spouses Viloria to moral and exemplary damages and attorney’s fees. CAI also invoked the following clause printed on the subject tickets:

3. To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carrier’s conditions of carriage and related regulations which are made part hereof (and are

available on application at the offices of carrier), except in transportation between a place in the United States or Canada and any place outside thereof to which tariffs in force in those countries apply.8

According to CAI, one of the conditions attached to their contract of carriage is the non-transferability and non-refundability of the subject tickets.

The RTC’s Ruling

Following a full-blown trial, the RTC rendered its April 3, 2006 Decision, holding that Spouses Viloria are entitled to a refund in view of Mager’s misrepresentation in obtaining their consent in the purchase of the subject tickets.9 The relevant portion of the April 3, 2006 Decision states:

Continental Airlines agent Ms. Mager was in bad faith when she was less candid and diligent in presenting to plaintiffs spouses their booking options. Plaintiff Fernando clearly wanted to travel via AMTRAK, but defendant’s agent misled him into purchasing Continental Airlines tickets instead on the fraudulent misrepresentation that Amtrak was fully booked. In fact, defendant Airline did not specifically denied (sic) this allegation.

Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into buying Continental Airline tickets on Ms. Mager’s misleading misrepresentations. Continental Airlines agent Ms. Mager further relied on and exploited plaintiff Fernando’s need and told him that they must book a flight immediately or risk not being able to travel at all on the couple’s preferred date. Unfortunately, plaintiffs spouses fell prey to the airline’s and its agent’s unethical tactics for baiting trusting customers.”10

Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is CAI’s agent, hence, bound by her bad faith and misrepresentation. As far as the RTC is concerned, there is no issue as to whether Mager was CAI’s agent in view of CAI’s implied recognition of her status as such in its March 24, 1998 letter.

The act of a travel agent or agency being involved here, the following are the pertinent New Civil Code provisions on agency:

Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

Agency may be oral, unless the law requires a specific form.

As its very name implies, a travel agency binds itself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. This court takes judicial notice of the common services rendered by travel agencies that represent themselves as such, specifically the reservation and booking of local and foreign tours as well as the issuance of airline tickets for a commission or fee.

The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff spouses on July 21, 1997 were no different from those offered in any other travel agency. Defendant airline impliedly if not expressly acknowledged its principal-agent relationship

with Ms. Mager by its offer in the letter dated March 24, 1998 – an obvious attempt to assuage plaintiffs spouses’ hurt feelings.11

Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the subject tickets within two (2) years from their date of issue when it charged Fernando with the amount of US$1,867.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use Lourdes’ ticket. Specifically:

Tickets may be reissued for up to two years from the original date of issue. When defendant airline still charged plaintiffs spouses US$1,867.40 or more than double the then going rate of US$856.00 for the unused tickets when the same were presented within two (2) years from date of issue, defendant airline exhibited callous treatment of passengers.12

The Appellate Court’s Ruling

On appeal, the CA reversed the RTC’s April 3, 2006 Decision, holding that CAI cannot be held liable for Mager’s act in the absence of any proof that a principal-agent relationship existed between CAI and Holiday Travel. According to the CA, Spouses Viloria, who have the burden of proof to establish the fact of agency, failed to present evidence demonstrating that Holiday Travel is CAI’s agent. Furthermore, contrary to Spouses Viloria’s claim, the contractual relationship between Holiday Travel and CAI is not an agency but that of a sale.

Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was in turn a ticketing agent of Holiday Travel who was in turn a ticketing agent of Continental Airlines. Proceeding from this premise, they contend that Continental Airlines should be held liable for the acts of Mager. The trial court held the same view.

We do not agree. By the contract of agency, a person binds him/herself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for him/herself; and (4) the agent acts within the scope of his/her authority. As the basis of agency is representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the principal’s words or actions. In the same manner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is generally no agency. It is likewise a settled rule that persons dealing with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. Agency is never presumed, neither is it created by the mere use of the word in a trade or business name. We have perused the evidence and documents so far presented. We find nothing except bare allegations of plaintiffs-appellees that Mager/Holiday Travel was acting in behalf of Continental Airlines. From all sides of legal prism, the transaction in issue was simply a contract of sale, wherein Holiday Travel buys airline tickets from Continental Airlines and then, through its employees, Mager included, sells it at a premium to clients.13

The CA also ruled that refund is not available to Spouses Viloria as the word “non-refundable” was clearly printed on the face of the subject tickets, which constitute their contract with CAI. Therefore, the grant of their prayer for a refund would violate the proscription against impairment of contracts.

