VI.

KINDRED TORTS/MEDICAL MALPRACTICE inferred from the mere fact that the accident happened provided the
character of the accident and circumstances attending it lead
• Batiquin vs CA, GR 118231, July 5, 1996
reasonably to belief that in the absence of negligence it would not
FACTS have occurred and that thing which caused injury is shown to have
been under the management and control of the alleged wrongdoer.
• On Sept 1988, Petitioner Dr. Batiquin performed a simple caesarean Under this doctrine the happening of an injury permits an inference
section on Respondent Mrs. Villegas when the latter gave birth. Soon of negligence where plaintiff produces substantial evidence that the
after leaving the hospital, respondent began to suffer abdominal injury was caused by an agency or instrumentality under the exclusive
pains and complained of being feverish. control and management of defendant, and that the occurrence was
• The abdominal pains and fever kept on recurring and this prompted such that in the ordinary course of things would not happen if
respondent to consult with another doctor, Dr. Kho (not Hayden). reasonable care had been used.
When Dr. Kho opened the abdomen of respondent to check her out • The doctrine of res ipsa loquitur as a rule of evidence is peculiar to
respondent’s infection, she discovered that a piece of rubber the law of negligence which recognizes that prima facie negligence
material, which looked like a piece of rubber glove and was deemed may be established without direct proof and furnishes a substitute for
a foreign body, was the cause of the respondent’s infection. specific proof of negligence. The doctrine is not a rule of substantive
• Respondent then sued petitioner for damages. RTC held in favor of law, but merely a mode of proof or a mere procedural convenience.
petitioner. CA reversed, ruling for the respondent. The rule, when applicable to the facts and circumstances of a
particular case, is not intended to and does not dispense with the
ISSUES & ARGUMENTS requirement of proof of culpable negligence on the party charged. It
• W/N petitioner is liable to respondent. merely determines and regulates what shall be prima facie evidence
thereof and facilitates the burden of plaintiff of proving a breach of
HOLDING & RATIO DECIDENDI the duty of due care. The doctrine can be invoked when and only
when, under the circumstances involved, direct evidence is
YES, UNDER THE RULE OF RES IPSA LOQUITUR, DR. BATIQUIN IS
absentand not readily available.
LIABLE.
• In the instant case, all the requisites for recourse to the doctrine are
• Res ipsa loquitur. The thing speaks for itself. Rebuttable
present. First, the entire proceedings of the caesarean section were
presumption or inference that defendant was negligent, which arises
under the exclusive control of Dr. Batiquin. In this light, the private
upon proof that the instrumentality causing injury was in defendant's
respondents were bereft of direct evidence as to the actual culprit or
exclusive control, and that the accident was one which ordinary does
the exact cause of the foreign object finding its way into private
not happen in absence of negligence. Res ipsa loquitur is a rule of
respondent Villegas's body, which, needless to say, does not occur
evidence whereby negligence of the alleged wrongdoer may be
unless through the intersection of negligence. Second, since aside
from the caesarean section, private respondent Villegas underwent
no other operation which could have caused the offending piece of
rubber to appear in her uterus, it stands to reason that such could
only have been a by-product of the caesarean section performed by
Dr. Batiquin. The petitioners, in this regard, failed to overcome the
presumption of negligence arising from resort to the doctrine of res
ipsa loquitur. Dr. Batiquin is therefore liable for negligently leaving
behind a piece of rubber in private respondent Villegas's abdomen
and for all the adverse effects thereof.
 • Ramos vs CA, GR 124354, Dec. 29, 1999 non-performance of the preanesthetic/preoperative evaluation prior
to an operation. The injury incurred by petitioner Erlinda does not
• Ramos vs CA, April 11, 2002 (MFR)
normally happen absent any negligence in the administration of
FACTS anesthesia and in the use of an endotracheal tube. As was noted in
our Decision, the instruments used in the administration of
• Erlinda Ramos underwent an operation known as cholecystectomy anesthesia, including the endotracheal tube, were all under the
(removal of stone in her gallbladder) under the hands of Dr. Orlino exclusive control of private respondents Dr. Gutierrez and Dr. Hosaka.
Hosaka. He was accompanied by Dr. Perfecta Gutierrez, an Thus the doctrine of res ipsa loquitor can be applied in this case.
anesthesiologist which Dr. Hosaka recommended since Ramos (and
her husband Rogelio) did not know any. • Such procedure was needed for 3 reasons: (1) to alleviate anxiety;
(2) to dry up the secretions and; (3) to relieve pain. Now, it is very
• The operation was schedule at 9am of June 17, 1985 but was important to alleviate anxiety because anxiety is associated with the
however delayed for three hours due to the late arrival of Dr. Hosaka. outpouring of certain substances formed in the body called adrenalin.
• Dr. Gutierrez subsequently started trying to intubate her. And at When a patient is anxious there is an outpouring of adrenalin which
around 3pm, Erlinda was seen being wheeled to the Intensive Care would have adverse effect on the patient. One of it is high blood
Unit (ICU). The doctors explained to petitioner Rogelio that his wife pressure, the other is that he opens himself to disturbances in the
had bronchospasm. Erlinda stayed in the ICU for a month. She was heart rhythm, which would have adverse implications. So, we would
released from the hospital only four months later or on November 15, like to alleviate patient’s anxiety mainly because he will not be in
1985. Since the ill-fated operation, Erlinda remained in comatose control of his body there could be adverse results to surgery and he
condition until she died on August 3, 1999. will be opened up; a knife is going to open up his body. (Dr. Camagay)

• Petitioners filed with the RTC a civil case for damages; the present •On the part of Dr. Hosaka, while his professional services were
petition is the 2nd MR of the private respondents in the SC, the main secured primarily for their performance of acts within their
decision was rendered in December 29, ‘00. respective fields of expertise for the treatment of petitioner Erlinda,
and that one does not exercise control over the other, they were
ISSUES & ARGUMENTS certainly not completely independent of each other so as to absolve
• W/N the private respondents should be held liable for the injury one from the negligent acts of the other physician.
caused to Erlinda and her family? • First, it was Dr. Hosaka who recommended to petitioners the
HOLDING & RATIO DECIDENDI services of Dr. Gutierrez. In effect, he represented to petitioners that
Dr. Gutierrez possessed the necessary competence and skills. Drs.
YES. On the part of Dr. Gutierrez, her failure to exercise the standards Hosaka and Gutierrez had worked together since 1977. Whenever Dr.
of care in the administration of anesthesia on a patient through the
Hosaka performed a surgery, he would always engage the services of
Dr. Gutierrez to administer the anesthesia on his patient.

