Areola vs CA

Facts

1. Prudential Guarantee cancelled Areola’s personal accident insurance on

the grounds that the latter failed to pay his premiums 7 months after

issuing the policy. Areola was supposed to pay the total amount of

P1,609.65 which included the premium of P1,470.00, documentary stamp

of P110.25 and 2% premium tax of P29.40. The statement of account had

a stipulation not considering it a receipt. It also reminded the customer to

ask for a receipt after payment. There was also a stipulation calling for a

demand for a provisional receipt after payment to an agent. A provisional

receipt was sent to petitioner telling him that the provisional receipt

would be confirmed by an official one. The company then cancelled the

policy for non-payment of premiums.

2. After being surprised, Areola confronted a company agent and demanded

an official receipt. The latter told him that it was a mistake, but never

gave him an official receipt. Areola sent a letter demanding that he be

reinstated or he would file for damages if his demand was not met. The

company then told him that his payments weren’t in full yet. The

company replied to Areola by telling him that there was reason to believe

that no payment has been made since no official receipt was issued. The

company then told him that they would still hold him under the policy.

The company then confirmed that he paid the premium and that they

would extend the policy by one year.

3. Thereby, the company offered to reinstate same policy it had previously

cancelled and even proposed to extend its lifetime on finding that the

cancellation was erroneous and that the premiums were paid in full by

petitioner-insured but were not remitted by the company's branch

manager, Mr. Malapit.

4. However, they were too late for Areola already filed an action for breach

of contract in the trial court.

5. The company’s defense lay in rectifying its omission; hence, there was no

breach of contract.

6. The court ruled in favor of Areola and asked Prudential to pay 250,000

pesos in moral and exemplary damages. The court held that the company

was in bad faith in cancelling the policy. Had the insured met an accident

at that time, he wouldn’t be covered by the policy.

7. Respondent appealed to CA. CA ruled in favor of respondent on the

grounds that it was not motivated by negligence, malice or bad faith in

cancelling subject policy. Rather, the cancellation of the insurance policy

was based on what the existing records showed. The court even added

that the errant manager who didn’t remit the profits was forced to resign.

Areola then filed for a petition in the Supreme Court.

Issue

1. WON the erroneous act of cancelling subject insurance policy entitle

petitioner-insured to payment of damages?

2. WON the subsequent act of reinstating the wrongfully cancelled insurance

policy by respondent insurance company, in an effort to rectify such

error, obliterate whatever liability for damages it may have to bear, thus

absolving it?

Ruling

1. Yes. No. Petition granted.

Petitioner alleged that the manager’s misappropriation of his premium

payments is the proximate cause of the cancellation of the insurance policy.

Subsequent reinstatement could not possibly absolve respondent insurance

company from liability, due to the breach of contract. He contended that

damage had already been done.

Prudential averred that the equitable relief sought by petitioner-insured was

granted to the filing of the complaint, petitioner-insured is left without a

cause of action. Reinstatement effectively restored petitioner-insured to all

his rights under the policy.

The court held that Malapit's fraudulent act of misappropriating the premiums

paid by petitioner-insured is directly imputable to respondent insurance

company. A corporation, such as respondent insurance company, acts solely

thru its employees. The latters' acts are considered as its own. Malapit

represented its interest and acted in its behalf. His act of receiving the

premiums collected is well within the province of his authority. Thus, his

receipt of said premiums is receipt by private respondent insurance company

who, by provision of law is bound by the acts of its agent.

Article 1910 thus reads:

The principal must comply with all the obligations which the agent

may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the

principal is not bound except when he ratifies it expressly or tacitly.

Malapit's failure to remit the premiums he received cannot constitute a

defense for private respondent insurance company; no exoneration from

liability could result therefrom. The fact that private respondent insurance

company was itself defrauded due to the anomalies that took place does not

free the same from its obligation to petitioner Areola. As held in Prudential

Bank v. Court of Appeals:

“A bank is liable for wrongful acts of its officers done in the interests

of the bank or in the course of dealings of the officers in their

representative capacity but not for acts outside the scope of their

authority. Accordingly, a banking corporation is liable to innocent third

persons where the representation is made in the course of its

business by an agent acting within the general scope of his authority

even though the agent is secretly abusing his authority and

attempting to perpetrate a fraud upon his principal or some other

person.”

Prudential is liable for damages for the fraudulent acts committed by Malapit.

Reinstating the insurance policy cannot obliterate the injury inflicted. A

contract of insurance creates reciprocal obligations for both insurer and

insured. Reciprocal obligations are those which arise from the same cause

and in which each party is both a debtor and a creditor of the other, such that

the obligation of one is dependent upon the obligation of the other.

2. Due to the agreement to enter into a contract of insurance where

Prudential promised to extend protection to petitioner-insured against the

risk insured, there was a debtor creditor relationship between the two

parties. Under Article 1191, the injured party is given a choice between

fulfillment or rescission of the obligation in case one of the obligors fails

to comply with what is incumbent upon him. However, said article entitles

the injured party to payment of damages, regardless of whether he

demands fulfillment or rescission of the obligation.

The damages would be nominal because the insurance company took steps

to rectify the contract . There was also no actual or substantial damage

inflicted. Nominal damages are "recoverable where a legal right is

technically violated and must be vindicated against an invasion that

has produced no actual present loss of any kind, or where there has

been a breach of contract and no substantial injury or actual

damages whatsoever have been or can be shown.”