Finally, the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the higher amount of US$1,867.40 for a round trip ticket to Los Angeles. According to the CA, there is no compulsion for CAI to charge the lower amount of US$856.00, which Spouses Viloria claim to be the fee charged by other airlines. The matter of fixing the prices for its services is CAI’s prerogative, which Spouses Viloria cannot intervene. In particular:

It is within the respective rights of persons owning and/or operating business entities to peg the premium of the services and items which they provide at a price which they deem fit, no matter how expensive or exhorbitant said price may seem vis-à-vis those of the competing companies. The Spouses Viloria may not intervene with the business judgment of Continental Airlines.14

The Petitioners’ Case

In this Petition, this Court is being asked to review the findings and conclusions of the CA, as the latter’s reversal of the RTC’s April 3, 2006 Decision allegedly lacks factual and legal bases. Spouses Viloria claim that CAI acted in bad faith when it required them to pay a higher amount for a round trip ticket to Los Angeles considering CAI’s undertaking to re-issue new tickets to them within the period stated in their March 24, 1998 letter. CAI likewise acted in bad faith when it disallowed Fernando to use Lourdes’ ticket to purchase a round trip to Los Angeles given that there is nothing in Lourdes’ ticket indicating that it is non-transferable. As a common carrier, it is CAI’s duty to inform its passengers of the terms and conditions of their contract and passengers cannot be bound by such terms and conditions which they are not made aware of. Also, the subject contract of carriage is a contract of adhesion; therefore, any ambiguities should be construed against CAI. Notably, the petitioners are no longer questioning the validity of the subject contracts and limited its claim for a refund on CAI’s alleged breach of its undertaking in its March 24, 1998 letter.

The Respondent’s Case

In its Comment, CAI claimed that Spouses Viloria’s allegation of bad faith is negated by its willingness to issue new tickets to them and to credit the value of the subject tickets against the value of the new ticket Fernando requested. CAI argued that Spouses Viloria’s sole basis to claim that the price at which CAI was willing to issue the new tickets is unconscionable is a piece of hearsay evidence – an advertisement appearing on a newspaper stating that airfares from Manila to Los Angeles or San Francisco cost US$818.00.15 Also, the advertisement pertains to airfares in September 2000 and not to airfares prevailing in June 1999, the time when Fernando asked CAI to apply the value of the subject tickets for the purchase of a new one.16 CAI likewise argued that it did not undertake to protect Spouses Viloria from any changes or fluctuations in the prices of airline tickets and its only obligation was to apply the value of the subject tickets to the purchase of the newly issued tickets.

With respect to Spouses Viloria’s claim that they are not aware of CAI’s restrictions on the subject tickets and that the terms and conditions that are printed on them are ambiguous, CAI denies any ambiguity and alleged that its representative informed Fernando that the subject tickets are non-transferable when he applied for the issuance of a new ticket. On the other hand, the word “non-refundable” clearly appears on the face of the subject tickets.

CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency relationship exists between them. As an independent contractor, Holiday Travel was without capacity to bind CAI.

Issues

To determine the propriety of disturbing the CA’s January 30, 2009 Decision and whether Spouses Viloria have the right to the reliefs they prayed for, this Court deems it necessary to resolve the following issues:

a. Does a principal-agent relationship exist between CAI and Holiday Travel?b. Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI

bound by the acts of Holiday Travel’s agents and employees such as Mager?c. Assuming that CAI is bound by the acts of Holiday Travel’s agents and employees, can the

representation of Mager as to unavailability of seats at Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria in the purchase of the subject tickets?

d. Is CAI justified in insisting that the subject tickets are non-transferable and non-refundable?

e. Is CAI justified in pegging a different price for the round trip ticket to Los Angeles requested by Fernando?

f. Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to apply the value of the subject tickets in the purchase of new ones when it refused to allow Fernando to use Lourdes’ ticket and in charging a higher price for a round trip ticket to Los Angeles?

