G.R. No.

L-10134 June 29, 1957

SABINA EXCONDE, plaintiff-appellant,

vs.
DELFIN CAPUNO and DANTE CAPUNO, defendants-appellees.

Magno T. Bueser for appellant.

Alver Law Offices and Edon B. Brion and Vencedor A. Alimario for appellees.

BAUTISTA ANGELO, J.:

Dante Capuno, son of Delfin Capuno, was accused of double homicide through reckless imprudence for the death of Isidoro
Caperina and Amado Ticzon on March 31, 1949 in the Court of First Instance of Laguna (Criminal Case No. 15001). During the
trial, Sabina Exconde, as mother of the deceased Isidoro Caperina, reserved her right to bring a separate civil action for
damages against the accused. After trial, Dante Capuno was found guilty of the crime charged and, on appeal, the Court
Appeals affirmed the decision. Dante Capuno was only (15) years old when he committed the crime.

In line with her reservation, Sabina Exconde filed the present action against Delfin Capuno and his son Dante Capuno asking
for damages in the aggregate amount of P2,959.00 for the death of her son Isidoro Caperiña. Defendants set up the defense
that if any one should be held liable for the death of Isidoro Caperina, he is Dante Capuno and not his father Delfin because at
the time of the accident, the former was not under the control, supervision and custody, of the latter. This defense was
sustained by the lower court and, as a consequence it only convicted Dante Capuno to pay the damages claimed in the
complaint. From decision, plaintiff appealed to the Court of Appeals but the case was certified to us on the ground that the
appeal only involves questions of law.

It appears that Dante Capuno was a member of the Boy Scouts Organization and a student of the Bilintawak Elementary
School situated in a barrio in the City of San Pablo and on March 31, 1949 he attended a parade in honor of Dr. Jose Rizal in
said city upon instruction of the city school's supervisor. From the school Dante, with other students, boarded a jeep and when
the same started to run, he took hold of the wheel and drove it while the driver sat on his left side. They have not gone far when
the jeep turned turtle and two of its passengers, Amado Ticzon and Isidore Caperiña, died as a consequence. It further appears
that Delfin Capuno, father of Dante, was not with his son at the time of the accident, nor did he know that his son was going to
attend a parade. He only came to know it when his son told him after the accident that he attended the parade upon instruction
of his teacher.

The only issue involved in this appeal is whether defendant Delfin Capuno can be held civilly liable, jointly and severally with his
son Dante, for damages resulting from the death of Isidoro Caperiña caused by the negligent act of minor Dante Capuno.

The case comes under Article 1903 of the Spanish Civil Code, paragraph 1 and 5, which provides:

ART. 1903. The obligation impossed by the next preceding articles is enforceable not only for personal acts and
omissions, but also for those of persons for whom another is responsible.

The father, and, in case of his death or incapacity, the mother, are liable for any damages caused by the minor
children who live with them.

xxx xxx xxx

Finally, teachers or directors of arts and trades are liable for any damages caused by their pupils or apprentices while
they are under their custody.

Plaintiff contends that defendant Delfin Capuno is liable for the damages in question jointly and severally with his son Dante
because at the time the latter committed the negligent act which resulted in the death of the victim, he was a minor and was
then living with his father, and inasmuch as these facts are not disputed, the civil liability of the father is evident. And so, plaintiff
contends, the lower court erred in relieving the father from liability. We find merit in this claim. It is true that under the law above
quoted, "teachers or directors of arts and trades are liable for any damages caused by their pupils or apprentices while they are
under their custody", but this provision only applies to an institution of arts and trades and not to any academic educational
institution (Padilla, Civil Law, 1953, Ed., Vol. IV, p. 841; See 12 Manresa, 4th Ed., p. 557). Here Dante capuno was then a
student of the Balintawak Elementary School and as part of his extra-curricular activity, he attended the parade in honor of Dr.
Jose Rizal upon instruction of the city school's supervisor. And it was in connection with that parade that Dante boarded a jeep
with some companions and while driving it, the accident occurred. In the circumstances, it is clear that neither the head of that
school, nor the city school's supervisor, could be held liable for the negligent act of Dante because he was not then a student of
an institute of arts and trades as provided by law. The civil liability which the law impose upon the father, and, in case of his
death or incapacity, the mother, for any damages that may be caused by the minor children who live with them, is obvious. This
is necessary consequence of the parental authority they exercise over them which imposes upon the parents the "duty of
supporting them, keeping them in their company, educating them and instructing them in proportion to their means", while, on
the other hand, gives them the "right to correct and punish them in moderation" (Articles 154 and 155, Spanish Civil Code). The
only way by which they can relieve themselves of this liability is if they prove that they exercised all the diligence of a good
father of a family to prevent the damage(Article 1903, last paragraph, Spanish Civil Code). This defendants failed to prove.
WHEREFORE, the decision appealed from is modified in the sense that defendants Delfin Capuno and Dante Capuno shall
pay to plaintiff, jointly and severally, the sum of P2,959.00 as damages, and the costs of action.

G.R. No. L-14342 May 30, 1960

CIRIACO L. MERCADO, petitioner,

vs.
THE COURT OF APPEALS, MANUEL QUISUMBING, JR., ET AL., respondents.

Abad Santos and Pablo for petitioner.

Sycip, Quisumbing, Salazar and Associates for respondents.

LABRADOR, J.:

This is a petition to review a decision of the Court of Appeals, which condemned petitioner to pay P2,000 as moral damages
and P50 for medical expenses, for a physical injury caused by the son of petitioner, Augusto Mercado, on a classmate, Manuel
Quisumbing, Jr., both pupils of the Lourdes Catholic School, Kanlaon, Quezon City. The case had originated in the Court of
First Instance of Manila, Hon. Bienvenido A. Tan, presiding, which dismissed the complaint filed by Manuel Quisumbing, Jr. and
his father against petitioner, father of the above-mentioned Mercado. The facts found by the Court of Appeals are as follows:

Plaintiff-appellant Manuel Quisumbing, Jr. is the son of his co-plaintiff-appellants Ana Pineda and Manuel L.
Quisumbing, while Augusto Mercado is the son of defendant-appellee Ciriaco L. Mercado, Manuel Quisumbing, Jr.
and Augusto Mercado were classmates in the Lourdes Catholic School on Kanlaon, Quezon City. A "pitogo", which
figures prominently in this case, may be described as an empty nutshell used by children as a piggy bank. On
February 22, 1956, Augusto Mercado and Manuel Quisumbing, Jr. quarrelled over a "pitogo". As a result, Augusto
wounded Manuel, Jr. on the right cheek with a piece of razor.

xxx xxx xxx

The facts of record clearly show that it was Augusto Mercado who started the aggression. Undeniably, the "pitogo"
belonged to Augusto Mercado but he lent it to Benedicto P. Lim and in turn Benedicto lent it to Renato Legaspi.
Renato was not aware that the "pitogo" belonged to Augusto, because right after Benedicto gave it to him, Benedicto
ran away to get a basket ball with which they could play. Manuel Quisumbing, Jr. was likewise unaware that the
"pitogo" belonged to Augusto. He thought it was the "pitogo" of Benedicto P. Lim, so that when Augusto attempted to
get the "pitogo" from Renato, Manuel, Jr. told him not to do so because Renato was better at putting the chain into
the holes of the "pitogo". However, Augusto resented Manuel, Jr.'s remark and he aggresively pushed the latter. The
fight started then. After Augusto gave successive blows to Manuel, Jr., and the latter was clutching his stomach
which bore the brunt of Augusto's anger, Augusto seeing that Manuel, Jr. was in a helpless position, cut him on the
right check with a piece of razor.

xxx xxx xxx

Although the doctor who treated Manuel Quisumbing, Jr., Antonio B. Past, testified for plaintiffs-appellants, he did not
declare as to the amount of fees he collected from plaintiff-appellants for the treatment of Manuel, Jr. the child was
not even hospitalized for the wound. We believe that the sum of P50.00 is a fair approximation of the medical
expenses incurred by plaintiffs-appellants.

xxx xxx xxx

The damages specified in paragraphs C and D of the aforequoted portion of plaintiffs-appellant's complaint come
under the class of moral damages. The evidence of record shows that the child suffered moral damages by reason of
the wound inflicted by Augusto Mercado. Though such kind of damages cannot be fully appreciated in terms of
money, we believe that the sum of P2,000.00 would fully compensate the child.