Second, Dr. Hosaka himself admitted that he was the attending

physician of Erlinda. Thus, when Erlinda showed signs of cyanosis, it
was Dr. Hosaka who gave instructions to call for another
anesthesiologist and cardiologist to help resuscitate Erlinda.

Third, it is conceded that in performing their responsibilities to the

patient, Drs. Hosaka and Gutierrez worked as a team. Their work
cannot be placed in separate watertight compartments because their
duties intersect with each other.

It is equally important to point out that Dr. Hosaka was remiss in his
duty of attending to petitioner Erlinda promptly, for he arrived more
than three (3) hours late for the scheduled operation. The
cholecystectomy was set for June 17, 1985 at 9:00 a.m., but he arrived
at DLSMC only at around 12:10 p.m. In reckless disregard for his
patient’s well being, Dr. Hosaka scheduled two procedures on the
same day, just thirty minutes apart from each other, at different
hospitals. Thus, when the first procedure (protoscopy) at the Sta.
Teresita Hospital did not proceed on time,

Erlinda was kept in a state of uncertainty at the DLSMC.

On the part of the hospital (DLSMC), since there was NO employer-

employee relationship between the hospital and Dr. Gutierrez and Dr.
Hosaka established in this case, the hospital cannot be held liable
under Art. 2180 of the Civil Code. The contract of the hospital with its
consultants is separate and distinct from the contract with its
patients.
 • Reyes vs Sisters of Mercy, GR 130547, Oct. 3, 2000 the patient a dose of triglobe. As she did not observe any adverse
reaction by the patient to chloromycetin, Dr. Blanes ordered the first
FACTS
five hundred milligrams of said antibiotic to be administered on Jorge
Petitioner Leah Alesna Reyes is the wife of the late Jorge Reyes. The at around 9:00 p.m. A second dose was administered on Jorge about
other petitioners, namely, Rose Nahdja, Johnny, Lloyd, and Kristine, three hours later just before midnight.
all surnamed Reyes, were their children. Five days before his death on
At around 1:00 a.m. of January 9, 1987, Dr. Blanes was called as
January 8, 1987, Jorge had been suffering from a recurring fever with
Jorge’s temperature rose to 41°C. The patient also experienced chills
chills. After he failed to get relief from some home medication he was
and exhibited respiratory distress, nausea, vomiting, and convulsions.
taking, which consisted of analgesic, antipyretic, and antibiotics, he
Dr. Blanes put him under oxygen, used a suction machine, and
decided to see the doctor.
administered hydrocortisone, temporarily easing the patient’s
On January 8, 1987, he was taken to the Mercy Community Clinic by convulsions. When he regained consciousness, the patient was asked
his wife. He was attended to by respondent Dr. Marlyn Rico, resident by Dr. Blanes whether he had a previous heart ailment or had suffered
physician and admitting physician on duty, who gave Jorge a physical from chest pains in the past. Jorge replied he did not After about 15
examination and took his medical history. She noted that at the time minutes, however, Jorge again started to vomit, showed restlessness,
of his admission, Jorge was conscious, ambulatory, oriented, and his convulsions returned. Dr. Blanes re-applied the emergency
coherent, and with respiratory distress. Typhoid fever was then measures taken before and, in addition, valium was administered.
prevalent in the locality, as the clinic had been getting from 15 to 20 Jorge, however, did not respond to the treatment and slipped into
cases of typhoid per month Suspecting that Jorge could be suffering cyanosis, a bluish or purplish discoloration of the skin or mucous
from this disease, Dr. Rico ordered a Widal Test, a standard test for membrane due to deficient oxygenation of the blood. At around 2:00
typhoid fever, to be performed on Jorge. Blood count, routine a.m., Jorge died. He was forty years old. The cause of his death was
urinalysis, stool examination, and malarial smear were also made “Ventricular Arrythemia Secondary to Hyperpyrexia and typhoid
After about an hour, the medical technician submitted the results of fever.”
the test from which Dr. Rico concluded that Jorge was positive for
ISSUE & ARGUMENTS
typhoid fever. As her shift was only up to 5:00 p.m., Dr. Rico indorsed
Jorge to respondent Dr. Marvie Blanes. Whether or not petitioner is entitled to damage applying res ipsa
loquitur?
Dr. Marvie Blanes attended to Jorge at around six in the evening. She
also took Jorge’s history and gave him a physical examination. Like Dr. HOLDING & RATION DECIDENDI
Rico, her impression was that Jorge had typhoid fever. Antibiotics
No. There is a case when expert testimony may be dispensed with,
being the accepted treatment for typhoid fever, she ordered that a
and that is under the doctrine of res ipsa loquitur. Thus, courts of
compatibility test with the antibiotic chloromycetin be done on Jorge.
other jurisdictions have applied the doctrine in the following
Said test was administered by nurse Josephine Pagente who also gave
situations: leaving of a foreign object in the body of the patient after by the analgesic, antipyretic, and antibiotics given him by his wife.
an operation, injuries sustained on a healthy part of the body which This shows that he had been suffering from a serious illness and
was not under, or in the area, of treatment, removal of the wrong part professional medical help came too late for him.
of the body when another part was intended, knocking out a tooth
Respondents alleged failure to observe due care was not immediately
while a patient’s jaw was under anesthetic for the removal of his
apparent to a layman so as to justify application of res ipsa loquitur.
tonsils, and loss of an eye while the patient was under the influence
The question required expert opinion on the alleged breach by
of anesthetic, during or following an operation for appendicitis,
respondents of the standard of care required by the circumstances.
among others. Petitioners now contend that all requisites for the
Furthermore, on the issue of the correctness of her diagnosis, no
application of res ipsa loquitur were present, namely: (1) the accident
presumption of negligence can be applied to Dr. Marlyn Rico.
was of a kind which does not ordinarily occur unless someone is
negligent; (2) the instrumentality or agency which caused the injury
was under the exclusive control of the person in charge; and (3) the
injury suffered must not have been due to any voluntary action or
contribution of the person injured.