This Court’s Ruling

I. A principal-agent relationship exists between CAI and Holiday Travel.

With respect to the first issue, which is a question of fact that would require this Court to review and re-examine the evidence presented by the parties below, this Court takes exception to the general rule that the CA’s findings of fact are conclusive upon Us and our jurisdiction is limited to the review of questions of law. It is well-settled to the point of being axiomatic that this Court is authorized to resolve questions of fact if confronted with contrasting factual findings of the trial court and appellate court and if the findings of the CA are contradicted by the evidence on record.17

According to the CA, agency is never presumed and that he who alleges that it exists has the burden of proof. Spouses Viloria, on whose shoulders such burden rests, presented evidence that fell short of indubitably demonstrating the existence of such agency.

We disagree. The CA failed to consider undisputed facts, discrediting CAI’s denial that Holiday Travel is one of its agents. Furthermore, in erroneously characterizing the contractual relationship between CAI and Holiday Travel as a contract of sale, the CA failed to apply the fundamental civil law principles governing agency and differentiating it from sale.

In Rallos v. Felix Go Chan & Sons Realty Corporation,18 this Court explained the nature of an agency and spelled out the essential elements thereof:

Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, called the principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself, and (4) the agent acts within the scope of his authority.

Agency is basically personal, representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself."19

Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and second elements are present as CAI does not deny that it concluded an agreement with Holiday Travel, whereby Holiday Travel would enter into contracts of carriage with third persons on CAI’s behalf. The third element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is CAI and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering that CAI has not made any allegation that Holiday Travel exceeded the authority that was granted to it. In fact, CAI consistently maintains the validity of the contracts of carriage that Holiday Travel executed with Spouses Viloria and that Mager was not guilty of any fraudulent misrepresentation. That CAI admits the authority of Holiday Travel to enter into contracts of carriage on its behalf is easily discernible from its February 24, 1998 and March 24, 1998 letters, where it impliedly recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. When Fernando informed CAI that it was Holiday Travel who issued to them the subject tickets, CAI did not deny that Holiday Travel is its authorized agent.

Prior to Spouses Viloria’s filing of a complaint against it, CAI never refuted that it gave Holiday Travel the power and authority to conclude contracts of carriage on its behalf. As clearly extant from the records, CAI recognized the validity of the contracts of carriage that Holiday Travel entered into with Spouses Viloria and considered itself bound with Spouses Viloria by the terms and conditions thereof; and this constitutes an unequivocal testament to Holiday Travel’s authority to act as its agent. This Court cannot therefore allow CAI to take an altogether different position and deny that Holiday Travel is its agent without condoning or giving imprimatur to whatever damage or prejudice that may result from such denial or retraction to Spouses Viloria, who relied on good faith on CAI’s acts in recognition of Holiday Travel’s authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice.20 Estoppel bars CAI from making such denial.

As categorically provided under Article 1869 of the Civil Code, “[a]gency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.”

Considering that the fundamental hallmarks of an agency are present, this Court finds it rather peculiar that the CA had branded the contractual relationship between CAI and Holiday Travel as one of sale. The distinctions between a sale and an agency are not difficult to discern and this Court, as early as 1970, had already formulated the guidelines that would aid in differentiating the two (2) contracts. In Commissioner of Internal Revenue v. Constantino,21 this Court extrapolated that the primordial differentiating consideration between the two (2) contracts is the transfer of ownership or title over the property subject of the contract. In an agency, the principal retains ownership and control over the property and the agent merely acts on the principal’s behalf and under his instructions in furtherance of the objectives for which the agency was established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the property will effect a relinquishment of title, control and ownership in such a way that the recipient may do with the property as he pleases.

Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the company's control, the relationship between the company and the dealer is one of agency, tested under the following criterion:

“The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an

agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made. 1 Mechem on Sales, Sec. 43; 1 Mechem on Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1.” (Salisbury v. Brooks, 94 SE 117, 118-119)22

As to how the CA have arrived at the conclusion that the contract between CAI and Holiday Travel is a sale is certainly confounding, considering that CAI is the one bound by the contracts of carriage embodied by the tickets being sold by Holiday Travel on its behalf. It is undisputed that CAI and not Holiday Travel who is the party to the contracts of carriage executed by Holiday Travel with third persons who desire to travel via Continental Airlines, and this conclusively indicates the existence of a principal-agent relationship. That the principal is bound by all the obligations contracted by the agent within the scope of the authority granted to him is clearly provided under Article 1910 of the Civil Code and this constitutes the very notion of agency.