As second cause of action, plaintiffs-appellants pray for P5,000.00 covering the moral damages they allegedly
suffered due to their son's being wounded; and the sum of P3,000.00 as attorney's fees. The facts of record do not
warrant the granting of moral damages to plaintiffs-appellants Manuel Quisumbing and Ana Pineda. "In law mental
anguish is restricted, as a rule, to such mental pain or suffering as arises from an injury or wrong to the person
himself, as distinguished from that form of mental suffering which is the accompaniment of sympathy or sorrow for
another's suffering of which arises from a contemplation of wrong committed on the person of another. Pursuant to
the rule stated, a husband or wife cannot recover for mental suffering caused by his or her sympathy for the other's
suffering. Nor can a parent recover for mental distress and anxiety on account of physical injury sustained by a child
or for anxiety for the safety of his child placed in peril by the negligence of another." (15 Am. Jur. 597). Plaintiffs-
appellants are not entitled to attorney's fees, it not appearing that defendant-appellee had wantonly disregarded their
claim for damages.
In the first, second and third assignments of error, counsel for petitioner argues that since the incident of the inflicting of the
wound on respondent occurred in a Catholic School (during recess time), through no fault of the father, petitioner herein, the
teacher or head of the school should be held responsible instead of the latter. This precise question was brought before this
Court in Exconde vs. Capuno and Capuno, 101 Phil., 843, but we held, through Mr. Justice Bautista:

We find merit in this claim. It is true that under the law above-quoted, "teachers or directors of arts and trades are
liable for any damage caused by their pupils or apprentices while they are under their custody", but this provision only
applies to an institution of arts and trades and not to any academic educational institution (Padilla, Civil Law, 1953
Ed., Vol. IV, p. 841; See 12 Manresa, 4th Ed., p. 557)

The last paragraph of Article 2180 of the Civil Code, upon which petitioner rests his claim that the school where his son was
studying should be made liable, is as follows:

ART. 2180. . . .

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.

It would be seem that the clause "so long as they remain in their custody," contemplates a situation where the pupil lives and
boards with the teacher, such that the control, direction and influence on the pupil supersedes those of the parents. In these
circumstances the control or influence over the conduct and actions of the pupil would pass from the father and mother to the
teacher; and so would the responsibility for the torts of the pupil. Such a situation does not appear in the case at bar; the pupils
appear to go to school during school hours and go back to their homes with their parents after school is over. The situation
contemplated in the last paragraph of Article 2180 does not apply, nor does paragraph 2 of said article, which makes father or
mother responsible for the damages caused by their minor children. The claim of petitioner that responsibility should pass to
the school must, therefore, be held to be without merit.

We next come to the claim of petitioner that the moral damages fixed at P2,000 are excessive. We note that the wound caused
to respondent was inflicted in the course of an ordinary or common fight between boys in a grade school. The Court of Appeals
fixed the medical expenses incurred in treating and curing the wound at P50. Said court stated that the wound did not even
require hospitalization. Neither was Mercado found guilty of any offense nor the scar in Quisumbing's face pronounced to have
caused a deformity, unlike the case of Araneta, et al. vs. Arreglado, et al., 104 Phil., 529; 55 Off. Gaz. (9) 1561. Petitioner's
counsel argues that if death call for P3,000 to P6,000, certainly the incised wound could cause mental pain and suffering to the
tune of P2,000.

In the decision of the Court of Appeals, said court pronounces that the child Quisumbing suffered moral damages "by reason of
the wound inflicted by Augusto Mercado." While moral damages included physical suffering, which must have been caused to
the wounded boy Quisumbing (Art. 2217, Civil Code), the decision of the court below does not declare that any of the cases
specified in Article 2219 of the Civil Code in which moral damages may be recovered, has attended or occasioned the physical
injury. The only possible circumstance in the case at bar in which moral damages are recoverable would be if a criminal offense
or a quasi-delict has been committed.

It does not appear that a criminal action for physical injuries was ever presented. The offender, Augusto Mercado, was nine
years old and it does not appear that he had acted with discernment when he inflicted the physical injuries on Manuel
Quisumbing, Jr.

It is possible that the Court of Appeals may have considered Augusto Mercado responsible for or guilty, of a quasi-delict
causing physical injuries, within the meaning of paragraph 2 of Article 2219. Even if we assume that said court considered
Mercado guilty of a quasi-delict when it imposed the moral damages, yet the facts found by said court indicate that Augusto's
resentment, which motivated the assault, was occasioned by the fact that Manuel, Jr. had tried to intervene in or interfere with
the attempt of Mercado to get "his pitogo from Renato." This is, according to the decision appealed from, the reason why
Mercado was incensed and pushed Quisumbing who, in turn, also pushed Mercado. It is, therefore, apparent that the proximate
cause of the injury caused to Quisumbing was Quisumbing's own fault or negligence for having interfered with Mercado while
trying to get the pitogo from another boy. (Art. 2179, Civil Code.)

After considering all the facts as found by the Court of Appeals, we find that none of the cases mentioned in Article 2219 of the
Civil Code, which authorizes the grant of moral damages, was shown to have existed. Consequently, the grant of moral
damages is not justified.

For the foregoing considerations, the decision appealed from is hereby reversed and the petitioner is declared exempt or free
from the payment of moral damages. The award of P50 for medical expenses, however, is hereby affirmed. Without costs.

PALISOC v. BRILLANTES
G.R. No. L-29025 [October 4, 1971]
FACTS:

Deceased Dominador Palisoc and defendant Virgilio Daffon were automotive

mechanics students at the Manila Technical Institute (MTI). In the afternoon of
March 10, 1966 during recess, an altercation transpired between the deceased and
the defendant. At the time of the incident, Dominador was sixteen years old while
Virgilio was already of age. Virgilio was working on a machine with Dominador
looking at them. The situation prompted Virgilio to remark that Dominador was
acting like a foreman. As a result, Dominador slapped Virgilio on the face. Virgilio
retaliated by inflicting severe blows upon Dominador’s stomach, which caused the
latter to stumble upon an engine block and faint. The latter died, the cause of death
being “shock due to traumatic fracture of the ribs”. The parents of Dominador filed
an action for damages against (1) Virgilio, (2) Valenton, the head/president of MTI,
(3) Quibule who was the teacher in charge at the time of the incident, and
(4) Brillantes who is a member of the board of directors and former sole proprietor of
MTI.
The trial court held Virgilio liable but absolved the other defendants-officials. It
stated that the clause “so long as they remain in their custody” contained in Article
2180 of the Civil Code applies only where the pupil lives and boards with the
teachers, such that the control or influence on the pupil supersedes those of the
parents., and such control and responsibility for the pupil’s actions would pass from
the father and mother to the teachers. This legal conclusion was based on the dictum
in Mercado v. CA, which in turn based its decision in Exconde v. Capuno. The trial
court held that Article 2180 was not applicable in this case, as defendant Virgilio did
not live with the defendants-officials at the time of the incident. Hence, this petition.

ISSUE:

Who must be held liable for damages for the death of Dominador together
with the defendant?

HELD:

The head/president and teacher of MTI (Valenton and Quibule respectively)

were held liable jointly and severally with the Virgilio for damages. No
liability attachesto Brillantes as a mere member of the MTI board of directors.
Similarly, MTI may not be held liable since it had not been properly impleaded as
party defendant.
The phrase used in Article 2180, “so long as the students remain in their custody”
means the protective and supervisory custody that the school and its heads and
teachers exercise over the pupils and students for as long as they are at attendance in
the school, including recess time. There is nothing in the law that requires that for
such liability to attach the pupil or student who commits the tortuous act must live
and board in the school. The dicta in the cases of Mercado as well as in Exconde v.
Capuno on which it relied are deemed to have been set aside. The rationale of such
liability of school heads and teachers for the tortious acts of their pupils and
students, so long as they remain in their custody, is that they stand, in loco parentis
to a certain extent to their pupils and students and are called upon to “exercise
reasonable supervision over the conduct of the child.” In this case, The unfortunate
death resulting from the fight between the protagonists-students could have been
avoided, had said defendants complied with their duty of providing adequate
supervision over the activities of the students in the school premises to protect their
students from harm. Since Valenton and Quibule failed to prove that they observed
all the diligence of a good father of a family to prevent damage, they cannot likewise
avail of the exemption to the liability. The judgment of the appellatecourt was
modified, while claim for compensatory damages was increased in accordancewith
recent jurisprudence and the claim for exemplary damages denied in the absence of
gross negligence on the part of the said defendants.

Amadora vs CA
Amadora vs. CA
GR No. L47745, April 15, 1988

FACTS:

Alfredo Amadora, while in the auditorium of the school, was mortally hit by a gun by Pablito
Daffon resulting to the former’s death. Daffon was convicted of homicide through reckless
imprudence. The victim’s parents, herein petitioners, filed a civil action for damages against
Colegio de San Jose-Recoletos, its rectors, high school principal, dean of boys, the physics
teacher together with Daffon and 2 other students. Complaints against the students were
dropped. Respondent Court absolved the defendants completely and reversed CFI Cebu’s
decision for the following reasons: 1. Since the school was an academic institution of learning
and not a school of arts and trades 2. That students were not in the custody of the school since the
semester has already ended 3. There was no clear identification of the fatal gun, and 4. In any
event, defendants exercised the necessary diligence through enforcement of the school
regulations in maintaining discipline. Petitioners on othe other hand claimed their son was under
school custody because he went to school to comply with a requirement for graduation
(submission of Physics reports).