The contention is without merit. We agree with the ruling of the Court
of Appeals. In the Ramos case, the question was whether a surgeon,
an anesthesiologist, and a hospital should be made liable for the
comatose condition of a patient scheduled for cholecystectomy. In
that case, the patient was given anesthesia prior to her operation.
Noting that the patient was neurologically sound at the time of her
operation, the Court applied the doctrine of res ipsa loquitur as
mental brain damage does not normally occur in a gallblader
operation in the absence of negligence of the anesthesiologist. Taking
judicial notice that anesthesia procedures had become so common
that even an ordinary person could tell if it was administered
properly, we allowed the testimony of a witness who was not an
expert.

In this case, while it is true that the patient died just a few hours after
professional medical assistance was rendered, there is really nothing
unusual or extraordinary about his death. Prior to his admission, the
patient already had recurring fevers and chills for five days unrelieved
 • Dr Ampil rushed to her house and removed the gauze measuring
1.5 inches. Thereafter the doctor assured her that the pain would
• Nograles vs CMC, GR 142625, Dec. 19, 2006
eventually disappear. But it didn’t, and in fact intensified. She then
• PSI vs Agana, GR Nos. 126297, 126467, 127590, Feb. 11, went to another hospital where a foul smelling gauze of the same
2008 length was found again.

FACTS • The couple filed with the QC RTC a complaint for damages against
the PSI, Medical City Hospital, Dr. Fuentes and Dr Ampil for their
• Natividad Agana was rushed to the Medical City General Hospital negligence and malpractice for concealing their acts of negligence.
(Medical City Hospital) because of difficulty of bowel movement and
bloody anal discharge. After a series of medical examinations, Dr. • Enrique Agana also filed with the Professional Regulation
Miguel Ampil diagnosed her to be suffering from "cancer of the Commission (PRC) an administrative complaint for gross negligence
sigmoid." and malpractice against Dr. Ampil and Dr. Fuentes

• Dr. Ampil, assisted by the medical staff of the Medical City Hospital, • The PRC dismissed the case against Dr Ampil and found Dr. Fuentes
performed an anterior resection surgery on Natividad. A to be negligent and found liable to reimburse
hysterectomy had to be performed on her, which was completed by
• Both the RTC and CA found Dr. Ampil guilty of negligence and
Dr. Fuentes. And from that point, Dr. Ampil took over, completed the
malpractice
operation and closed the incision.
ISSUES & ARGUMENTS
• However, the operation appeared to be flawed. In the
corresponding Record of Operation, the attending nurses entered the W/N Dr. Ampil is guilty of negligence and medical malpractice
remarks to the effect that 2 sponges were lacking and after an
W/N PSI, the hospital can be held liable for damages under the
unsuccessful search by the surgeon, the closure was continued.
Respondeat Superior doctrine
• Days after, Natividad started complaining about excruciating pains
HOLDING & RATIO DECIDENDI
in the anal region. She went back to Dr Ampil and the latter assured
her that it’s a normal consequence of the operation. The pain YES
continued so Natividad, with her husband, went to the US for another
consultation. The hospital there informed her that she’s free of cancer Simply put, the elements are duty, breach, injury and proximate
and was advised to come back. The couple returned. Then the causation. Dr, Ampil, as the lead surgeon, had the duty to remove all
unthinkable happened. Natividad’s daughter saw a gauze protruding foreign objects, such as gauzes, from Natividad’s body before closure
from Natividad’s vagina. of the incision. When he failed to do so, it was his duty to inform
Natividad about it. Dr. Ampil breached both duties. Such breach
caused injury to Natividad, necessitating her further examination by Q that modern hospitals are increasingly taking active role in
American doctors and another surgery. That Dr. Ampil’s negligence is supplying and regulating medical care to patients.
the proximate cause12 of Natividad’s injury could be traced from his
No longer were a hospital’s functions limited to furnishing room,
act of closing the incision despite the information given by the
food, facilities for treatment and operation, and attendants for its
attending nurses that two pieces of gauze were still missing. That they patients.
were later on extracted from Natividad’s vagina established the causal
• In Bing v. Thunig,27 the New York Court of Appeals deviated from
link between Dr. Ampil’s negligence and the injury.
the Schloendorff doctrine, noting that modern hospitals actually do
YES far more than provide facilities for treatment. Rather, they regularly
employ, on a salaried basis, a large staff of physicians, interns, nurses,
• One important legal change is an increase in hospital liability for
administrative and manual workers. They charge patients for medical
medical malpractice. Many courts now allow claims for hospital
care and treatment, even collecting for such services through legal
vicarious liability under the theories of respondeat superior, apparent
action, if necessary. The court then concluded that there is no reason
authority, ostensible authority, or agency by estoppel.
to exempt hospitals from the universal rule of respondeat superior.
• ART. 2180. The obligation imposed by Article 2176 is demandable
• In other words, private hospitals, hire, fire and exercise real control
not only for one’s own acts or omissions, but also for those of persons
over their attending and visiting ‘consultant’ staff. While ‘consultants’
for whom one is responsible.
are not, technically employees, x x x, the control exercised, the hiring,
• The responsibility treated of in this article shall cease when the and the right to terminate consultants all fulfill the important
persons herein mentioned prove that they observed all the diligence hallmarks of an employer-employee relationship, with the exception
of a good father of a family to prevent damage. of the payment of wages