II. In actions based on quasi-delict, a principal can only be held liable for the tort committed by its agent’s employees if it has been established by preponderance of evidence that the principal was also at fault or negligent or that the principal exercise control and supervision over them.

Considering that Holiday Travel is CAI’s agent, does it necessarily follow that CAI is liable for the fault or negligence of Holiday Travel’s employees? Citing China Air Lines, Ltd. v. Court of Appeals, et al.,23 CAI argues that it cannot be held liable for the actions of the employee of its ticketing agent in the absence of an employer-employee relationship.

An examination of this Court’s pronouncements in China Air Lines will reveal that an airline company is not completely exonerated from any liability for the tort committed by its agent’s employees. A prior determination of the nature of the passenger’s cause of action is necessary. If the passenger’s cause of action against the airline company is premised onculpa aquiliana or quasi-delict for a tort committed by the employee of the airline company’s agent, there must be an independent showing that the airline company was at fault or negligent or has contributed to the negligence or tortuous conduct committed by the employee of its agent. The mere fact that the employee of the airline company’s agent has committed a tort is not sufficient to hold the airline company liable. There is no vinculum juris between the airline company and its agent’s employees and the contractual relationship between the airline company and its agent does not operate to create a juridical tie between the airline company and its agent’s employees. Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed by its agent’s employees and the principal-agency relationship per se does not make the principal a party to such tort; hence, the need to prove the principal’s own fault or negligence.

On the other hand, if the passenger’s cause of action for damages against the airline company is based on contractual breach or culpa contractual, it is not necessary that there be evidence of the airline company’s fault or negligence. As this Court previously stated in China Air Lines and reiterated in Air France vs. Gillego,24 “in an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier.”

Spouses Viloria’s cause of action on the basis of Mager’s alleged fraudulent misrepresentation is clearly one of tort or quasi-delict, there being no pre-existing contractual relationship between them. Therefore, it was incumbent upon Spouses Viloria to prove that CAI was equally at fault.

However, the records are devoid of any evidence by which CAI’s alleged liability can be substantiated. Apart from their claim that CAI must be held liable for Mager’s supposed fraud because Holiday Travel is CAI’s agent, Spouses Viloria did not present evidence that CAI was a party or had contributed to Mager’s complained act either by instructing or authorizing Holiday Travel and Mager to issue the said misrepresentation.

It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and conditions of the subject contracts, which Mager entered into with them on CAI’s behalf, in order to deny Spouses Viloria’s request for a refund or Fernando’s use of Lourdes’ ticket for the re-issuance of a new one, and simultaneously claim that they are not bound by Mager’s supposed misrepresentation for purposes of avoiding Spouses Viloria’s claim for damages and maintaining the validity of the subject contracts. It may likewise be argued that CAI cannot deny liability as it benefited from Mager’s acts, which were performed in compliance with Holiday Travel’s obligations as CAI’s agent.

However, a person’s vicarious liability is anchored on his possession of control, whether absolute or limited, on the tortfeasor. Without such control, there is nothing which could justify extending the liability to a person other than the one who committed the tort. As this Court explained in Cangco v. Manila Railroad Co.:25

With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is competent for the legislature to elect — and our Legislature has so elected — to limit such liability to cases in which the person upon whom such an obligation is imposed is morally culpable or, on the contrary, for reasons of public policy, to extend that liability, without regard to the lack of moral culpability, so as to include responsibility for the negligence of those persons whose acts or omissions are imputable, by a legal fiction, to others who are in a position to exercise an absolute or limited control over them. The legislature which adopted our Civil Code has elected to limit extra-contractual liability — with certain well-defined exceptions — to cases in which moral culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in having failed to exercise due care in one's own acts, or in having failed to exercise due care in the selection and control of one's agent or servants, or in the control of persons who, by reasons of their status, occupy a position of dependency with respect to the person made liable for their conduct.26 (emphasis supplied)