ISSUE: WON Collegio de San Jose-Recoletos should be held liable.

HELD:

The time Alfredo was fatally shot, he was in the custody of the authorities of the school
notwithstanding classes had formally ended when the incident happened. It was immaterial if he
was in the school auditorium to finish his physics requirement. What was important is that he
was there for a legitimate purpose. On the other hand, the rector, high school principal and the
dean of boys cannot be held liable because none of them was the teacher-in-charge as defined in
the provision. Each was exercising only a general authority over the students and not direct
control and influence exerted by the teacher placed in-charge of particular classes.

In the absence of a teacher- in charge, dean of boys should probably be held liable considering
that he had earlier confiscated an unlicensed gun from a student and later returned to him without
taking disciplinary action or reporting the matter to the higher authorities. Though it was clear
negligence on his part, no proof was shown to necessarily link this gun with the shooting
incident.

Collegio San Jose-Recoletos cannot directly be held liable under the provision because only the
teacher of the head of school of arts and trade is made responsible for the damage caused by the
student. Hence, under the facts disclosed, none of the respondents were held liable for the injury
inflicted with Alfredo resulting to his death.
Petition was denied.

Amadora v. CA (1988)

Topic: Substitute and Special Parental Authority

SUMMARY: Under Article 2180 of the Civil Code only the teacher or the head of the school
of arts and trades is made responsible for the damage caused by the student or apprentice.
Thus, the school, its rector, the high school principal, and the dean of boys cannot be held
liable.

FACTS:

On April 13, 1972, while they were in the auditorium of their school, the Colegio de San
Jose-Recoletos, a classmate, Pablito Damon, fired a gun that mortally hit Alfredo Amadora.

Daffon was convicted of homicide thru reckless imprudence. Additionally, petitioners, as the
victim's parents, filed a civil action for damages under Article 2180 of the Civil Code against
the Colegio de San Jose-Recoletos, its rector, the high school principal, the dean of boys,
and the physics teacher, together with Daffon and two other students, through their
respective parents. The complaint against the students was later dropped.

After trial, the Court of First Instance of Cebu held the remaining defendants liable to the
plaintiffs in the sum of P294,984.00, representing death compensation, loss of earning
capacity, costs of litigation, funeral expenses, moral damages, exemplary damages, and
attorney's fees.

On appeal to the respondent court, however, the decision was reversed and all the
defendants were completely absolved.

ISSUE/S:

 Whether or not respondents may be held liable for the acts of its students
o NO. Applying Article 2180 of the Civil Code:
o At the time Alfredo Amadora was fatally shot, he was still in the custody of the
authorities of Colegio de San Jose-Recoletos notwithstanding that the fourth
year classes had formally ended. It was immaterial if he was in the school
auditorium to finish his physics experiment or merely to submit his physics
report for what is important is that he was there for a legitimate purpose. As
previously observed, even the mere savoring of the company of his
friends in the premises of the school is a legitimate purpose that would
have also brought him in the custody of the school authorities.
o The rector, the high school principal and the dean of boys cannot be
held liable because none of them was the teacher-in-charge as
previously defined. Each of them was exercising only a general authority
over the student body and not the direct control and influence exerted by the
teacher placed in charge of particular classes or sections and thus
immediately involved in its discipline. The evidence of the parties does not
disclose who the teacher-in-charge of the offending student was. The mere
fact that Alfredo Amadora had gone to school that day in connection
 with his physics report did not necessarily make the physics teacher,
respondent Celestino Dicon, the teacher-in-charge of Alfredo's killer.
o At any rate, assuming that he was the teacher-in-charge, there is no
showing that Dicon was negligent in enforcing discipline upon Daffon or
that he had waived observance of the rules and regulations of the
school or condoned their non-observance. His absence when the tragedy
happened cannot be considered against him because he was not supposed
or required to report to school on that day. And while it is true that the
offending student was still in the custody of the teacher-in-charge even if the
latter was physically absent when the tort was committed, it has not been
established that it was caused by his laxness in enforcing discipline upon the
student. On the contrary, the private respondents have proved that they had
exercised due diligence, through the enforcement of the school regulations, in
maintaining that discipline.
o In the absence of a teacher-in-charge, it is probably the dean of boys
who should be held liable especially in view of the unrefuted evidence
that he had earlier confiscated an unlicensed gun from one of the
students and returned the same later to him without taking disciplinary
action or reporting the matter to higher authorities. While this was clearly
negligence on his part, for which he deserves sanctions from the school, it
does not necessarily link him to the shooting of Amador as it has not
been shown that he confiscated and returned pistol was the gun that
killed the petitioners' son.
o Finally, as previously observed, the Colegio de San Jose-Recoletos cannot
be held directly liable under the article because only the teacher or the
head of the school of arts and trades is made responsible for the
damage caused by the student or apprentice. Neither can it be held to
answer for the tort committed by any of the other private respondents for
none of them has been found to have been charged with the custody of the
offending student or has been remiss in the discharge of his duties in
connection with such custody.

NOTES:

In a footnote, Justice Teehankee said he agreed with Justice Reyes' dissent in the Exconde
Case but added that "since the school involved at bar is a non-academic school, the
question as to the applicability of the cited codal provision to academic institutions will have
to await another case wherein it may properly be raised."

This is the case.

Unlike in Exconde and Mercado, the Colegio de San Jose-Recoletos has been directly
impleaded and is sought to be held liable under Article 2180; and unlike in Palisoc, it is not a
school of arts and trades but an academic institution of learning. The parties herein have
also directly raised the question of whether or not Article 2180 covers even establishments
which are technically not schools of arts and trades, and, if so, when the offending student is
supposed to be "in its custody."
After an exhaustive examination of the problem, the Court has come to the conclusion that
the provision in question should apply to all schools, academic as well as non-academic.
Where the school is academic rather than technical or vocational in nature, responsibility for
the tort committed by the student will attach to the teacher in charge of such student,
following the first part of the provision. This is the general rule. In the case of establishments
of arts and trades, it is the head thereof, and only he, who shall be held liable as an
exception to the general rule. In other words, teachers in general shall be liable for the acts
of their students except where the school is technical in nature, in which case it is the head
thereof who shall be answerable. Following the canon ofreddendo singula singulis "teachers"
should apply to the words "pupils and students" and "heads of establishments of arts and
trades" to the word "apprentices."

G.R. No. 84698 February 4, 1992

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

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

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

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

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

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

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

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

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

At any rate, the law holds the teachers and heads of the school staff liable unless they relieve themselves
of such liability pursuant to the last paragraph of Article 2180 by "proving that they observed all the
diligence to prevent damage." This can only be done at a trial on the merits of the case. 5
While we agree with the respondent appellate court that the motion to dismiss the complaint was correctly denied and the
complaint should be tried on the merits, we do not however agree with the premises of the appellate court's ruling.

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

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

When an academic institution accepts students for enrollment, there is established a contract between them, resulting in
bilateral obligations which both parties are bound to comply with. 7 For its part, the school undertakes to provide the student
with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or
a profession. On the other hand, the student covenants to abide by the school's academic requirements and observe its rules
and regulations.

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

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

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

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

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

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

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

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

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

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

WHEREFORE, the foregoing premises considered, the petition is DENIED. The court of origin (RTC, Manila, Br. 47) is hereby
ordered to continue proceedings consistent with this ruling of the Court. Costs against the petitioners. SO ORDERED.

MAXIMO SOLIMAN JR. represented by guardian VIRIGINIA SOLIMAN vs. HON. JUDGE TUAZON and
REPUBLIC CENTRAL COLLEGES

FACTS:

1. Security guard JIMMY SOLOMON, who was on duty at the time of the incident in the Republic Central
Colleges, shot petitioner Maximino on the abdomen. Maximino was treated at the Angeles Medical
Center and as per doctor’s opinion, he may not be able to attend to his regular classes and will be
incapacitated in the performance of his usual work for a duration of three to four months.
2. Petitioner Maximino filed a civil complaint for damages against Republic Central Colleges and Jimmy
Solomon.
3. Private respondent Colleges filed a motion to dismiss stating that the complaint stated no cause of
action against it.
a. It was not the employer of the security guard.
b. Art. 2180 does not apply to it because said par. Holds teachers and heads of establishment of
arts and trades liable for damages caused by their pupils and students or apprentices while
security guard Jimmy was not a pupil, student or apprentice of the school.
4. Lower court granted the MTD.
5. Hence this petition. It is contended that the trial judge committed GAD when he refused to apply the
provisions of Article 2180 as well as 349, 350 and 352 of the Civil Code.