Picart vs Smith

Facts

1. On the Carlatan Bridge in La Union. Picart was riding on his pony over

said bridge. Before he had gotten half way across, Smith approached

from the opposite direction in an automobile. As the defendant neared

the bridge he saw a horseman on it and blew his horn to give warning of

his approach. He continued his course and after he had taken the bridge

he gave two more successive blasts, as it appeared to him that the man

on horseback before him was not observing the rule of the road.

2. Picart saw the automobile coming and heard the warning signals.

However, being perturbed by the novelty of the apparition or the rapidity

of the approach, he pulled the pony closely up against the railing on the

right side of the bridge instead of going to the left. He says that the

reason he did this was that he thought he did not have sufficient time to

get over to the other side.

3. As the automobile approached, Smith guided it toward his left, that being

the proper side of the road for the machine. In so doing the defendant

assumed that the horseman would move to the other side. Seeing that

the pony was apparently quiet, the defendant, instead of veering to the

right while yet some distance away or slowing down, continued to

approach directly toward the horse without diminution of speed.

4. When he had gotten quite near, there being then no possibility of the

horse getting across to the other side, the defendant quickly turned his

car sufficiently to the right to escape hitting the horse; but in so doing the

automobile passed in such close proximity to the animal that it became

frightened and turned its body across the bridge, got hit by the car and

the limb was broken.

5. The horse fell and its rider was thrown off with some violenceAs a result

of its injuries the horse died. The plaintiff received contusions which

caused temporary unconsciousness and required medical attention for

several days.

6. Picart has appealed from a judgment of the CFI of La Union absolving

Smith from liability

Issue

1. WON Smith was guilty of negligence so as to give rise to a civil obligation

to repair the damage done

Ruling

1. Yes, Smith was negligent.

The test by which to determine the existence of negligence in a

particular case may be stated as follows: Did the defendant in doing the

alleged negligent act use that person would have used in the same

situation ? If not, then he is guilty of negligence. The existence of

negligence in a given case is not determined by reference to the personal

judgment of the actor in the situation before him. The law considers what

would be reckless, blameworthy, or negligent in the man of ordinary

intelligence and prudence and determines liability by that. The question as to

what would constitute the conduct of a prudent man in a given situation must

of course be always determined in the light of human experience and

in view of the facts involved in the particular case.

Could a prudent man, in the case under consideration, foresee harm

as a result of the course actually pursued? If so, it was the duty of

the actor to take precautions to guard against that harm.

Reasonable foresight of harm, followed by ignoring of the

suggestion born of this prevision, is always necessary before

negligence can be held to exist. Stated in these terms, the proper

criterion for determining the existence of negligence in a given case is this:

Conduct is said to be negligent when a prudent man in the position of the

tortfeasor would have foreseen that an effect harmful to another was

sufficiently probable to warrant his foregoing conduct or guarding against its

consequences.

Applying this test to the conduct of the defendant in the present case we

think that negligence is clearly established. A prudent man, placed in the

position of the defendant, would in our opinion, have recognized that the

course which he was pursuing was fraught with risk, and would therefore

have foreseen harm to the horse and the rider as reasonable consequence of

that course. Under these circumstances the law imposed on the Smith the

duty to guard against the threatened harm.

Doctrine of Last Clear Chance

It goes without saying that the plaintiff himself was not free from fault, for he

was guilty of antecedent negligence in planting himself on the wrong side of

the road. But as we have already stated, Smith was also negligent; and in

such case the problem always is to discover which agent is immediately and

directly responsible. It will be noted that the negligent acts of the two

parties were not contemporaneous, since the negligence of the

defendant succeeded the negligence of the plaintiff by an

appreciable interval. Under these circumstances the law is that the

person who has the last fair chance to avoid the impending harm

and fails to do so is chargeable with the consequences, without

reference to the prior negligence of the other party.

Layugan vs IAC

Facts

1. Pedro T. Layugan filed an action for damages against Godofredo Isidro,

alleging that while at Baretbet, Bagabag, Nueva Vizcaya, the Plaintiff and

a companion were repairing the tire of their cargo truck which was parked

along the right side of the National Highway; that defendant's truck,

driven recklessly by Daniel Serrano bumped the plaintiff, that as a result,

plaintiff was injured and hospitalized where he incurred and will incur

more expenses as he recuperates from said injuries; Plaintiff's right leg

was amputated and that because of said injuries he would be deprived of

a lifetime income.

2. To free themselves from liability, defendants Isidro [owner] and Serrano

[driver] averred that he knows his responsibilities as a driver and further

contends that it was the negligence of plaintiff that was the proximate

cause of the accident. They alleged that plaintiff parked his truck in a

manner which occupied a part of the highway and he did not even put a

warning sign.

3. Subsequently, a third-party complaint was filed by the defendant against

his insurer, the Travellers Multi Indemnity Corporation; that the third-

party plaintiff [Isidro], without admitting his liability to the plaintiff,

claimed that the third-party defendant [Travellers] is liable to the former

for contribution, indemnity and subrogation by virtue of their insurance

contract which covers the insurer's liability for damages arising from

death, bodily injuries and damage to property. The Insurance company

argued that it is only liable for the amount agreed in the policy and the

complaint was premature since no claim was made to it.

4. The RTC ruled in favor of the Petitioners. The CA reversed the decision,

stating that it is the petitioners who were negligent since they did not

exercise caution by putting warning signs that their truck is park on the

shoulder of the highway.