It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager by preponderant evidence. The existence of control or supervision cannot be presumed and CAI is under no obligation to prove its denial or nugatory assertion. Citing Belen v. Belen,27 this Court ruled in Jayme v. Apostol,28 that:

In Belen v. Belen, this Court ruled that it was enough for defendant to deny an alleged employment relationship. The defendant is under no obligation to prove the negative averment. This Court said:

“It is an old and well-settled rule of the courts that the burden of proving the action is upon the plaintiff, and that if he fails satisfactorily to show the facts upon which he bases his claim, the defendant is under no obligation to prove his exceptions. This [rule] is in harmony with the provisions of Section 297 of the Code of Civil Procedure holding that each party must prove his own affirmative allegations, etc.”29 (citations omitted)

Therefore, without a modicum of evidence that CAI exercised control over Holiday Travel’s employees or that CAI was equally at fault, no liability can be imposed on CAI for Mager’s supposed misrepresentation.

III. Even on the assumption that CAI may be held liable for the acts of Mager, still, Spouses Viloria are not entitled to a refund. Mager’s statement cannot be considered a causal fraud that would justify the annulment of the subject contracts that would oblige CAI to indemnify Spouses Viloria and return the money they paid for the subject tickets.

Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within four (4) years from the time of the discovery of the fraud. Once a contract is annulled, the parties are obliged under Article 1398 of the same Code to restore to each other the things subject matter of the contract, including their fruits and interest.

On the basis of the foregoing and given the allegation of Spouses Viloria that Fernando’s consent to the subject contracts was supposedly secured by Mager through fraudulent means, it is plainly apparent that their demand for a refund is tantamount to seeking for an annulment of the subject contracts on the ground of vitiated consent.

Whether the subject contracts are annullable, this Court is required to determine whether Mager’s alleged misrepresentation constitutes causal fraud. Similar to the dispute on the existence of an agency, whether fraud attended the execution of a contract is factual in nature and this Court, as discussed above, may scrutinize the records if the findings of the CA are contrary to those of the RTC.

Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract.30 In Samson v. Court of Appeals,31 causal fraud was defined as “a deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other.”32

Also, fraud must be serious and its existence must be established by clear and convincing evidence. As ruled by this Court in Sierra v. Hon. Court of Appeals, et al.,33 mere preponderance of evidence is not adequate:

Fraud must also be discounted, for according to the Civil Code:

Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which without them, he would not have agreed to.

Art. 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties.

To quote Tolentino again, the “misrepresentation constituting the fraud must be established by full, clear, and convincing evidence, and not merely by a preponderance thereof. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circumstances of each case should be considered, taking into account the personal conditions of the victim.”34

After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria has not been satisfactorily established as causal in nature to warrant the annulment of the subject contracts. In fact, Spouses Viloria failed to prove by clear and convincing evidence that Mager’s statement was fraudulent. Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at Amtrak for a trip to New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b) Mager knew about this; and (c) that she purposely informed them otherwise.

This Court finds the only proof of Mager’s alleged fraud, which is Fernando’s testimony that an Amtrak had assured him of the perennial availability of seats at Amtrak, to be wanting. As CAI correctly pointed out and as Fernando admitted, it was possible that during the intervening period of three (3) weeks from the time Fernando purchased the subject tickets to the time he talked to said Amtrak employee, other passengers may have cancelled their bookings and reservations with Amtrak, making it possible for Amtrak to accommodate them. Indeed, the existence of fraud cannot be proved by mere speculations and conjectures. Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed that "a person is innocent of crime or wrong" and that "private transactions have been fair and regular."35 Spouses Viloria failed to overcome this presumption.

IV. Assuming the contrary, Spouses Viloria are nevertheless deemed to have ratified the subject contracts.

Even assuming that Mager’s representation is causal fraud, the subject contracts have been impliedly ratified when Spouses Viloria decided to exercise their right to use the subject tickets for the purchase of new ones. Under Article 1392 of the Civil Code, “ratification extinguishes the action to annul a voidable contract.”

Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows:

Art. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.

Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.36

Simultaneous with their demand for a refund on the ground of Fernando’s vitiated consent, Spouses Viloria likewise asked for a refund based on CAI’s supposed bad faith in reneging on its undertaking to replace the subject tickets with a round trip ticket from Manila to Los Angeles.