ISSUE: Whether or not respondent Colleges is liable.

HELD: YES

The first par. Of 2180 offers no basis for the liability of the Colleges for the alleged wrongful acts of the security
guard because it is not the employer of the said security guard.

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. 3 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; thse 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.

Similarly the 7th par. Of the same article is not available in imposing liability since clearly Security Guard
Solomon is not a pupil, student or apprentice of the school. The school had no substitute parental authority
over Solomon.

School is liable on the basis of its contractual obligation.

In the case of PSBA vs. CA, the Court held that Article 2180 of the Civil Code was not applicable where a
student had been injured by one who was an outsider or by one over whom the school did not exercise any
custody or control or supervision. At the same time, however, the Court stressed that an implied contract may
be held to be established between a school which accepts students for enrollment, on the one hand, and the
students who are enrolled, on the other hand, which contract results in obligations for both parties.

When an academic institution accepts students for enrollment, there is established

a contract between them, resulting in bilateral obligations which 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

As PSBA, states, acts which are tortious or allegedly tortious in character may at the same time constitute
breach of a contractual, or other legal, obligation. Respondent trial judge was in serious error when he
supposed that petitioner could have no cause of action other than one based on Article 2180 of the Civil Code.
Respondent trial judge should not have granted the motion to dismiss but rather should have, in the interest
of justice, allowed petitioner to prove acts constituting breach of an obligation ex contractu or ex lege on the
part of respondent Colleges.

G.R. No. 156109 November 18, 2004

KHRISTINE REA M. REGINO, Assisted and Represented by ARMANDO REGINO, petitioner,

vs.
PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY, RACHELLE A. GAMUROT and ELISSA BALADAD,
respondents.

Upon enrolment, students and their school enter upon a reciprocal contract. The students agree to abide by the standards of
academic performance and codes of conduct, issued usually in the form of manuals that are distributed to the enrollees at the
start of the school term. Further, the school informs them of the itemized fees they are expected to pay. Consequently, it
cannot, after the enrolment of a student, vary the terms of the contract. It cannot require fees other than those it specified upon
enrolment.

The Case

Before the Court is a Petition for Review under Rule 45,1 seeking to nullify the July 12, 20022 and the November 22, 20023
Orders of the Regional Trial Court (RTC) of Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U-7541. The decretal
portion of the first assailed Order reads:

"WHEREFORE, the Court GRANTS the instant motion to dismiss for lack of cause of action."4

The second challenged Order denied petitioner's Motion for Reconsideration.

The Facts

Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science
and Technology (PCST). Reared in a poor family, Regino went to college mainly through the financial support of her relatives.
During the second semester of school year 2001-2002, she enrolled in logic and statistics subjects under Respondents
Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.

In February 2002, PCST held a fund raising campaign dubbed the "Rave Party and Dance Revolution," the proceeds of which
were to go to the construction of the school's tennis and volleyball courts. Each student was required to pay for two tickets at
the price of P100 each. The project was allegedly implemented by recompensing students who purchased tickets with
additional points in their test scores; those who refused to pay were denied the opportunity to take the final examinations.
Financially strapped and prohibited by her religion from attending dance parties and celebrations, Regino refused to pay for the
tickets. On March 14 and March 15, 2002, the scheduled dates of the final examinations in logic and statistics, her teachers --
Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests. According to petitioner,
Gamurot made her sit out her logic class while her classmates were taking their examinations. The next day, Baladad, after
announcing to the entire class that she was not permitting petitioner and another student to take their statistics examinations for
failing to pay for their tickets, allegedly ejected them from the classroom. Petitioner's pleas ostensibly went unheeded by
Gamurot and Baladad, who unrelentingly defended their positions as compliance with PCST's policy.

On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint5 for damages against PCST, Gamurot and Baladad. In her
Complaint, she prayed for P500,000 as nominal damages; P500,000 as moral damages; at least P1,000,000 as exemplary
damages; P250,000 as actual damages; plus the costs of litigation and attorney's fees.

On May 30, 2002, respondents filed a Motion to Dismiss6 on the ground of petitioner's failure to exhaust administrative
remedies. According to respondents, the question raised involved the determination of the wisdom of an administrative policy of
the PCST; hence, the case should have been initiated before the proper administrative body, the Commission of Higher
Education (CHED).

In her Comment to respondents' Motion, petitioner argued that prior exhaustion of administrative remedies was unnecessary,
because her action was not administrative in nature, but one purely for damages arising from respondents' breach of the laws
on human relations. As such, jurisdiction lay with the courts.

On July 12, 2002, the RTC dismissed the Complaint for lack of cause of action.

Issues

In her Memorandum, petitioner raises the following issues for our consideration:

"Whether or not the principle of exhaustion of administrative remedies applies in a civil action exclusively for
damages based on violation of the human relation provisions of the Civil Code, filed by a student against her former
school.

"Whether or not there is a need for prior declaration of invalidity of a certain school administrative policy by the
Commission on Higher Education (CHED) before a former student can successfully maintain an action exclusively for
damages in regular courts.

"Whether or not the Commission on Higher Education (CHED) has exclusive original jurisdiction over actions for
damages based upon violation of the Civil Code provisions on human relations filed by a student against the
school."9

All of the foregoing point to one issue -- whether the doctrine of exhaustion of administrative remedies is applicable. The Court,
however, sees a second issue which, though not expressly raised by petitioner, was impliedly contained in her Petition: whether
the Complaint stated sufficient cause(s) of action.

Reciprocity of the
School-Student Contract

In Alcuaz v. PSBA,23 the Court characterized the relationship between the school and the student as a contract, in which "a
student, once admitted by the school is considered enrolled for one semester."24 Two years later, in Non v. Dames II,25 the
Court modified the "termination of contract theory" in Alcuaz by holding that the contractual relationship between the school and
the student is not only semestral in duration, but for the entire period the latter are expected to complete it."26 Except for the
variance in the period during which the contractual relationship is considered to subsist, both Alcuaz and Non were unanimous
in characterizing the school-student relationship as contractual in nature.

The school-student relationship is also reciprocal. Thus, it has consequences appurtenant to and inherent in all contracts of
such kind -- it gives rise to bilateral or reciprocal rights and obligations. The school undertakes to provide students with
education sufficient to enable them to pursue higher education or a profession. On the other hand, the students agree to abide
by the academic requirements of the school and to observe its rules and regulations.27

The terms of the school-student contract are defined at the moment of its inception -- upon enrolment of the student. Standards
of academic performance and the code of behavior and discipline are usually set forth in manuals distributed to new students at
the start of every school year. Further, schools inform prospective enrollees the amount of fees and the terms of payment.

In practice, students are normally required to make a down payment upon enrollment, with the balance to be paid before every
preliminary, midterm and final examination. Their failure to pay their financial obligation is regarded as a valid ground for the
school to deny them the opportunity to take these examinations.
The foregoing practice does not merely ensure compliance with financial obligations; it also underlines the importance of major
examinations. Failure to take a major examination is usually fatal to the students' promotion to the next grade or to graduation.
Examination results form a significant basis for their final grades. These tests are usually a primary and an indispensable
requisite to their elevation to the next educational level and, ultimately, to their completion of a course.

Education is not a measurable commodity. It is not possible to determine who is "better educated" than another. Nevertheless,
a student's grades are an accepted approximation of what would otherwise be an intangible product of countless hours of
study. The importance of grades cannot be discounted in a setting where education is generally the gate pass to employment
opportunities and better life; such grades are often the means by which a prospective employer measures whether a job
applicant has acquired the necessary tools or skills for a particular profession or trade.

Thus, students expect that upon their payment of tuition fees, satisfaction of the set academic standards, completion of
academic requirements and observance of school rules and regulations, the school would reward them by recognizing their
"completion" of the course enrolled in.

The obligation on the part of the school has been established in Magtibay v. Garcia,28 Licup v. University of San Carlos29 and
Ateneo de Manila University v. Garcia,30 in which the Court held that, barring any violation of the rules on the part of the
students, an institution of higher learning has a contractual obligation to afford its students a fair opportunity to complete the
course they seek to pursue.

We recognize the need of a school to fund its facilities and to meet astronomical operating costs; this is a reality in running it.
Crystal v. Cebu International School31 upheld the imposition by respondent school of a "land purchase deposit" in the amount
of P50,000 per student to be used for the "purchase of a piece of land and for the construction of new buildings and other
facilities x x x which the school would transfer [to] and occupy after the expiration of its lease contract over its present site."