Issue

1. WON the Doctrine of Res Ipsa Loquitur is applicable in this case ---- NO

2. WON Isidro is liable as employer of Serrano ---- YES

Ruling

1. No, it is not applicable.

The Doctrine of Res Ipsa Loquitur states that “Where the thing

which causes injury is shown to be under the management of the

defendant, and the accident is such as in the ordinary course of things

does not happen if those who have the management used proper care,

it affords reasonable evidence, in the absence of an explanation by the

defendant, that the accident arose from want of care.”

The doctrine of Res ipsa loquitur as a rule of evidence is peculiar to the law of negligence which recognizes that prima facie negligence may be established without direct proof and furnishes a substitute for specific proof of negligence.  The doctrine is not a rule of substantive law but merely a mode of proof or a mere procedural convenience.  The rule, when applicable to the facts and circumstances of a particular case, is not intended to and does not dispense with the requirement of proof of culpable negligence on the part of the party charged.  It merely determines and regulates what shall be prima facie evidence thereof and facilitates the burden of plaintiff of proving a breach of the duty of due care.  

The doctrine can be invoked when and only when, under the circumstances involved, direct evidence is absent and not readily available.  Hence, it has generally been held that the presumption of inference arising from the doctrine cannot be availed of, or is overcome,

a. where plaintiff has knowledge and testifies or presents evidence as to the specific act of negligence which is the cause of the injury complained of

b. where there is direct evidence as to the precise cause of the accident and all the facts and circumstances attendant on the occurrence clearly appear

Finally, once the actual cause of injury is established beyond controversy, whether by the plaintiff or by the defendant, no presumptions will be involved and the doctrine becomes inapplicable when the circumstances have been so completely eludicated that no inference of defendant's liability can reasonably be made, whatever the source of the evidence, as in this case.

2. Yes, Isidro is liable as Serrano’s employer. The SC held that the CA

erroneously appreciated the evidence. It was proven that the petitioner

placed a warning sign within 3 to 4 meters from their truck in the form

of a lighted kerosene lamp. The existence of this warning sings was

corroborated by Serrano, respondent's driver, and further stated that

when he saw a parked truck, he kept on stepping on the brake pedal

but it did not function. Thus despite this warning signs, the truck

recklessly driven by Serrano and owned by Respondent Isidro bumped

the truck of petitioner.

The private respondent is sued under Art. 2176 in relation to Art. 2180,

paragraph 5, of the Civil Code. In the latter, when an injury is caused

by the negligence of a servant or employee there instantly arises a

presumption of law that there was negligence on the part of the

master or employer either in the selection of the servant or employee,

or in supervision over him after selection, or both. Such presumption is

juris tantum and not juris et de jure and consequently, may be

rebutted. If follows necessarily that if the employer shows to the

satisfaction of the court that in the selection and in the supervision he

has exercised the care and diligence of a good father of a family, the

presumption is overcome and he is relieved from liability. In

disclaiming liability for the incident, the private respondent stresses

that the negligence of his employee has already been adequately

overcome by his driver's statement that he knew his responsibilities as

a driver and that the truck owner used to instruct him to be careful in

driving.

We do not agree with the private respondent in his submission. In the

first place, it is clear that the driver did not know his responsibilities

because he apparently did not check his vehicle before he took it on

the road. If he did he could have discovered earlier that the brake fluid

pipe on the right was cut, and could have repaired it and thus the

accident could have been avoided. Moveover, to our mind, the fact

that the private respondent used to instruct his driver to be careful in

his driving, that the driver was licensed, and the fact that he had no

record of any accident, as found by the respondent court, are not

sufficient to destroy the finding of negligence of the Regional Trial

Court given the facts established at the trial. The private respondent or

his mechanic, who must be competent, should have conducted a

thorough inspection of his vehicle before allowing his driver to drive it.

In the light of the circumstances obtaining in the case, we hold that

Isidro failed to prove that the diligence of a good father of a family in

the supervision of his employees which would exculpate him from

solidary liability with his driver to the petitioner. But even if we

concede that the diligence of a good father of a family was observed

by Isidro in the supervision of his driver, there is not an iota of

evidence on record of the observance by Isidro of the same quantum of

diligence in the supervision of his mechanic, if any, who would be

directly in charge in maintaining the road worthiness of his (Isidro's)

truck. But that is not all. There is paucity of proof that Isidro exercised

the diligence of a good father of a family in the selection of his driver,

Daniel Serrano, as well as in the selection of his mechanic, if any, in

order to insure the safe operation of his truck and thus prevent

damage to others. Accordingly, the responsibility of Isidro as employer

treated in Article 2180, paragraph 5, of the Civil Code has not ceased.

Additional Notes:

Indeed, it is an elementary rule in the review of decisions of the Court of Appeals that its findings of fact are entitled to great respect and will not ordinarily be disturbed by this Court. Surely there are established exceptions  — when the Court should review and rectify the findings of fact of the lower court, such as:

1. when the conclusion is a finding grounded entirely on speculation, surmise, or conjecture

2. the inference made is manifestly mistaken

3. there is grave abuse of discretion

4. the judgment is based on misapprehension of facts

5. the Court of Appeals went beyond the issues of the case if the findings are contrary to the admission of both the appellant and the appellee

6. the findings of the Court of Appeals are contrary to those of the trial court

7. the said findings of fact are conclusions without citation of specific evidence on which they are based

8. the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents;

9. when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted on record.