In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on contractual breach. Resolution, the action referred to in Article 1191, is based on the defendant’s breach of faith, a violation of the reciprocity between the parties37 and in Solar Harvest, Inc. v. Davao Corrugated Carton Corporation,38 this Court ruled that a claim for a reimbursement in view of the other party’s failure to comply with his obligations under the contract is one for rescission or resolution.

However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2) inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment, one of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect is in the consummation stage of the contract when the parties are in the process of performing their respective obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of the contract. Accordingly, by pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly admitted the validity of the subject contracts, forfeiting their right to demand their annulment. A party cannot

rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions.39

V. Contracts cannot be rescinded for a slight or casual breach.

CAI cannot insist on the non-transferability of the subject tickets.

Considering that the subject contracts are not annullable on the ground of vitiated consent, the next question is: “Do Spouses Viloria have the right to rescind the contract on the ground of CAI’s supposed breach of its undertaking to issue new tickets upon surrender of the subject tickets?”

Article 1191, as presently worded, states:

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfilment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.

According to Spouses Viloria, CAI acted in bad faith and breached the subject contracts when it refused to apply the value of Lourdes’ ticket for Fernando’s purchase of a round trip ticket to Los Angeles and in requiring him to pay an amount higher than the price fixed by other airline companies.

In its March 24, 1998 letter, CAI stated that “non-refundable tickets may be used as a form of payment toward the purchase of another Continental ticket for $75.00, per ticket, reissue fee ($50.00, per ticket, for tickets purchased prior to October 30, 1997).”

Clearly, there is nothing in the above-quoted section of CAI’s letter from which the restriction on the non-transferability of the subject tickets can be inferred. In fact, the words used by CAI in its letter supports the position of Spouses Viloria, that each of them can use the ticket under their name for the purchase of new tickets whether for themselves or for some other person.

Moreover, as CAI admitted, it was only when Fernando had expressed his interest to use the subject tickets for the purchase of a round trip ticket between Manila and Los Angeles that he was informed that he cannot use the ticket in Lourdes’ name as payment.

Contrary to CAI’s claim, that the subject tickets are non-transferable cannot be implied from a plain reading of the provision printed on the subject tickets stating that “[t]o the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (a) provisions contained in this ticket, x x x (iii) carrier’s conditions of carriage and related regulations which are made part hereof (and are available on application at the offices of carrier) x x x.” As a common carrier whose business is imbued with public interest, the exercise of extraordinary diligence requires CAI to inform Spouses Viloria, or all of its passengers for that matter, of all the terms and conditions governing their contract of carriage. CAI is

proscribed from taking advantage of any ambiguity in the contract of carriage to impute knowledge on its passengers of and demand compliance with a certain condition or undertaking that is not clearly stipulated. Since the prohibition on transferability is not written on the face of the subject tickets and CAI failed to inform Spouses Viloria thereof, CAI cannot refuse to apply the value of Lourdes’ ticket as payment for Fernando’s purchase of a new ticket.

CAI’s refusal to accept Lourdes’ ticket for the purchase of a new ticket for Fernando is only a casual breach.

Nonetheless, the right to rescind a contract for non-performance of its stipulations is not absolute. The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement.40 Whether a breach is substantial is largely determined by the attendant circumstances.41

While CAI’s refusal to allow Fernando to use the value of Lourdes’ ticket as payment for the purchase of a new ticket is unjustified as the non-transferability of the subject tickets was not clearly stipulated, it cannot, however be considered substantial. The endorsability of the subject tickets is not an essential part of the underlying contracts and CAI’s failure to comply is not essential to its fulfillment of its undertaking to issue new tickets upon Spouses Viloria’s surrender of the subject tickets. This Court takes note of CAI’s willingness to perform its principal obligation and this is to apply the price of the ticket in Fernando’s name to the price of the round trip ticket between Manila and Los Angeles. CAI was likewise willing to accept the ticket in Lourdes’ name as full or partial payment as the case may be for the purchase of any ticket, albeit under her name and for her exclusive use. In other words, CAI’s willingness to comply with its undertaking under its March 24, 1998 cannot be doubted, albeit tainted with its erroneous insistence that Lourdes’ ticket is non-transferable.