• The case of Schloendorff v. Society of New York Hospital26 was then • The Ramos pronouncement is not our only basis in sustaining PSI’s
considered an authority for this view. The "Schloendorff doctrine" liability. Its liability is also anchored upon the agency principle of
regards a physician, even if employed by a hospital, as an apparent authority or agency by estoppel and the doctrine of
independent contractor because of the skill he exercises and the lack corporate negligence which have gained acceptance in the
of control exerted over his work. Under this doctrine, hospitals are determination of a hospital’s liability for negligent acts of health
exempt from the application of the respondeat superior principle for professionals.
fault or negligence committed by physicians in the discharge of their
• In this case, PSI publicly displays in the lobby of the Medical City
profession.
Hospital the names and specializations of the physicians associated
• However, the efficacy of the foregoing doctrine has weakened with or accredited by it, including those of Dr. Ampil and Dr. Fuentes. We
the significant developments in medical care. Courts came to realize concur with the Court of Appeals’ conclusion that it "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." Indeed, PSI’s act is
tantamount to holding out to the public that Medical City Hospital,
through its accredited physicians, offers quality health care services.
VII. SPECIAL TORTS IN HUMAN RELATIONS • A few days after the incident, petitioner received a letter from
Valmonte demanding a formal letter of apology which she wanted to
a. ABUSE of RIGHTS (Art. 19)
be circulated to the newlyweds’ relatives and guests to redeem her
Article 19. Every person must, in the exercise of his rights and in the smeared reputation as a result of petitioner’s imputations against her.
performance of his duties, act with justice, give everyone his due, and Petitioner did not respond to the letter. Thus, on 20 February 1997,
observe honesty and good faith. Valmonte filed a suit for damages against petitioner.

• Carpio vs. Valmonte, 438 SCRA 38

FACTS ISSUES & ARGUMENTS

• Respondent Leonora Valmonte is a wedding coordinator. Michelle • W/N respondent Valmonte is entitled to damages
del Rosario and Jon Sierra engaged her services for their church
wedding. On that day, Valmonte went to the Manila Hotel where the
bride and her family were billeted. When she arrived at the Suite, HOLDING & RATIO DECIDENDI
several persons were already there including the bride. Among those
Valmonte is entitled to damages.
present was petitioner Soledad Carpio, an aunt of the bride who was
preparing to dress up for the occasion. • To warrant recovery of damages, there must be both a right of
action, for a wrong inflicted by the defendant, and the damage
• After reporting to the bride, Valmonte went out of the suite carrying
resulting therefrom to the plaintiff. Wrong without damage, or
the items needed for the wedding rites and the gifts from the
damage without wrong, does not constitute a cause of action.
principal sponsors. She proceeded to the Maynila Restaurant where
the reception was to be held. • In the our law on human relations, the victim of a wrongful act or
omission, whether done willfully or negligently, is not left without any
• She went back to the suite after, and found several people staring
remedy or recourse to obtain relief for the damage or injury he
at her when she entered. It was at this juncture that petitioner
sustained. Incorporated into our civil law are not only principles of
allegedly uttered the following words to Valmonte: “Ikaw lang ang
equity but also universal moral precepts which are designed to
lumabas ng kwarto, nasaan ang dala mong bag? Saan ka pumunta?
indicate certain norms that spring from the fountain of good
Ikaw lang and lumabas ng kwarto, ikaw ang kumuha.” Petitioner then
conscience and which are meant to serve as guides for human
ordered one of the ladies to search Valmonte’s bag. It turned out that
conduct. First of these fundamental precepts is the principle
after Valmonte left the room to attend to her duties, petitioner
commonly known as “abuse of rights” under Article 19 of the Civil
discovered that the pieces of jewelry which she placed inside the
Code. It provides that “Every person must, in the exercise of his rights
comfort room in a paper bag were lost. Hotel Security was later called.
and in the performance of his duties, act with justice, give everyone
his due and observe honesty and good faith.” To find the existence of provisions of Article 19 in relation to Article 21 for which she should
an abuse of right, the following elements must be present: (1) there be held accountable.
is a legal right or duty; (2) which is exercised in bad faith; (3) for the
sole intent or prejudicing or injuring another. When a right is
exercised in a manner which discards these norms resulting in
damage to another, a legal wrong is committed for which the actor
can be held accountable.

• The following provisions Complement the abuse of right principle:

Art. 20. Every person who, contrary to law, willfully or negligently
causes damage to another, shall indemnify the latter for the same.
Art. 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals or good customs or public policy
shall compensate the latter for the damage.

• The foregoing rules provide the legal bedrock for the award of
damages to a party who suffers damage whenever one commits an
act in violation of some legal provision, or an act which though not
constituting a transgression of positive law, nevertheless violates
certain rudimentary rights of the party aggrieved.