The amount was refundable after the student graduated or left the school. After noting that the imposition of the fee was made
only after prior consultation and approval by the parents of the students, the Court held that the school committed no actionable
wrong in refusing to admit the children of the petitioners therein for their failure to pay the "land purchase deposit" and the 2.5
percent monthly surcharge thereon.

In the present case, PCST imposed the assailed revenue-raising measure belatedly, in the middle of the semester. It exacted
the dance party fee as a condition for the students' taking the final examinations, and ultimately for its recognition of their ability
to finish a course. The fee, however, was not part of the school-student contract entered into at the start of the school year.
Hence, it could not be unilaterally imposed to the prejudice of the enrollees.

Such contract is by no means an ordinary one. In Non, we stressed that the school-student contract "is imbued with public
interest, considering the high priority given by the Constitution to education and the grant to the State of supervisory and
regulatory powers over all educational institutions."32 Sections 5 (1) and (3) of Article XIV of the 1987 Constitution provide:

"The State shall protect and promote the right of all citizens to quality education at all levels and shall take
appropriate steps to make such declaration accessible to all.

"Every student has a right to select a profession or course of study, subject to fair, reasonable and equitable
admission and academic requirements."

The same state policy resonates in Section 9(2) of BP 232, otherwise known as the Education Act of 1982:

"Section 9. Rights of Students in School. – In addition to other rights, and subject to the limitations prescribed by law
and regulations, students and pupils in all schools shall enjoy the following rights:

xxx xxx xxx

(2) The right to freely choose their field of study subject to existing curricula and to continue their course
therein up to graduation, except in cases of academic deficiency, or violation of disciplinary regulations."

Liability for Tort

In her Complaint, petitioner also charged that private respondents "inhumanly punish students x x x by reason only of their
poverty, religious practice or lowly station in life, which inculcated upon [petitioner] the feelings of guilt, disgrace and
unworthiness;"33 as a result of such punishment, she was allegedly unable to finish any of her subjects for the second
semester of that school year and had to lag behind in her studies by a full year. The acts of respondents supposedly caused
her extreme humiliation, mental agony and "demoralization of unimaginable proportions" in violation of Articles 19, 21 and 26 of
the Civil Code. These provisions of the law state thus:

"Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith."
 "Article 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage."

"Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other
persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of
action for damages, prevention and other relief:

(1) Prying into the privacy of another's residence;

(2) Meddling with or disturbing the private life or family relations of another;

(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or humiliating another on account of his beliefs, lowly station in life, place of birth, physical
defect, or other personal condition."

Generally, liability for tort arises only between parties not otherwise bound by a contract. An academic institution, however, may
be held liable for tort even if it has an existing contract with its students, since the act that violated the contract may also be a
tort. We ruled thus in PSBA vs. CA,34 from which we quote:

"x x x A perusal of Article 2176 [of the Civil Code] shows that obligations arising from quasi-delicts or tort, also known
as extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or
implied. However, this impression has not prevented this Court from determining the existence of a tort even when
there obtains a contract. In Air France v. Carrascoso (124 Phil. 722), the private respondent was awarded damages
for his unwarranted expulsion from a first-class seat aboard the petitioner airline. It is noted, however, that the Court
referred to the petitioner-airline's liability as one arising from tort, not one arising form a contract of carriage. In effect,
Air France is authority for the view that liability from tort may exist even if there is a contract, for the act that breaks
the contract may be also a tort. x x x This view was not all that revolutionary, for even as early as 1918, this Court
was already of a similar mind. In Cangco v. Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus: 'x x x.
When such a contractual relation exists the obligor may break the contract under such conditions that the same act
which constitutes a breach of the contract would have constituted the source of an extra-contractual obligation had
no contract existed between the parties.'

"Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21 x x
x."35

Academic Freedom

In their Memorandum, respondents harp on their right to "academic freedom." We are not impressed. According to present
jurisprudence, academic freedom encompasses the independence of an academic institution to determine for itself (1) who
may teach, (2) what may be taught, (3) how it shall teach, and (4) who may be admitted to study.36 In Garcia v. the Faculty
Admission Committee, Loyola School of Theology,37 the Court upheld the respondent therein when it denied a female
student's admission to theological studies in a seminary for prospective priests. The Court defined the freedom of an academic
institution thus: "to decide for itself aims and objectives and how best to attain them x x x free from outside coercion or
interference save possibly when overriding public welfare calls for some restraint."38

In Tangonan v. Paño,39 the Court upheld, in the name of academic freedom, the right of the school to refuse readmission of a
nursing student who had been enrolled on probation, and who had failed her nursing subjects. These instances
notwithstanding, the Court has emphasized that once a school has, in the name of academic freedom, set its standards, these
should be meticulously observed and should not be used to discriminate against certain students.40 After accepting them upon
enrollment, the school cannot renege on its contractual obligation on grounds other than those made known to, and accepted
by, students at the start of the school year.

In sum, the Court holds that the Complaint alleges sufficient causes of action against respondents, and that it should not have
been summarily dismissed. Needless to say, the Court is not holding respondents liable for the acts complained of. That will
have to be ruled upon in due course by the court a quo.

WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders REVERSED. The trial court is DIRECTED to
reinstate the Complaint and, with all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No costs.

SO ORDERED.

G.R. No. 164012 June 8, 2007

FLORDELIZA MENDOZA, petitioner,

vs.
MUTYA SORIANO and Minor JULIE ANN SORIANO duly represented by her natural mother and guardian ad litem
MUTYA SORIANO, respondents.

DECISION

QUISUMBING, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioner asks this Court to reverse and set aside the Decision 1
dated November 17, 2003 and the Resolution2 dated May 24, 2004 of the Court of Appeals in CA-G.R. CV No. 69037. The
appellate court found petitioner, as employer of Lomer Macasasa, liable for damages.

The facts are as follows:

At around 1:00 a.m., July 14, 1997, Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue in Quezon City,
was hit by a speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five meters away, while the vehicle only
stopped some 25 meters from the point of impact. Gerard Villaspin, one of Soriano’s companions, asked Macasasa to bring
Soriano to the hospital, but after checking out the scene of the incident, Macasasa returned to the FX, only to flee. A school bus
brought Soriano to East Avenue Medical Center where he later died. Subsequently, the Quezon City Prosecutor recommended
the filing of a criminal case for reckless imprudence resulting to homicide against Macasasa. 3

On August 20, 1997, respondents Mutya Soriano and Julie Ann Soriano, Soriano’s wife and daughter, respectively, filed a
complaint for damages against Macasasa and petitioner Flordeliza Mendoza, the registered owner of the vehicle. The
complaint was docketed as Civil Case No. C-18038 in the Regional Trial Court of Caloocan City, Branch 121. Respondents
prayed that Macasasa and petitioner be ordered to pay them: ₱200,000 moral damages; ₱500,000 for lost income; ₱22,250 for
funeral services; ₱45,000 for burial lot; ₱15,150 for interment and lapida; ₱8,066 for hospitalization, other medical and
transportation expenses; ₱28,540 for food and drinks during the wake; ₱50,000 exemplary damages; ₱60,000 indemnity for
Soriano’s death; and ₱25,000 for attorney’s fees plus ₱500 per court appearance. 4

In her answer, petitioner Mendoza maintained that she was not liable since as owner of the vehicle, she had exercised the
diligence of a good father of a family over her employee, Macasasa.

Upon respondents’ motion, the complaint for damages against Macasasa was dismissed.

After trial, the trial court also dismissed the complaint against petitioner.5 It found Soriano negligent for crossing Commonwealth
Avenue by using a small gap in the island’s fencing rather than the pedestrian overpass. The lower court also ruled that
petitioner was not negligent in the selection and supervision of Macasasa since complainants presented no evidence to support
their allegation of petitioner’s negligence.6

Respondents appealed. The Court of Appeals reversed the trial court. The dispositive portion of the appellate court’s decision
reads:

WHEREFORE, the judgment appealed from is REVERSED, and another one is hereby rendered ordering [petitioner] Flordeliza
Mendoza to pay [respondents] Mutya Soriano and Julie Ann Soriano the following amounts:

1. Hospital and Burial Expenses ₱80,926.25

2. Loss of earning capacity ₱77,000.00

3. Moral Damages ₱20,000.00

4. Indemnity for the death of Sonny Soriano ₱50,000.00

Actual payment of the aforementioned amounts should, however, be reduced by twenty (20%) per cent due to the presence of
contributory negligence by the victim as provided for in Article 2179 of the Civil Code.