PNB vs CA and Pujol

Facts

1. Some before 23 October 1990, Lily Pujol opened a “combo account” with

PNB Mandaluyong which combined a savings and current account in

Pujol’s Business aka Pujol Trading. Under the combo account, checks

drawn in her checking account could be charged with her savings account

should the amount in her current account would be insufficient to cover

the value of her checks.

2. In 23 October 1990, Pujol issued a P30,000 check in favor of her

daughter-in-law. When presented for payment, the check was dishonored

allegedly because Pujol had insufficient funds in her savings account. The

same thing happened on 24 October 1990, when Pujol issued a check for

her daughter. On 4 November 1990, PNB realized its mistake and

accepted and honored the second check and recredited the P250 debited

as penalty to Pujol’s account.

3. Pujol filed a case for moral and exemplary damages for dishonoring her

account despite sufficiency of her funds in the bank.

4. In its answer, PNB admitted that Pujol opened a “combo account” but

justified its dishonoring Pujol’s checks because her account was not yet

operational due to lack of documentary requirements ie Cert. of Business

Registration, Permit to Operate Business, ID card, Combination

agreement. PNB further alleged that despite the lack of these documents,

it still put the “combo flag” in her account out its generosity.

5. The RTC awarded Pujol P100,000 moral damages, and P20,000 Attorney’s

fees. It found that Pujol suffered mental anguish and besmirched

reputation as a result of the dishonor of her checks, and that being a

former member of the judiciary who was expected to be the embodiment

of integrity and good behavior, she was subjected to embarrassment due

to the erroneous dishonor of her checks by PNB. The CA affirmed the

decision of the RTC.

6. Hence this petition.

Issue

1. Is the PNB estopped from denying the existence of the combo account

and the fact that it was operational?

2. Are the awards inordinately unconscionable?

Ruling

1. Yes. PNB is estopped. Her passbook had the words “Combo Deposit Plan”

without any qualification. Althout PNB gave evidence that some

documents were lacking, it failed to show that Pujol knew that the

account was not yet operational. Because of the words on her passbook,

Pujol was justified in thinking that her accounts were covered by the

arrangement. When the checks[The first check was to refloat 2 vessels

that sank which belonged to the daughter in law. The second check was

to pay for round trip tickets to the US.] were dishonored, Pujol was

subjected to humiliation because she was confronted by her daughter in

law and her son-in-law would no longer hold her in high-esteem.

2. No. The Supreme Court has ruled before that a bank is under

obligation to treat the accounts of its depositors with meticulous

care whether such account consists only of a few hundred pesos

or of millions of pesos. Responsibility arising from negligence in

the performance of every kind of obligation is demandable. While

PNB's negligence in this case may not have been attended with

malice and bad faith, nevertheless, it caused serious anxiety, and

humiliation to Pujol for which she is entitled to recover

reasonable moral damages. Damages are not intended to enrich the

complainant at the expense of the defendant, and 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 facts. The

yardstick should be that it is not palpably and scandalously excessive. In

this case, the award of P100,000.00 is reasonable considering the

reputation and social standing of Pujol (former judge) and applying our

rulings in similar cases involving banks' negligence with regard to the

accounts of their depositors. The award of attorney's fees in the amount

of P20,000.00 is proper for Pujol was compelled to litigate to protect her

interest.

PNB vs Pike

Facts

1. Respondent opened a dollar savings account with petitioner bank

sometime in 1991.

2. Respondent alleged that he kept his passbook under lock and key before

he left for Japan on March 18, 1993 where he worked as a gay entertainer

and that when he returned on April 19, 1993, he discovered that the

passbook was missing along with several other valuables and that he

immediately reported to the police which resulted in the arrest and

prosecution of Mr. Joy Manuel Davasol.

3. Respondent averred that Davasol made 2 unauthorized withdrawals from

his dollar savings account with the petitioner bank amounting to $7500.

4. Respondent went to the bank and complained verbally and demanded the

return of the $7500 on the ground that he never authorized anyone to

withdraw from his account and that the signatures on the withdrawal slip

were clearly forgeries and alleged that the bank did not exercise due

diligence in handling the account.

5. Petitioner bank claims that they did exercise due diligence and that the

respondent even wrote them on May 6, 1993 requesting to withdraw the

remaining balance and nothing else and averred that on March 15, 1993,

respondent went to the bank together with a Joy Davasol to withdraw

$2000 and that respondent informed the AVP that he is leaving for Japan

and made verbal instruction to honor all transactions and withdrawals

made by his talent manager and choreographer Joy Davasol who shall

present pre-signed withdrawal slips bearing the respondent’s signature.

Petitioner bank also claims that on April 19, 1993, a certain Josephine

Balmaceda claiming to be the respondent’s sister went to the bank to

inform them of the theft of the passbook since allegedly, the respondent

was still in Japan and that the May 6 letter also contained a promise made

by the respondent not to hold the bank and its officers responsible for the

withdrawals.

6. TC ruled in favor of the respondent on the grounds that the bank did not

exercise due diligence.

7. Motion for reconsideration was denied. On appeal, CA affirmed LC’s

decision but changed the amount of damages.