• In the case at bar, petitioner’s verbal reproach against respondent

was certainly uncalled for considering that by her own account
nobody knew that she brought such kind and amount of jewelry
inside the paper bag. True, petitioner had the right to ascertain the
identity of the malefactor, but to malign respondent without an iota
of proof that she was the one who actually stole the jewelry is an act
which, by any standard or principle of law is impermissible. Petitioner
had willfully caused injury to respondent in a manner which is
contrary to morals and good customs. She did not act with justice and
good faith for apparently, she had no other purpose in mind but to
prejudice respondent. Certainly, petitioner transgressed the
 • Sea Comm’l. Vs. CA, 319 SCRA 211 HOLDING & RATIO DECIDENDI

FACTS • "Art. 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
• SEACOM is a corporation engaged in the business of selling and
observe honesty and good faith.”
distributing agricultural machinery, products and equipment. On
September 20, 1966, SEACOM and JII entered into a dealership • Article 19 was intended to expand the concept of torts by granting
agreement whereby SEACOM appointed JII as its exclusive dealer in adequate legal remedy for the untold number of moral wrongs which
the City and Province of Iloilo. Tirso Jamandre executed a suretyship is impossible for human foresight to provide specifically in statutory
agreement binding himself jointly and severally with JII to pay for all law. If mere fault or negligence in one’s acts can make him liable for
obligations of JII to SEACOM. The agreement was subsequently damages for injury caused thereby, with more reason should abuse
amended to include Capiz in the territorial coverage and to make the or bad faith make him liable. The absence of good faith is essential to
dealership agreement on a non-exclusive basis. In the course of the abuse of right. Good faith is an honest intention to abstain from
business relationship arising from the dealership agreement, JII taking any unconscientious advantage of another, even through the
allegedly incurred a balance of P18,843.85 for unpaid deliveries, and forms or technicalities of the law, together with an absence of all
SEACOM brought action to recover said amount plus interest and information or belief of fact which would render the transaction
attorney’s fees. unconscientious. In business relations, it means good faith as
understood by men of affairs.
• JII filed an Answer denying the obligation and interposing a
counterclaim for damages representing unrealized profits when JII • While Article 19 may have been intended as a mere declaration of
sold to the Farm System Development Corporation (FSDC) twenty one principle, the “cardinal law on human conduct” expressed in said
(21) units of Mitsubishi power tillers. In the counterclaim, JII alleged article has given rise to certain rules, e.g. that where a person
that as a dealer in Capiz, JII contracted to sell in 1977 twenty-four (24) exercises his rights but does so arbitrarily or unjustly or performs his
units of Mitsubishi power tillers to a group of farmers to be financed duties in a manner that is not in keeping with honesty and good faith,
by said corporation, which fact JII allegedly made known to petitioner, he opens himself to liability. The elements of an abuse of rights under
but the latter taking advantage of said information and in bad faith, Article 19 are: (1) there is a legal right or duty; (2) which is exercised
went directly to FSDC and dealt with it and sold twenty one (21) units in bad faith; (3) for the sole intent of prejudicing or injuring another.
of said tractors, thereby depriving JII of unrealized profit of eighty-five
• Clearly, the bad faith of SEACOM was established. By appointing as
thousand four hundred fifteen and 61/100 pesos (P85,415.61).
a dealer of its agricultural equipment, SEACOM recognized the role
ISSUES & ARGUMENTS and undertaking of JII to promote and sell said equipment. Under the
dealership agreement, JII was to act as a middleman to sell SEACOM’s
• W/N SEACOM acted in bad faith when it competed with its own
products, in its area of operations, i.e. Iloilo and Capiz provinces, to
dealer as regards the sale of farm machineries to FSDC
the exclusion of other places, to send its men to Manila for training
on repair, servicing and installation of the items to be handled by it,
and to comply with other personnel and vehicle requirements
intended for the benefit of the dealership After being informed of the
demonstrations JII had conducted to promote the sales of SEACOM
equipment, including the operations at JII’s expense conducted for
five months, and the approval of its facilities (service and parts) by
FSDC, SEACOM participated in the bidding for the said equipment at
a lower price, placing itself in direct competition with its own dealer.
The actuations of SEACOM are tainted by bad faith.

• Even if the dealership agreement was amended to make it on a non-

exclusive basis, SEACOM may not exercise its right unjustly or in a
manner that is not in keeping with honesty or good faith; otherwise
it opens itself to liability under the abuse of right rule embodied in
Article 19 of the Civil Code above-quoted. This provision, together
with the succeeding article on human relation, was intended to
embody certain basic principles “that are to be observed for the
rightful relationship between human beings and for the stability of
the social order.” What is sought to be written into the law is the
pervading principle of equity and justice above strict legalism.
 • Citytrust Banking vs. Villanueva, 361 SCRA 446 the trial court rendered... a decision... dismissing the complaint... for
lack of merit.
FACTS
The trial court found that VILLANUEVA's negligence set the chain of
Isagani C. Villanueva... opened a savings account and a current
events which resulted in his alleged losses and damages.
account with Citytrust Banking Corporation
The Court of Appeals... ruled that when the BANK voluntarily
VILLANUEVA's Check... was dishonored due to insufficiency of funds
processed the requisition slip without the requisite account number
and disparity in the signature. VILLANUEVA called Kingly
being supplied by the applicant, it in effect took upon itself the
Commodities and explained that there was a mistake in the dishonor
obligation to supply... the correct account number.
of the check because he had sufficient funds.
Thus, when the new checkbook was released to VILLANUEVA... the
Forthwith on the same day, VILLANUEVA called up the BANK's Legaspi
BANK was deemed to have waived any defect in the requisition slip
Village Branch... and inquired about the dishonor of his well-funded
and estopped from putting the blame on VILLANUEVA's failure to
check.
indicate his account number.
VILLANUEVA learned that his check was again dishonored due to
it nonetheless awarded moral damages
insufficiency of funds and a stop- payment order he allegedly issued.
ISSUES & ARGUMENTS
VILLANUEVA filed... a complaint for damages based on breach of
contract and/or quasi-delict Is VILLANUEVA entitled to the moral damages