SO ORDERED.7

While the appellate court agreed that Soriano was negligent, it also found Macasasa negligent for speeding, such that he was
unable to avoid hitting the victim. It observed that Soriano’s own negligence did not preclude recovery of damages from
Macasasa’s negligence. It further held that since petitioner failed to present evidence to the contrary, and conformably with
Article 21808 of the Civil Code, the presumption of negligence of the employer in the selection and supervision of employees
stood.

Petitioner’s motion for reconsideration was denied by the appellate court in a Resolution9 dated May 24, 2004.
Hence, this appeal where petitioner alleges that:

I.

THE TOTAL AMOUNT PRAYED FOR IN THE COMPLAINT IS NOT WITHIN THE JURISDICTION OF THE REGIONAL TRIAL
COURT.

II.

[COROLLARILY], THE AWARD OF DAMAGES IN FAVOR OF THE RESPONDENTS [HAS] NO BASIS IN LAW.10

The issues are simple: (1) Did the Regional Trial Court have jurisdiction to try the case? and (2) Was there sufficient legal basis
to award damages?

Petitioner argues that the amount claimed by respondents is within the jurisdiction of the Metropolitan Trial Court. She posits
that to determine the jurisdictional amount, what should only be considered are the following: ₱22,250 for funeral services;
₱45,000 for burial lot; ₱15,150 for interment and lapida; ₱8,066 for hospitalization and transportation; ₱28,540 for food and
drinks during the wake; and ₱60,000 indemnity for Soriano’s death. She maintains that the sum of these amounts, ₱179,006, is
below the jurisdictional amount of the Regional Trial Court. She states that under Section 19(8) of the Judiciary Reorganization
Act of 1980, the following claims of respondents must be excluded: ₱200,000 moral damages, ₱500,000 for lost income;
₱50,000 exemplary damages; ₱25,000 attorney’s fees plus ₱500 per court appearance. Petitioner thus prays that the decision
of the Court of Appeals be reversed, and the dismissal of the case by the trial court be affirmed on the ground of lack of
jurisdiction.

Section 19(8) of Batas Pambansa Blg. 129,11 as amended by Republic Act No. 7691, states the pertinent law.

SEC. 19. Jurisdiction in civil cases.–Regional Trial Courts shall exercise exclusive original jurisdiction:

xxxx

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses,
and costs or the value of the property in controversy exceeds One hundred thousand pesos (₱100,000.00) or, in such other
cases in Metro Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred thousand pesos
(₱200,000.00).

But relatedly, Administrative Circular No. 09-9412 expressly states:

xxxx

2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional amount under Section 19(8) and
Section 33(1) of BP Blg. 129, as amended by RA No. 7691, applies to cases where the damages are merely incidental to or a
consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action, or one
of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court. (Underscoring
supplied.)

Actions for damages based on quasi-delicts, as in this case, are primarily and effectively actions for the recovery of a sum of
money for the damages for tortious acts.13 In this case, respondents’ claim of ₱929,006 in damages and ₱25,000 attorney’s
fees plus ₱500 per court appearance represents the monetary equivalent for compensation of the alleged injury. These money
claims are the principal reliefs sought by respondents in their complaint for damages.14 Consequently then, we hold that the
Regional Trial Court of Caloocan City possessed and properly exercised jurisdiction over the case.15

Petitioner further argues that since respondents caused the dismissal of the complaint against Macasasa, there is no longer
any basis to find her liable. She claims that "no iota of evidence" was presented in this case to prove Macasasa’s negligence,
and besides, respondents can recover damages in the criminal case against him.

Respondents counter that as Macasasa’s employer, petitioner was presumed negligent in selecting and supervising Macasasa
after he was found negligent by the Court of Appeals.

The records show that Macasasa violated two traffic rules under the Land Transportation and Traffic Code. First, he failed to
maintain a safe speed to avoid endangering lives.16 Both the trial and the appellate courts found Macasasa overspeeding. 17 The
records show also that Soriano was thrown five meters away after he was hit. 18 Moreover, the vehicle stopped only some 25
meters from the point of impact.19

Both circumstances support the conclusion that the FX vehicle driven by Macasasa was overspeeding. Second, Macasasa, the
vehicle driver, did not aid Soriano, the accident victim, in violation of Section 55,20 Article V of the Land Transportation and
Traffic Code. While Macasasa at first agreed to bring Soriano to the hospital, he fled the scene in a hurry. Contrary to
petitioner’s claim, there is no showing of any factual basis that Macasasa fled for fear of the people’s wrath. What remains
undisputed is that he did not report the accident to a police officer, nor did he summon a doctor. Under Article 2185 21 of the Civil
Code, a person driving a motor vehicle is presumed negligent if at the time of the mishap, he was violating traffic regulations.

While respondents could recover damages from Macasasa in a criminal case and petitioner could become subsidiarily liable,
still petitioner, as owner and employer, is directly and separately civilly liable for her failure to exercise due diligence in
supervising Macasasa.22 We must emphasize that this damage suit is for the quasi-delict of petitioner, as owner and employer,
and not for the delict of Macasasa, as driver and employee.

Under Article 2180 of the Civil Code, employers are liable for the damages caused by their employees acting within the scope
of their assigned tasks. The liability arises due to the presumed negligence of the employers in supervising their employees
unless they prove that they observed all the diligence of a good father of a family to prevent the damage.

In this case, we hold petitioner primarily and solidarily liable for the damages caused by Macasasa. 23 Respondents could
recover directly from petitioner24 since petitioner failed to prove that she exercised the diligence of a good father of a family in
supervising Macasasa.25 Indeed, it is unfortunate that petitioner harbored the notion that the Regional Trial Court did not have
jurisdiction over the case and opted not to present her evidence on this point.

Lastly, we agree that the Court of Appeals did not err in ruling that Soriano was guilty of contributory negligence for not using
the pedestrian overpass while crossing Commonwealth Avenue. We even note that the respondents now admit this point, and
concede that the appellate court had properly reduced by 20% the amount of damages it awarded. Hence, we affirm the
reduction26 of the amount earlier awarded, based on Article 2179 of the Civil Code which reads:

When the plaintiff's own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if
his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care,
the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.

WHEREFORE, we DENY the petition for lack of merit and hereby AFFIRM the Decision dated November 17, 2003 and the
Resolution dated May 24, 2004 of the Court of Appeals in CA-G.R. CV No. 69037.

Costs against petitioner.

SO ORDERED.

Professional Services Inc. (PSI) v. Natividad and Enrique Agana

Natividad and Enrique Agana v. Juan Fuentes
Miguel Ampil v. Natividad and Enrique Agana
2007 / Sandoval-Gutierrez / Petition for review on certiorari of CA decisions
Standard of conduct > Experts > Medical professionals

FACTS
Natividad Agana was rushed to Medical City because of difficulty of bowel movement and bloody anal discharge. Dr. Ampil
diagnosed her to be suffering from cancer of the sigmoid. Dr. Ampil performed an anterior resection surgery on her, and
finding that the malignancy spread on her left ovary, he obtained the consent of her husband, Enrique, to permit Dr. Fuentes
to perform hysterectomy on her. After the hysterectomy, Dr. Fuentes showed his work to Dr. Ampil, who examined it and
found it in order, so he allowed Dr. Fuentes to leave the operating room. Dr. Ampil was about to complete the procedure
when the attending nurses made some remarks on the Record of Operation: “sponge count lacking 2; announced to
surgeon search done but to no avail continue for closure” (two pieces of gauze were missing). A “diligent search” was
conducted but they could not be found. Dr. Ampil then directed that the incision be closed.
A couple of days after, she complained of pain in her anal region, but the doctors told her that it was just a natural
consequence of the surgery. Dr. Ampil recommended that she consult an oncologist to examine the cancerous nodes which
were not removed during the operation. After months of consultations and examinations in the US, she was told that she was
free of cancer. Weeks after coming back, her daughter found a piece of gauze (1.5 in) protruding from her vagina, so Dr.
Ampil manually extracted this, assuring Natividad that the pains will go away. However, the pain worsened, so she sought
treatment at a hospital, where another 1.5 in piece of gauze was found in her vagina. She underwent another surgery.
Sps. Agana filed a complaint for damages against PSI (owner of Medical City), Dr. Ampil, and Dr. Fuentes, alleging
that the latter are liable for negligence for leaving 2 pieces of gauze in Natividad’s body, and malpractice for concealing
their acts of negligence. Enrique Agana also filed an administrative complaint for gross negligence and malpractice against
the two doctors with the PRC (although only the case against Dr. Fuentes was heard since Dr. Ampil was abroad). Pending
the outcome of the cases, Natividad died (now substituted by her children). RTC found PSI and the two doctors liable for
negligence and malpractice. PRC dismissed the case against Dr. Fuentes. CA dismissed only the case against Fuentes.