Moreover, Spouses Viloria’s demand for rescission cannot prosper as CAI cannot be solely faulted for the fact that their agreement failed to consummate and no new ticket was issued to Fernando. Spouses Viloria have no right to insist that a single round trip ticket between Manila and Los Angeles should be priced at around $856.00 and refuse to pay the difference between the price of the subject tickets and the amount fixed by CAI. The petitioners failed to allege, much less prove, that CAI had obliged itself to issue to them tickets for any flight anywhere in the world upon their surrender of the subject tickets. In its March 24, 1998 letter, it was clearly stated that “[n]on-refundable tickets may be used as a form of payment toward the purchase of another Continental ticket”42 and there is nothing in it suggesting that CAI had obliged itself to protect Spouses Viloria from any fluctuation in the prices of tickets or that the surrender of the subject tickets will be considered as full payment for any ticket that the petitioners intend to buy regardless of actual price and destination. The CA was correct in holding that it is CAI’s right and exclusive prerogative to fix the prices for its services and it may not be compelled to observe and maintain the prices of other airline companies.43

The conflict as to the endorsability of the subject tickets is an altogether different matter, which does not preclude CAI from fixing the price of a round trip ticket between Manila and Los Angeles in an amount it deems proper and which does not provide Spouses Viloria an excuse not to pay such price, albeit subject to a reduction coming from the value of the subject tickets. It cannot be denied that Spouses Viloria had the concomitant obligation to pay whatever is not covered by the value of the subject tickets whether or not the subject tickets are transferable or not.

There is also no showing that Spouses Viloria were discriminated against in bad faith by being charged with a higher rate. The only evidence the petitioners presented to prove that the price of a round trip ticket between Manila and Los Angeles at that time was only $856.00 is a newspaper advertisement for another airline company, which is inadmissible for being “hearsay evidence, twice removed.” Newspaper clippings are hearsay if they were offered for the purpose of proving the truth of the matter alleged. As ruled in Feria v. Court of Appeals,:44

[N]ewspaper articles amount to “hearsay evidence, twice removed” and are therefore not only inadmissible but without any probative value at all whether objected to or not, unless offered for a purpose other than proving the truth of the matter asserted. In this case, the news article is admissible only as evidence that such publication does exist with the tenor of the news therein stated.45(citations omitted)

The records of this case demonstrate that both parties were equally in default; hence, none of them can seek judicial redress for the cancellation or resolution of the subject contracts and they are therefore bound to their respective obligations thereunder. As the 1st sentence of Article 1192 provides:

Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. (emphasis supplied)

Therefore, CAI’s liability for damages for its refusal to accept Lourdes’ ticket for the purchase of Fernando’s round trip ticket is offset by Spouses Viloria’s liability for their refusal to pay the amount, which is not covered by the subject tickets. Moreover, the contract between them remains, hence, CAI is duty bound to issue new tickets for a destination chosen by Spouses Viloria upon their surrender of the subject tickets and Spouses Viloria are obliged to pay whatever amount is not covered by the value of the subject tickets.

This Court made a similar ruling in Central Bank of the Philippines v. Court of Appeals.46 Thus:

Since both parties were in default in the performance of their respective reciprocal obligations, that is, Island Savings Bank failed to comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they are both liable for damages.

Article 1192 of the Civil Code provides that in case both parties have committed a breach of their reciprocal obligations, the liability of the first infractor shall be equitably tempered by the courts. WE rule that the liability of Island Savings Bank for damages in not furnishing the entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for not paying his overdue P17,000.00 debt. x x x.47

Another consideration that militates against the propriety of holding CAI liable for moral damages is the absence of a showing that the latter acted fraudulently and in bad faith. Article 2220 of the Civil Code requires evidence of bad faith and fraud and moral damages are generally not recoverable in culpa contractual except when bad faith had been proven.48The award of exemplary damages is likewise not warranted. Apart from the requirement that the defendant acted in a wanton, oppressive and malevolent manner, the claimant must prove his entitlement to moral damages.49

WHEREFORE, premises considered, the instant Petition is DENIED.

SO ORDERED.