VILLANUEVA alleged in his complaint that the BANK breached its

contractual obligation to him as a depositor because of its repeated
HOLDING & RATIO DECIDENDI
dishonor of his valid and well-funded check. The breach arose from
the BANK's gross negligence and culpable recklessness in supplying NO
the wrong... account number.
Both the Court of Appeals and the trial court have ascertained that
In its answer, the BANK alleged that VILLANUEVA suffered no VILLANUEVA was unable to prove his demand for compensatory
actionable injury, much less damages, considering his blatant damages arising from loss. His... evidence thereon was found
irresponsibility in not remembering his current account number and inadequate, uncorroborated, speculative, hearsay and not the best
in failing to bring his checkbook re-order slip form on which his evidence. Basic is the jurisprudential principle that in determining
account number was... inscribed when he requested a new set of actual damages, the court cannot rely on mere assertions,
checks. speculations, conjectures or guesswork but must depend on...
competent proof and on the best obtainable evidence of the actual been so grave or intolerable as he attempts to... portray or impress
amount of the loss. upon us.

Actual damages cannot be presumed but must be duly proved with Further, it is clear from the records that the BANK was able to remedy
reasonable certainty. the caveat of Kingly Commodities to VILLANUEVA that his trading
account would be closed at 5:30 p.m. on 26 June 1986. The BANK was
Moral damages include physical suffering, mental anguish, fright,
able to issue a manager's check in favor of Kingly Commodities before
serious anxiety, besmirched reputation, wounded feelings, moral
the... deadline.
shock, social humiliation, and similar injury.
Verily, the alleged embarrassment or inconvenience caused to
Although incapable of pecuniary computation, moral damages may
VILLANUEVA as a result of the incident was timely and adequately
be recovered... if they are the proximate result of the defendant's
contained, corrected, mitigated,... if not entirely eradicated.
wrongful act or omission.
VILLANUEVA, thus, failed to support his claim for moral damages. In
Thus, case law establishes the requisites for the award of moral short, none of the circumstances mentioned in Article 2219 of the
damages, viz: (1) there must be an injury, whether physical, mental or Civil Code exists to sanction the award for moral damages.
psychological, clearly sustained... by the claimant; (2) there must be
a culpable act or omission factually established; (3) the wrongful act
or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) the award of damages is predicated
on any of the cases stated in Article

2219 of the Civil Code.

It is beyond cavil that VILLANUEVA had sufficient funds for the check.
Had his account number been correct, the check would not have been
dishonored. Hence, we can say that VILLANUEVA's injury arose from
the dishonor of his well-funded check. We have already ruled that
the... dishonor of the check does not entitle him to compensatory
damages.

True, we find that under the circumstances of this case, VILLANUEVA

might have suffered some form of inconvenience and discomfort as a
result of the dishonor of his check. However, the same could not have
 • Nikko Hotel Manila Garden vs. Reyes, 452 SCRA ISSUE:
532
WON Ruby Lim acted abusively in asking Roberto Reyes to leave the
FACTS: party.

Roberto Reyes (AKA Amay Bisaya), filed an action for damages under
Arts. 19 and 21 against petitioners. He alleged that at around 6:00 in HELD:
the evening of 13 October 1994, while he was having coffee at the
NO. We find more credible the lower courts findings of fact. We are
lobby of Hotel Nikko, he was spotted by his friend, Dr. Violeta Filart.
dealing with a formal party in a posh, five-star hotel, for-invitation--
Mrs. Filart invited him to join her in a birthday party of the hotel’s
only, thrown for the hotel’s former Manager. To unnecessarily call
manager, Mr. Masakazu Tsuruoka, and that she will vouch for him. He
attention to the presence of Mr. Reyes would certainly reflect badly
then carried Filart’s present (basket of fruits) to the party. However,
on Ms. Lim’s ability to follow the instructions of the celebrant to invite
while lining up at the buffet table, Reyes was stopped by Ruby Lim
only his close friends and some of the hotel’s personnel. In the
(Executive Secretary for Hotel Nikko) and in a loud voice, was told to
absence of any proof of motive on the part of Ms. Lim to humiliate
leave the party. Filart was within hearing distance but completely
Mr. Reyes and expose him to ridicule and shame, it is highly unlikely
ignored him when he said that he was invited by Filart. Thereafter, he
that she would shout at him from a very close distance.
was escorted out by a Makati policeman.
Considering the closeness of defendant Lim to plaintiff when the
Ms. Lim said that she approached the captain waiter, Dr. Filart’s sister
request for the latter to leave the party was made such that they
(Ms. Fruto), and Capt. Batung regarding his presence, and requested
nearly kissed each other, the request was meant to be heard by him
Fruto & Batung to tell Reyes to leave. Because he still lingered, she
only and there could have been no intention on her part to cause
then approached Reyes when he went to a corner to eat and
embarrassment to him. Moreover, another problem with Mr. Reyes’s
requested him to leave, but when she turned around, Reyes began
version of the story is that it is unsupported.
making a big scene. Filart, on the other hand, stated that she never
invited Mr. Reyes to the party and that it was Reyes who volunteered A common theme runs through Articles 19 and 21, and that is, the act
to carry the basket as he was also going to take the elevator, but he complained of must be intentional. As applied to herein case and as
was going to a different floor. earlier discussed, Mr. Reyes has not shown that Ms. Lim was driven
by animosity against him. These two people did not know each other
The RTC dismissed the complaint, but the CA reversed the same.
personally before the evening of 13 October 1994, thus, Mr. Reyes
Hence, this petition for review. Petitioners contend that pursuant to
had nothing to offer for an explanation for Ms. Lim’s alleged abusive
the doctrine of volenti non fit injuria, they cannot be made liable for
conduct except the statement that Ms. Lim, being single at 44 years
damages as respondent Reyes assumed the risk of being asked to
old, had a very strong bias and prejudice against (Mr. Reyes) possibly
leave for being a gate-crasher.
influenced by her associates in her work at the hotel with foreign
businessmen. The lameness of this argument need not be belabored.