ISSUE AND HOLDING

1. WON CA erred in holding Dr. Ampil liable for negligence and malpractice. NO; DR. AMPIL IS GUILTY
 2. WON CA erred in absolving Dr. Fuentes of any liability. NO
3. WON PSI may be held solidarily liable for Dr. Ampil’s negligence. YES
RATIO
DR. AMPIL IS LIABLE FOR NEGLIGENCE AND MALPRACTICE
His arguments are without basis [did not prove that the American doctors were the ones who put / left the gauzes; did not
submit evidence to rebut the correctness of the operation record (re: number of gauzes used); re: Dr. Fuentes’ alleged
negligence, Dr. Ampil examined his work and found it in order].
Leaving foreign substances in the wound after incision has been closed is at least prima facie negligence by the
operating surgeon. Even if it has been shown that a surgeon was required to leave a sponge in his patient’s abdomen
because of the dangers attendant upon delay, still, it is his legal duty to inform his patient within a reasonable time by
advising her of what he had been compelled to do, so she can seek relief from the effects of the foreign object left in her
body as her condition might permit. What’s worse in this case is that he misled her by saying that the pain was an ordinary
consequence of her operation.

Medical negligence; standard of diligence

To successfully pursue this case of medical negligence, a patient must only prove that a health care provider either failed to
do something [or did something] which a reasonably prudent health care provider would have done [or wouldn’t have done],
and that the failure or action caused injury to the patient.
 Duty – to remove all foreign objects from the body before closure of the incision; if he fails to do so, it was his duty to
inform the patient about it
 Breach – failed to remove foreign objects; failed to inform patient
 Injury – suffered pain that necessitated examination and another surgery
 Proximate Causation – breach caused this injury; could be traced from his act of closing the incision despite information
given by the attendant nurses that 2 pieces of gauze were still missing; what established causal link: gauze pieces later
extracted from patient’s vagina
DR. FUENTES NOT LIABLE
The res ipsa loquitur [thing speaks for itself] argument of the Aganas’ does not convince the court. Mere invocation and
application of this doctrine does not dispense with the requirement of proof of negligence.

Requisites for the applicability of res ipsa loquitur

1. Occurrence of injury
2. Thing which caused injury was under the control and management of the defendant [DR. FUENTES] —
LACKING SINCE CTRL+MGT WAS WITH DR. AMPIL
3. Occurrence was such that in the ordinary course of things, would not have happened if those who had control or
management used proper care
4. Absence of explanation by defendant
Under the Captain of the Ship rule, the operating surgeon is the person in complete charge of the surgery room and all
personnel connected with the operation. That Dr. Ampil discharged such role is evident from the following:
 He called Dr. Fuentes to perform a hysterectomy
 He examined Dr. Fuentes’ work and found it in order
 He granted Dr. Fuentes permission to leave
 He ordered the closure of the incision
HOSPITAL OWNER PSI SOLIDARILY LIABLE WITH DR. AMPIL [NCC 2180], AND DIRECTLY LIABLE TO SPS.
AGANAS [NCC 2176]
Previously, employers cannot be held liable for the fault or negligence of its professionals. However, this doctrine has
weakened since courts came to realize that modern hospitals are taking a more active role in supplying and regulating
medical care to its patients, by employing staff of physicians, among others. Hence, there is no reason to exempt hospitals
from the universal rule of respondeat superior. Here are the Court’s bases for sustaining PSI’s liability:
 Ramos v. CA doctrine on E-E relationship


o For purposes of apportioning responsibility in medical negligence cases, an employer-employee relationship in effect
exists between hospitals and their attending and visiting physicians. [LABOR LESSON: power to hire, fire, power of
control]
 Agency principle of apparent authority / agency by estoppel

o Imposes liability because of the actions of a principal or employer in somehow misleading the public into believing
that the relationship or the authority exists [see NCC 1869]
o PSI publicly displays in the Medical City lobby the names and specializations of their physicians. Hence, PSI is now
estopped from passing all the blame to the physicians whose names it proudly paraded in the public directory, leading
the public to believe that it vouched for their skill and competence.
o
  If doctors do well, hospital profits financially, so when negligence mars the quality of its services, the hospital
should not be allowed to escape liability for its agents’ acts.
 Doctrine of corporate negligence / corporate responsibility

o This is the judicial answer to the problem of allocating hospital’s liability for the negligent acts of health practitioners,
absent facts to support the application of respondeat superior.
o This provides for the duties expected [from hospitals]. In this case, PSI failed to perform the duty of
exercising reasonable care to protect from harm all patients admitted into its facility for medical treatment. PSI failed
to conduct an investigation of the matter reported in the note of the count nurse, and this established PSI’s part
in the dark conspiracy of silence and concealment about the gauzes.
o


PSI has actual / constructive knowledge of the matter, through the report of the attending nurses + the fact that the
operation was carried on with the assistance of various hospital staff
o It also breached its duties to oversee or supervise all persons who practice medicine within its walls and take an active
step in fixing the negligence committed
 PSI also liable under NCC 2180


o It failed to adduce evidence to show that it exercised the diligence of a good father of the family in the accreditation
and supervision of Dr. Ampil
Cathay Pacific v. Vazquez
G.R. No. 150843; 14 March 2003
 Facts:
Sps. Dr. Daniel and Maria Luisa Vazquez, resposdents, together
with their maid and two friends went to Hongkong for pleasure
and business. On their return flight, they booked Cathay Pacific
Airways. While boarding, they were advised that there was a seat
change from Business Class to First Class. Dr. Vazquez refused
the upgrade for the reason that it would not look nice for them as
hosts to travel First Class and their guests, in the Business Class;
and that they were going to discuss business matter during the
flight. Cathay informed the Vazquezes that the Business Class
was fully booked, and that since they are Marco Polo Club
members, they had the priority to be upgraded to first class. Dr.
Vazquez eventually gave in, after being prohibited to take the
flight if they would not avail themselves of the privilege. Upon
their return to Manila, the Vazquezes filed a complaint and
demanded to be indemnified for the humiliation and
embarrassment caused by Cathay’s employees.
 Issues:
Are the Vazquezes obliged to avail the privilege and take the
First Class flight?
 Held:
No. A contract of carriage existed between Cathay and the
Vazquezes. They voluntarily and freely gave their consent to an
agreement whose object was the transportation of the Vazquezes
 from Manila to Hong Kong and back to Manila, with seats in the
Business Class Section of the aircraft, and whose cause or
consideration was the fare paid by the Vazquezes to Cathay. The
Vazquezes should have been consulted first whether they wanted
to avail themselves of the privilege or would consent to a change
of seat accommodation before their seat assignments were given
to other passengers. It should not have been imposed on them
over their vehement objection. By insisting on the upgrade,
Cathay breached its contract of carriage with the Vazquezes.
 Art. 1244. The debtor of a thing cannot compel the creditor to
receive a different one, although the latter may be of the same
value as, or more valuable than that which is due.

In obligations to do or not to do, an act or forbearance cannot

be substituted by another act or forbearance against the
obligee’s will.

Singapore Airlines Ltd. vs. Fernandez, GR 142305, Dec. 10, 2003

FACTS:

Respondent Andion Fernandez is an acclaimed soprano in the Philippines

and abroad. At the time of the incident she was availing of an educational
grant from the Federal Republic of Germany pursuing a Master’s Degree in
Music major in Voice. She was invited to sing before the King and Queen of
Malaysia on Feb. 3-4, 1991. For this purpose, she took an airline ticket from
Singapore Airlines (SAL) FOR THE Frankfurt-Manila-Malaysia route. Respondent
had to pass by Manila in order to gather her wardrobe and rehearse with the
pianist. SAL issued ticket for Flight SQ 27 leaving Frankfurt on Jan. 27, 1991 for
Singapore with connections to Manila in the morning of Jan. 28, 1991. On
Jan. 27, 1991 SQ 27 LEFT Frankfurt but arrived two hours late in Singapore on
Jan. 28, 1991. By then, the aircraft bound for Manila had already left. Upon
deplaning in Singapore, Fernandez approached the transit counter at
Changi Airport and was told by a lady employee that there were no more
flights to Manila on that day and that she had to stay in Singapore, if she
wanted, she could fly to HK but at her own expense. Respondent stayed with
a relative in Singapore for the night. The next day, she was brought back to
the airport and approached a counter for immediate booking but was told
by a male employee: “Can’t you see I am doing something.” She explained
her predicament but was told: “It’s your problem, not ours.”

The respondent never made it to Manila and was forced to take a direct
flight to Malaysia on Jan. 29, 1991 through the efforts of her mother and a
travel agency in Manila. Her mother had to travel to Malaysia with the
wardrobe which caused them to incur expenses of ₱ 50,000.