8. Hence this petition.

Issue

1. WON the petitioner exercised due diligence in handling the respondent’s

account

Ruling

1. No, negligence of banking institutions should never be countenanced. The

negligence here lies in the lackadaisical attitude exhibited by employees

of petitioner PNB in their treatment of respondent Pike's US Dollar

Savings Account that resulted in the unauthorized withdrawal of

$7,500.00. Nevertheless, though its employees may be the ones

negligent, a bank's liability as an obligor is not merely vicarious but

primary, as banks are expected to exercise the highest degree of

diligence in the selection and supervision of their employees,  and having

such obligation, this Court cannot ignore the circumstances surrounding

the case at bar — how the employees of petitioner PNB turned their

heads, nay, closed their eyes to the suspicious circumstances enfolding

the two withdrawals subject of the case at bar. It may even be said that

they went out of their ways to disregard standard operating procedures

formulated to ensure the security of each and every account that they

are handling. Petitioner PNB does not deny that the withdrawal slips used

were in breach of standard operating procedures of banks in the ordinary

and usual course of banking operations.

With banks, the degree of diligence required, contrary to the

position of petitioner   PNB , is   more than   that of a good father of a

family considering that the business of banking is imbued with

public interest due to the nature of their functions. The stability of

banks largely depends on the confidence of the people in the

honesty and efficiency of banks. Thus, the law imposes on banks a

high degree of obligation to treat the accounts of its depositors with

meticulous care, always having in mind the fiduciary nature of

banking. Section 2 of Republic Act No. 8791,  which took effect on 13 June

2000, makes a categorical declaration that the State recognizes the

"fiduciary nature of banking that requires high standards of integrity and

performance." 

Though passed long after the unauthorized withdrawals in this case, the

aforequoted provision is a statutory affirmation of Supreme Court

decisions already in esse at the time of such withdrawals. We elucidated in

the 1990 case of Simex International, Inc. v. Court of Appeals,  that "the bank

is under obligation to treat the accounts of its depositors with meticulous

care, always having in mind the fiduciary nature of their relationship." 

Specifically, in culpa contractual or breach of contract, as here, moral

damages are recoverable only if the defendant has acted fraudulently or in

bad faith,  or is found guilty of gross negligence amounting to bad faith,  or in

wanton disregard of his contractual obligations.  Verily, the breach must be

wanton, reckless, malicious, or in bad faith, oppressive or abusive. 

There is no reason to disturb the trial court's finding of petitioner bank's

employees' negligence in their treatment of respondent Pike's account. In the

case on hand, the Court of Appeals sustained, and rightly so, that an award of

moral damages is warranted. For, as found by said appellate court, citing the

case of Prudential Bank v. Court of Appeals,  "the bank's negligence is a

result of lack of due care and caution required of managers and employees of

a firm engaged in so sensitive and demanding business, as banking, hence,

the award of P20,000.00 as moral damages, is proper.

The award of exemplary damages is also proper as a warning to

petitioner PNB and all concerned not to recklessly disregard their obligation

to exercise the highest and strictest diligence in serving their depositors.

Samson vs CA

Facts

1. The subject matter of this case is a commercial unit at the Madrigal

Building, located at Claro M. Recto Avenue, Sta. Cruz, Manila. The

building is owned by Susana Realty Corporation and the subject premises

was leased to private respondent Angel Santos. The lessee's

haberdashery store, Santos & Sons, Inc., occupied the premises for

almost twenty (20) years on a yearly basis. Thus, the lease contract in

force between the parties in the year 1983 provided that the term of the

lease shall be one (1) year, starting on August 1, 1983 until July 31,

1984. 

2. On June 28, 1984, lessor informed lessee that they will not renew the

lease which will expire on July 31, 1994.

3. Nonetheless, private respondent's lease contract was extended

until December 31, 1984.  Private respondent also continued to

occupy the leased premises beyond the extended term.

4. On February 5, 1985, private respondent received a letter  from the

lessor, through its Real Estate Accountant Jane F. Bartolome,

informing him of the increase in rentals, retroactive to January

1985, pending renewal of his contract until the arrival of Ms. Ma.

Rosa Madrigal (one of the owners of Susana Realty).

5. Four days later or on February 9, 1985, petitioner

Manolo Samson saw private respondent in the latter's house and

offered to buy the store of Santos & Sons and his right to lease the

subject premises Petitioner was advised to return after a week.

6. Counter proposal included “The lease contract between Santos and

Sons, Inc. and Madrigal was impliedly renewed. It will be formally

renewed this monthly when Tanya Madrigal arrives.”

7. Sale concluded. All went well for a few months. In July 1985,

however, petitioner received a notice from Susana Realty,

addressed to Santos & Sons, Inc., directing the latter to vacate the

leased premises on or before July 15, 1985.  Private respondent

failed to renew his lease over the premises and petitioner was

forced to vacate the same on July 16, 1985.

8. Petitioner then filed an action for damages against private

respondent. He imputed fraud and bad faith against private

respondent when the latter stated in his letter-proposal that his

lease contract with Susana Realty has been impliedly renewed.

Petitioner claimed that this misrepresentation induced him to

purchase the store of Santos & Sons and the leasehold right of

private respondent.

9. TC ruled in favor of petitioner on the ground that private

respondent exercised bad faith. On appeal, CA modified the award

given by the TC removing the moral and exemplary damages since

it was found that private respondent did not exercise bad faith.

10. Hence this petition.

Issue

1. WON private respondent Angel Santos committed fraud or bad

faith in representing to petitioner that his contract of lease over the

subject premises has been impliedly renewed by Susana Realty

Ruling

1. No, private respondent did not commit bad faith.

Bad faith is essentially a state of mind affirmatively operating with furtive

design or with some motive of ill-will.  It does not simply connote bad

judgment or negligence. It imports a dishonest purpose or some moral

obliquity and conscious doing of wrong.  Bad faith is thus synonymous

with fraud and involves a design to mislead or deceive another, not prompted

by an honest mistake as to one's rights or duties, but by some interested or

sinister motive. 