Parenthetically, the manner by which Ms. Lim asked Mr. Reyes to

leave was likewise acceptable and humane under the circumstances.
Not being liable for both actual and moral damages, neither can
petitioners Lim and Hotel Nikko be made answerable for exemplary
damages.
 b. ACTS & OMISSIONS CONTRARY TO MORALS (Arts. 20- petitioner failed to pay, private respondent sought the extrajudicial
21) foreclosure of the real estate mortgage.

• Petitioner filed a complaint, with a prayer for the issuance of TRO

Article 20. Every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same. to enjoin the sheriff from proceeding with the foreclosure sale and to
fix her indebtedness to P706,000.
Article 21. Any person who wilfully causes loss or injury to another in ISSUES & ARGUMENTS
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage. W/N the rates of interests and surcharges on the obligation of
petitioner to private respondent are valid?

• Ruiz vs. Sec. of Nat’l Defense, 9 SCRA 925

HOLDING & RATIO DECIDENDI
FACTS
NO. INTEREST RATES ARE INVALID.
• Petitioner Corazon Ruiz is engaged in the business of buying and
selling jewelry. She obtained loans from private respondent Consuelo • SC affirmed the CA ruling, striking down as invalid the 10%
Torres on different occasions. compounded monthly interest, the 10% surcharge per month
stipulated in the promissory notes, and the 1% compounded monthly
• These loans were consolidated under one promissory note and interest stipulated in another promissory note.
were secured by a real estate mortgage. The promissory note
provided for a monthly interest rate of 3%, a surcharge of 1%, and • The legal rate of interest of 12% per annum shall apply after the
10% compounded monthly interest on remaining balance as of the maturity dates of the notes until full payment of the entire amount
maturity date. due.

• Petitioner obtained three more loans from private respondent and • The only permissible rate of surcharge is 1% per month, without
was secured by P571,000 worth of jewelry. compounding.

• Petitioner was unable to make interest payments as she had • SC upheld the award of CA of attorney’s fees, reasonably reducing
difficulties collecting from her clients in her jewelry business. the stipulated 25% to 10% of the entire amount due.

• Due to petitioner’s failure to pay the principal loan, as well as the • SC also equitably reduced the 3% per month or 36% per annum
interest payment, private respondent demanded payment. When interest present in all four promissory notes to 1% per month or 12%
per annum interest.
• SC based its decision on the Medel, Garcia, Bautista, and Spouses
Solangon cases.

• An interest of 12% per annum is deemed fair and reasonable.

• The 1% surcharge on the principal loan for every month of default

is valid. This surcharge or penalty stipulated in a loan agreement in
case of default partakes of the nature of liquidated damages under
Art. 2227 of the NCC, and is separated and distinct from interest
payment.

• Although the courts may not at liberty ignore the freedom of the
parties to agree on such terms and conditions as they see fit that
contravene neither law nor morals, good customs, public order or
public policy, a stipulated penalty, nevertheless, may be equitably
reduced if it is iniquitous or unconscionable.
 • Tenchavez vs. Escano, 122 Phil 752 cruelty, entirely mental in character." On 21 October 1950, a decree
of divorce, "final and absolute", was issued in open court by the said
FACTS
tribunal.
• Direct appeal, on factual and legal questions, from the judgment of
• In 1951 Mamerto and Mena Escaño filed a petition with the
the Court of First Instance of Cebu, denying the claim of the plaintiff-
Archbishop of Cebu to annul their daughter's marriage to Pastor (Exh.
appellant, Pastor B. Tenchavez, for legal separation and one million
"D"). On 10 September 1954, Vicenta sought papal dispensation of
pesos in damages against his wife and parents-in-law, the defendants-
her marriage (Exh. "D"-2).
appellees, Vicente, Mamerto and Mena, all surnamed "Escaño,"
respectively • On 13 September 1954, Vicenta married an American, Russell Leo
Moran, in Nevada. She now lives with him in California, and, by him,
• Missing her late afternoon classes on 24 February 1948 in the
has begotten children. She acquired American citizenship on 8 August
University of San Carlos, Cebu City, where she was then enrolled as a
1958.
second year student of commerce, Vicenta Escaño, 27 years of age
(scion of a well-to-do and socially prominent Filipino family of Spanish • But on 30 July 1955, Tenchavez had initiated the proceedings at bar
ancestry and a "sheltered colegiala"), exchanged marriage vows with by a complaint in the Court of First Instance of Cebu, and amended
Pastor Tenchavez, 32 years of age, an engineer, ex-army officer and of on 31 May 1956, against Vicenta F. Escaño, her parents, Mamerto and
undistinguished stock, without the knowledge of her parents, before Mena Escaño, whom he charged with having dissuaded and
a Catholic chaplain, Lt. Moises Lavares, in the house of one Juan discouraged Vicenta from joining her husband, and alienating her
Alburo in the said city. The marriage was the culmination of a previous affections, and against the Roman Catholic Church, for having,
love affair and was duly registered with the local civil register. through its Diocesan Tribunal, decreed the annulment of the
marriage, and asked for legal separation and one million pesos in
• Her parents were disgusted when they found out about the
damages. Vicenta claimed a valid divorce from plaintiff and an equally
marriage and considered a Re-celebration of the marriage as they
valid marriage to her present husband, Russell Leo Moran; while her
believed it to be invalid. The re-celebration never took place.
parents denied that they had in any way influenced their daughter's
• On 24 June 1950, without informing her husband, Vicenta applied acts, and counterclaimed for moral damages. The appealed judgment
for a passport, indicating in her application that she was single, that did not decree a legal separation, but freed the plaintiff from
her purpose was to study, and she was domiciled in Cebu City, and supporting his wife and to acquire property to the exclusion of his
that she intended to return after two years. The application was wife. It allowed the counterclaim of Mamerto Escaño and Mena
approved, and she left for the United States. Escaño for moral and exemplary damages and attorney's fees against
the plaintiff-appellant, to the extent of P45,000.00, and plaintiff
• On 22 August 1950, she filed a verified complaint for divorce against resorted directly to this Court.
the herein plaintiff in the Second Judicial District Court of the State of
Nevada in and for the County of Washoe, on the ground of "extreme
ISSUES & ARGUMENTS