RTC Manila ordered SAL to pay respondent ₱ 50k as actual damages, ₱ 250k
as moral damages, ₱ 100k as exemplary damages, ₱ 75k as attorney’s fees
and costs of suit.

CA affirmed RTC decision.

ISSUE:
Did SAL break the contract of carriage?

RULING:

Yes, when an airline issues a ticket to a passenger, confirmed for a particular

flight on a certain date, a contract of carriage arises. The passenger has
every right to expect that he be transported on that flight and on that date. If
he does not, then the carrier opens itself to a suit for a breach of contract of
carriage. A contract of carriage requires common carriers to transport
passengers safely as human care and foresight can provide (Art. 1755, NCC).
In an action for brech of a contract of carriage, the aggrieved party does
not have to prove that the common carrier was at fault or was negligent. All
that is necessary is to prove the existence of the contract and the fact of its
non-performance by the carrier.
SAL failed to inform of the delay in the turnaround aircraft in Frankfurt, neither
did it ask if the respondent and 25 other delayed passengers are amenable
to a stay in Singapore. Even SAL’s manual mandates that in cases of urgent
connections the head office of defendant in Singapore has to be informed
of delays so as to make needed arrangements for connecting passengers.

When respondent conveyed her apprehension in Frankfurt of the impending

delay, she was assured by petitioner’s personnel in Frankfurt that she will be
transported to Manila on the same date. The lady employee at the counter
in Singapore only allowed respondent to use the phone upon threat of suit,
the male employee at the counter marked “Immediate Attention to
Passengers with Immediate Booking” was rude to her.

Petition is denied. CA decision affirmed.

When a passenger contracts for a specific flight, he has a purpose in making that choice which must be respected. This choice,
once exercised, must not be impaired by a breach on the part of the airline without the latter incurring any liability.25 For
petitioner’s failure to bring the respondent to her destination, as scheduled, we find the petitioner clearly liable for the breach of
its contract of carriage with the respondent.

We are convinced that the petitioner acted in bad faith.1âwphi1 Bad faith means a breach of known duty through some motive
of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may well have been the motive; but it is malice
nevertheless.26 Bad faith was imputed by the trial court when it found that the petitioner’s employees at the Singapore airport
did not accord the respondent the attention and treatment allegedly warranted under the circumstances. The lady employee at
the counter was unkind and of no help to her. The respondent further alleged that without her threats of suing the company, she
was not allowed to use the company’s phone to make long distance calls to her mother in Manila. The male employee at the
counter where it says: "Immediate Attention to Passengers with Immediate Booking" was rude to her when he curtly retorted
that he was busy attending to other passengers in line. The trial court concluded that this inattentiveness and rudeness of
petitioner’s personnel to respondent’s plight was gross enough amounting to bad faith. This is a finding that is generally binding
upon the Court which we find no reason to disturb.

Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship, exemplary damages may be
awarded only if the defendant had acted in a "wanton, fraudulent, reckless, oppressive or malevolent manner." In this case,
petitioner’s employees acted in a wanton, oppressive or malevolent manner. The award of exemplary damages is, therefore,
warranted in this case.

WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

Equitable PCI Bank v. Ng Sheung Ngor

Article 1250. In case an extraordinary inflation or deflation of the currency stipulated should
intervene, the value of the currency at the time of the establishment of the obligation shall be the
basis of payment, unless there is an agreement to the contrary.

xxx

FACTS:

1. Respondents Ng Sheung Ngor et al. filed an action for annulment and/or reformation of
documents and contracts against Equitable PCI Bank and its employees.

2. Respondents claim that Equitable induced them to avail of its peso and dollar credit facilities by
offering low interest rates, so they accepted the bank’s proposal and signed Equitable’s pre-printed
promissory notes.

3. However, they were unaware that the documents contained identical escalation clauses granting
Equitable authority to increase interest rates without their consent. Equitable answered that
respondents knowingly accepted all the terms and conditions contained in the promissory notes.

4. RTC upheld the validity of the promissory notes but invalidated the escalation clause because it
violated the principle of mutuality of contracts.

5. Nevertheless, RTC took judicial notice of the steep depreciation of the peso during the intervening
period and declared the existence of extraordinary deflation. RTC ordered the use of the 1996 dollar
exchange rate in computing respondents’ dollar-denominated loans.

6. RTC’s dispositive: directing Ng Sheung Ngor et al. to pay Equitable the unpaid principal obligation
for the peso loan as well as the unpaid obligation for the dollar-denominated loan, following the
conversion rate at the time of incurring the obligation, in accordance with Article 1250 of the Civil
Code.

RELEVANT ISSUE:
1. Whether or not respondents Ng Sheung Ngor should pay their dollar-denominated loans at the
exchange rate fixed by the BSP on the date of maturity YES

HELD:

1. THERE WAS NO EXTRAORDINARY DEFLATION.

2. Extraordinary inflation exists when there is an unusual decrease in the purchasing power of
currency (that is, beyond the common fluctuation in the value of currency) and such decrease could
not be reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of
the obligation. Extraordinary deflation involves an inverse situation.

3. Article 1250. In case an extraordinary inflation or deflation of the currency stipulated should
intervene, the value of the currency at the time of the establishment of the obligation shall be the
basis of payment, unless there is an agreement to the contrary.

4. For extraordinary inflation or deflation to affect an obligation, the following requisites must be
proven: a) That there was an official declaration of extraordinary deflation from the Bangko Sentral
ng Pilipinas b) That the obligation was contractual in nature c) That the parties expressly agreed to
consider the effects of the extraordinary deflation.

5. In this case, despite the devaluation of the peso, the BSP never declared a situation of
extraordinary inflation.

6. Moreover, although the obligation arose out of a contract, the parties did not agree to recognize
the effects of extraordinary inflation.

7. The RTC never mentioned that there was such a stipulation either in the promissory note or loan
agreement.

8. Therefore, respondents Ng Sheung Ngor should pay their dollar-denominated loans at the
exchange rate fixed by the BSP on the date of maturity.

Macalinao vs. BPI

Ileana Macalinao was an APPROVED cardholder of BPI Mastercard

She made some purchases through the use of the said credit card and defaulted in paying for said
purchases. She subsequently received a demand letter from BPI asking for the payment of PhP
141,518.34.

Terms and Conditions:

 The charges or balance thereof remaining unpaid after the payment due date indicated on the monthly Statement
of Accounts shall bear interest at the rate of 3% per month for BPI Express Credit, BPI Gold Mastercard and an
additional penalty fee equivalent to another 3% of the amount due for every month or a fraction of a months delay.

PROVIDED that if there occurs any change on the prevailing market rates, BCC shall have the option to adjust the rate of
interest and/or penalty fee due on the outstanding obligation with prior notice to the cardholder. The Cardholder hereby
authorizes BCC to correspondingly increase the rate of such interest [in] the event of changes in the prevailing market rates,
and to charge additional service fees as may be deemed necessary in order to maintain its service to the Cardholder.

Macalinao failed to settle her obligations, and thus BPI filed a complaint for collection of sum of money.

CA Ruling:

The amount of PhP 141,518.34 already incorporated the interest rates in the said amount. Thus, the said
amount should not be made as basis in computing the total obligation of petitioner Macalinao. The CA also
held, however, that the MeTC erred in modifying the amount of interest rate from 3% monthly to
only 2% considering that petitioner Macalinao freely availed herself of the credit card facility
offered by respondent BPI to the general public.

Statement of the Issue:

Macalinao claims that the interest rate and penalty charge of 3% per month imposed by the CA is
iniquitous as the same translates to 36% per annum or thrice the legal rate of interest. On the other hand,
respondent BPI asserts that said interest rate and penalty charge are reasonable as the same are based on
the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card.

SC Ruling
We are of the opinion that the interest rate and penalty charge of 3% per month should be
equitably reduced to 2% per month or 24% per annum. Indeed, in the Terms and Conditions Governing
the Issuance and Use of the BPI Credit Card, there was a stipulation on the 3% interest rate. But, we held
in Chua vs. Timan:

We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates
of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such
stipulations are void for being contrary to morals, if not against the law. While C.B. Circular No. 905-82,
which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as
granting carte blanche authority to lenders to raise interest rates to levels which would either enslave
their borrowers or lead to a hemorrhaging of their assets.

Since the stipulation on the interest rate is void, it is as if there was no express contract
thereon. Hence, courts may reduce the interest rate as reason and equity demand.[18]
The same is true with respect to the penalty charge. Pertinently, Article 1229 of the Civil Code
states:
Art. 1229. The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if there has
been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.

Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by
the CA at 1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1%
monthly or a total of 2% per month or 24% per annum in line with the prevailing jurisprudence and in
accordance with Art. 1229 of the Civil Code.