In contracts, the kind of fraud that will vitiate consent is one where, 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.  This is known as dolo causante or causal fraud which is basically a

deception employed by one party prior to or simultaneous to the contract in

order to secure the consent of the other.

After carefully examining the records, we sustain the finding of public

respondent Court of Appeals that private respondent was neither guilty of

fraud nor bad faith in claiming that there was implied renewal of his contract

of lease with Susana Realty. The records will bear that the original contract

of lease between the lessor Susana Realty and the lessee private respondent

was for a period of one year, commencing on August 1, 1983 until July 31,

1984. Subsequently, however, private respondent's lease was extended until

December 31, 1984. At this point, it was clear that the lessor had no

intention to renew the lease contract of private respondent for another year.

Indeed, petitioner had every opportunity to verify the status of the lease

contract of private respondent with Susana Realty. As held by this Court in

the case of Caram, Jr. v. Laureta,  the rule caveat emptor requires the

purchaser to be aware of the supposed title of the vendor and he who buys

without checking the vendor's title takes all the risks and losses consequent

to such failure. In the case at bench, the means of verifying for himself the

status of private respondent's lease contract with Susana Realty was open to

petitioner. Nonetheless, no effort was exerted by petitioner to confirm the

status of the subject lease right.  He cannot now claim that he has been

deceived.

In sum, we hold that under the facts proved, private respondent cannot be

held guilty of fraud or bad faith when he entered into the subject contract

with petitioner. Causal fraud or bad faith on the part of one of the contracting

parties which allegedly induced the other to enter into a contract must be

proved by clear and convincing evidence. This petitioner failed to do.

Dioquino vs Laureano

Facts

1. Attorney Pedro Dioquino is the owner of a car. He went to the office of

the MVO, Masbate, to register the same where he met the defendant

Federico Laureano, a patrol officer of said MVO office. Dioquino

requested Laureano to introduce him to one of the clerks in the MVO

Office, who could facilitate the registration of his car and the request was

attended to. Laureano rode on the car of Atty. Dioquino on his way to the

P.C. Barracks at Masbate.

2. While about to reach their destination, the car driven by plaintiff's driver

and with Laureano as the sole passenger was stoned by some

'mischievous boys,' and its windshield was broken. Laureano chased the

boys and he was able to catch one of them.

3. The plaintiff and Laureano with the boy returned to the P.C. barracks and

the father of the boy was called, but no satisfactory arrangements were

made about the damage to the windshield. It was likewise noted in the

decision now on appeal: "The defendant Federico Laureano refused to

file any charges against the boy and his parents because he thought that

the stone-throwing was merely accidental and that it was due to force

majeure.

4. So he did not want to take any action and after delaying the settlement,

after perhaps consulting a lawyer, the defendant Federico Laureano

refused to pay the windshield himself and challenged that the case be

brought to court for judicial adjudication.

5. There is no question that the plaintiff tried to convince the defendant

Federico Laureano just to pay the value of the windshield and he even

came to the extent of asking the wife to convince her husband to settle

the matter amicably but the defendant Federico Laureano refused to

make any settlement, clinging to the belief that he could not be held

liable because a minor child threw a stone accidentally on the windshield

and therefore, the same was due to force majeure."

Issue

1. WON Federico Laureano may be held liable for the payment of the

windshield of Atty Dioquino?

Ruling

1. No. The law being what it is, such a belief on the part of defendant

Federico Laureano was justified. The express language of Art. 1174 of

the present Civil Code which is a restatement of Art. 1105 of the Old

Civil Code, except for the addition of the nature of an obligation requiring

the assumption of risk, compels such a conclusion.

2. It reads thus: "Except in cases expressly specified by the law, or

when it is otherwise declared by stipulation, or when the nature

of the obligation requires the assumption of risk, no person shall

be responsible for those events which could not be, foreseen, or

which, though foreseen were inevitable."

3. Even under the old Civil Code then, as stressed by us in the first decision

dating back to 1908, in an opinion by Justice Mapa, the rule was well-

settled that in the absence of a legal provision or an express covenant,

"no one should be held to account for fortuitous cases." Its basis, as

Justice Moreland stressed, is the Roman law principle major casus est, cui

humana infirmitas resistere non potest. Authorities of repute are in

agreement, more specifically concerning an obligation arising from

contract "that some extraordinary circumstance independent of the will

of the obligor, or of his employees, is an essential element of a caso

fortuito."

4. If it could be shown that such indeed was the case, liability is ruled out.

There is no requirement of "diligence beyond what human care and

foresight can provide." The error committed by the lower court in holding

defendant Federico Laureano liable appears to be thus obvious. Its own

findings of fact repel the motion that he should be made to respond in

damages to the plaintiff for the broken windshield.

5. What happened was clearly unforeseen. It was a fortuitous event

resulting in a loss which must be borne by the owner of the car. It was

misled, apparently, by the inclusion of the exemption from the operation

of such a provision of a party assuming the risk, considering the nature

of the obligation undertaken.

6. A more careful analysis would have led the lower court to a different and

correct interpretation. The very wording of the law dispels any doubt that

what is therein contemplated is the resulting liability even if caused by a

fortuitous event where the party charged may be considered as having

assumed the risk incident in the nature of the obligation to be

performed.

7. It would be an affront, not only to the logic but to the realities of the

situation, if in the light of what transpired, as found by the lower court,

defendant Federico Laureano could be held as bound to assume a risk of

this nature. There was no such obligation on his part.

8. The decision of the lower court of November 2, 1965 insofar as it orders

defendant Federico Laureano to pay plaintiff the amount of P30,000.00

as damages plus the payment of costs, is hereby reversed. It is affirmed

insofar as it dismissed the case against the other two defendants, Juanita

Laureano and Aida de Laureano, and declared that no moral damages

should be awarded the parties.

La Mallorca vs CA

Facts:

1. Plaintiffs husband and wife, together with their three minor children,

namely, Milagros, Raquel and Fe boarded the Pambusco Bus No. 352

bearing plate TPU No. 757 owned and operated by LaMallorca at San

Fernando, Pampanga, bound for Anao, Mexico, Pampanga. At the time,

they were carrying with them four pieces of baggages containing their

personal belonging. The conductor(half-brother of Beltran) of the bus

issued three tickets covering the full fares of the plaintiff and their eldest

child, Milagros. No fare was charged on Raquel and Fe, since both were

below the height at which fare is charged in accordance with the

appellant's rules and regulations.

2. After about an hour's trip and after Beltran’s family got off, Mariano

Beltran went back to the bus to get the baggage he had left under one of

the seats near the door while the rest was waiting on a shaded area, he

did not notice that Raquel was following him.

3. While said Mariano Beltran was on the running board of the bus waiting

for the conductor to hand him his bayong, the bus, whose motor was not

shut off while unloading, suddenly started moving forward, evidently to

resume its trip, notwithstanding the fact that the conductor has not given

the driver the customary signal to start, since said conductor was still

attending to the baggage left behind by Mariano Beltran.

4. Incidentally, when the bus was again placed into a complete stop, it had

travelled about ten meters from the point where the plaintiffs had gotten

off. Sensing that the bus was again in motion, Mariano Beltran

immediately jumped from the running board without getting his bayong

from the conductor. He landed on the side of the road almost in front of

the shaded place where he left his wife and children.

5. At that precise time, he saw people beginning to gather around the body

of a child lying prostrate on the ground, her skull crushed, and without

life. The child was none other than his daughter Raquel, who was run

over by the bus in which she rode earlier together with her parents.

Issue

1. Whether or not La Mallorca is liable for the negligence of its driver and

for the death of Beltran’s daughter.

Ruling

1. La Mallorca is liable for damages. It was pointed out that even though, M.

Beltran s family already alighted from the bus, the fact that Beltran

went back to the bus to retrieve his bayong, the relation of carrier-

passenger relation between La Mallorca and Beltran still subsist.

2. It has been recognized as a rule that the relation of carrier and

passenger does not cease at the moment the passenger alights from the

carrier's vehicle at a place selected by the carrier at the point of

destination, but continues until the passenger has had a reasonable time

or a reasonable opportunity to leave the carrier's premises.

3. And, what is a reasonable time or a reasonable delay within this rule is to

be determined from all the circumstances. In the circumstances, it

cannot be claimed that the carrier's agent had exercised the "utmost

diligence" of a" very cautious person" required by Article 1755 of the

Civil Code to be observed by a common carrier in the discharge of its

obligation to transport safely its passengers.

4. In the first place, the driver, although stopping the bus, nevertheless did

not put off the engine. Secondly, he started to run the bus even before

the bus conductor gave him the signal to go and while the latter was still

unloading part of the baggages of the passengers Mariano Beltran and

family. The presence of said passengers near the bus was not

unreasonable and they are, therefore, to be considered still as

passengers of the carrier, entitled to the protection under their contract

of carriage.

5. But even assuming arguendo that the contract of carriage has already

terminated, herein petitioner can be held liable for the negligence of its

driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the

Civil Code. Paragraph 7 of the complaint, which reads That aside from

the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs'

daughter, was caused by the negligence and want of exercise of the

utmost diligence of a very cautious person on the part of the defendants

and their agent, necessary to transport plaintiffs and their daughter

safely as far as human care and foresight can provide in the operation of

their vehicle. The driver did not exercise utmost diligence required of

him; hence, petitioner must be adjudged peculiarly liable for the death of

the child Raquel Beltran

PAL vs CA

Facts

1. Samson is a licensed aviator employed by the Philippine Airlines. He was

partnered with another pilot Bustamante. Samson had complained on

previous occasions to PAL that Bustamante was slow in reacting and was

having lapses of poor judgment during flights. PAL however still allowed

Bustamante to continue flying.

2. On a certain flight, Bustamante overshot the airfield while landing the

plane at the Daet airport. Samson tried to control the plane, but did not

succeed. The plane crash-landed beyond the runway into a mangrove.

Samson hit his head on the windshield due to the impact of the crash. He

suffered head injuries such as brain concussions and wounds on his

forehead. To make matters worse, plaintiff was discharged from

employment. Samson then filed an action for damages against PAL.

Issue

1. Whether or not PAL is liable for damages.

Held

1. The Court held that PAL is liable for damages. There was gross negligence

on the part of PAL because despite the knowledge of Bustamante’s

condition the still allowed him to continue flying. Bustamante had a tumor

in his nasopharynx which affected his vision. As provided in Articles 1732,

1733, and 1756 of the NCC, PAL being a common carrier should have

exercised extraordinary diligence in the supervision of their employees

and utmost diligence in bringing passengers to their destination.

The court affirmed the decision of the trial court in awarding damages.

Private respondent is entitled to P198,000.00 as unearned income or

compulsory damages, P80,000.00 for moral damages, P20,000 as attorney’s

fees and P5,000 as expenses for litigation. This claim of the plaintiff for loss

and impairment of earning capacity is based on the provision of Art. 2205,

NCC. Even from the standpoint of the petitioner that there is employer-

employee relationship between it and private respondent arising from the

contract of employment, private respondent is still entitled to moral damages

in view of the finding of bad faith or malice, applying the provisions of Art.

2220 of the NCC.

Philippine National Construction Corporation vs CA

Facts

1. PASUDECO, sugarcane transporter, requested permission from Toll

Regulatory Board (TRB) to pass through NCLEX as the national bridges

along Abacan-Angeles and Sapang Maragul via Magalang, Pampanga

were heavily damaged by the eruption of Mt. Pinatubo in 1991. PNCC,

franchisee that operates and maintains NCLEX, was furnished with the

copy of the request to comment on.

2. Thereafter, TRB and PASUDECO entered into a Memorandum Agreement

wherein PNCC was also furnished with a copy. The latter was allowed to

enter and pass through the NLEX provided they abide to the terms and

conditions agreed upon.

3. At around 2:30 a.m. on January 23, 1993, Alex Sendin, the PNCC security

supervisor, and his co-employees Eduardo Ducusin and Vicente Pascual

were patrolling Km. 72 going north of the NLEX and saw a pile of

sugarcane in the middle portion. Sundin, Ducusin and Pascual requested

PASUDECO to clear the area as it was hazardous for the travelers.

4. However, Engineer Oscar Mallari, PASUDECO's equipment supervisor and

transportation superintendent, told them that no equipment operator

was available as it was still very early. Thereafter, Sendin and company

went back to Km. 72 and manned the traffic.

5. At around 4:00 a.m., five(5)PASUDECO men arrived, and started clearing

the highway of the sugarcane. They stacked the sugarcane at the side of

the road leaving a few flattened sugarcanes scattered on the road. As

the bulk of the sugarcanes had been piled and transferred along the

roadside, Sendin thought there was no longer a need to man the traffic.

6. As dawn was already approaching, Sendin and company removed the

lighted cans and lane dividers. Sendin went to his office in Sta. Rita,

Guiguinto, Bulacan, and made the necessary report.

7. At about 6:30 a.m., Rodrigo S. Arnaiz was driving his two-door Toyota

Corolla with plate number FAG 961 along the NLEX at about 65

kilometers per hour. He was with his sister Regina Latagan, and his

friend Ricardo Generalao on their way to Baguio to attend their

grandmother's first death anniversary.

8. As the vehicle ran over the scattered sugarcane, it flew out of control

and turned turtle several times. The accident threw the car about fifteen

paces away from the scattered sugarcane. Latagan sustained injuries

and Arnaiz car was totally wrecked.

ssue

1. Whether or not there was gross negligence on the part of Pasudeco and

PNCC and the latter be made to pay for damages.

Ruling

1. Pasudeco and PNCC are jointly and solidarily liable. There are three

elements of a quasi-delict:

a) damages suffered by the plaintiff;

b) fault or negligence of the defendant, or some other person for whose

acts he must respond; and

c) the connection of cause and effect between the fault or negligence of

the defendant and the damages incurred by the plaintiff. Article 2176

of the New Civil Code provides:

Whoever by act or omission causes damage to

another, there being fault or negligence, is obliged to pay

for the damage done. Such fault or negligence, if there is

no pre-existing contractual relation between the parties,

is called a quasi-delict and is governed by the provisions

of this Chapter.

Negligence is the omission to do something which a reasonable man, guided

by those considerations which ordinarily regulate the conduct of human

affairs, would do, or the doing of something which a prudent and reasonable

man would do. It also refers to the conduct which creates undue risk of harm

to another, the failure to observe that degree of care, precaution and

vigilance that the circumstance justly demand, whereby that other person

suffers injury. The Court declared the test by which to determine the

existence of negligence in Picart v. Smith viz : In the case at bar, it is clear

that the petitioner failed to exercise the requisite diligence in maintaining

the NLEX safe for motorists. The petitioner should have foreseen that the wet

condition of the highway would endanger motorists passing by at night or in

the wee hours of the morning. The petitioner cannot escape liability under

the MOA between PASUDECO and TRB, since respondent Latagan was not a

party thereto.

We agree with the following ruling of the CA: Both defendants, appellant

PASUDECO and appellee PNCC, should be held liable. PNCC, in charge of the

maintenance of the expressway, has been negligent in the performance of

its duties. The obligation of PNCC should not be relegated to, by virtue of a

private agreement, to other parties. PNCC declared the area free from

obstruction since there were no piles of sugarcane, but evidence shows there

were still pieces of sugarcane stalks left flattened by motorists.

There must be an observance of that degree of care, precaution, and

vigilance which the situation demands. There should have been sufficient

warning devices considering that there were scattered sugarcane stalks still

left along the tollway. The records show, and as admitted by the parties, that

Arnaiz's car ran over scattered sugarcanes spilled from a hauler truck.

Moreover, the MOA refers to accidents or damages to the toll facilities. It

does not cover damages to property or injuries caused to motorists on the

NLEX who are not privies to the MOA .PASUDECO's negligence in

transporting sugarcanes without proper harness/straps, and that of PNCC in

removing the emergency warning devices, were two successive negligent

acts which were the direct and proximate cause of Latagan's injuries.

As such, PASUDECO and PNCC are jointly and severally liable.