• W/N Vicenta’s parents are liable for damages

HOLDING & RATIO DECIDENDI

• No. There is no evidence that the parents of Vicenta, out of

improper motives, aided and abetted her original suit for annulment,
or her subsequent divorce; she appears to have acted independently,
and being of age, she was entitled to judge what was best for her and
ask that her decisions be respected. Her parents, in so doing, certainly
cannot be charged with alienation of affections in the absence of
malice or unworthy motives, which have not been shown, good faith
being always presumed until the contrary is proved.

• Plaintiff Tenchavez, in falsely charging Vicenta's aged parents with

racial or social discrimination and with having exerted efforts and
pressured her to seek annulment and divorce, unquestionably caused
them unrest and anxiety, entitling them to recover damages. While
this suit may not have been impelled by actual malice, the charges
were certainly reckless in the face of the proven facts and
circumstances. Court actions are not established for parties to give
vent to their prejudices or spleen.
 • Pe vs. Pe, 115 SCRA 186 HELD:

FACTS: YES. Alfonso committed an injury to Lolita’s family in a manner

contrary to morals, good customs and public policy contemplated in
Plaintiffs are the parents, brothers and sisters of one Lolita Pe, who is
Article 20 of the Civil Code. The wrong caused by Alfonso is
24 years old and unmarried. Defendant, Alfonso Pe, on the other
immeasurable considering the fact that he is a married man.
hand, is a married man. Because of the similarity in their family name,
defendant became close to the plaintiffs who regarded him as a The defendant took advantage of the trust of the plaintiffs and even
member of their family. Defendant frequented the house of Lolita on used the praying of rosary as a reason to get close with Lolita. The
the pretext that he wanted her to teach him how to pray the rosary. defendant tried to win Lolita’s affection thru an ingenious scheme or
The two eventually fell in love with each other and conducted trickery, seduced Lolita to the extent of making her fall in love with
clandestine love affairs. When the rumors about their illicit affairs him. No other conclusion can be drawn from this chain of events than
reached the knowledge of her parents, defendant was forbidden from that defendant not only deliberately, but through a clever strategy,
going to their house and even from seeing Lolita. Nevertheless, succeeded in winning the affection and love of Lolita to the extent of
defendant continued his love affairs with Lolita until she disappeared having illicit relations with her.
from the parental home.

Plaintiffs then brought an action to recover moral, compensatory,

exemplary and corrective damages. They based their action on Article
21 of the New Civil Code, which provides that “Any person who
wilfully causes loss or injury to another in a manner which is contrary
to morals, good customs or public policy shall compensate the latter
for the damage.” Defendant set up as a defense that the facts alleged
therein, even if true, do not constitute a valid cause of action.

ISSUE:

Did the defendant commit injury to Lolita’s family in a manner

contrary to morals, good customs and public policy as contemplated
in Article 21 of the New Civil Code?
 • Wassmer vs. Velez, 120 Phil 1440 accessories, was bought. Bridal showers were given and gifts
received. - This is not a case of mere breach of promise to marry. To
FACTS
formally set a wedding and go through all the above-described
Francisco X. Velez and Beatriz P. Wassmer, following their mutual preparation and publicity, only to walk out of it when the matrimony
promise of love, decided to get married and set September 4, 1954 is about to be solemnized, is quite different. This is palpably and
as the big day. On September 2, Velez left a note for Wassmer saying unjustifiably contrary to good customs for which defendant must be
that he has to postpone the wedding because his mother opposes it. held answerable in damages in accordance with Article 21 aforesaid.
- But the next day, he sent a telegram assuring Wassmer that nothing - Per express provision of Article 2219 (10) of the New Civil Code,
has changed and he will return soon. But Velez did not appear nor moral damages are recoverable in the cases mentioned in Article 21
was he heard from again. - Sued by Beatriz for damages, Velez filed of said Code. As to exemplary damages, defendant contends that the
no answer and was declared in default. Plaintiff adduced evidence same could not be adjudged against him because under Article 2232
before the clerk of court as commissioner Judgment was rendered of the New Civil Code the condition precedent is that "the defendant
ordering defendant to pay plaintiff P2,000 as actual damages; acted in a wanton, fraudulent, reckless, oppressive, or malevolent
P25,000 as moral and exemplary damages; P2,500 as attorney's fees; manner." The argument is devoid of merit as under the above-
and the costs. narrated circumstances of this case defendant clearly acted in a
"wanton ... , reckless [and] oppressive manner." P15,000.00 as moral
ISSUE and exemplary damages is deemed to be a reasonable award.
WON Velez is liable for the cost of wedding preparations spent by
Wassmer

HELD

YES - While mere breach of contract is not an actionable wrong,

Article 21 of the Civil Code says that when the person willfully causes
loss or injury contrary to good custom, he shall compensate the latter
for damages. It is the abuse of right which can be a cause for moral
and material damages. - The record reveals that on August 23, 1954
plaintiff and defendant applied for a license to contract marriage,
which was subsequently issued. Their wedding was set. Invitations
were printed and distributed to relatives, friends and acquaintances.
The bride-to-be's trousseau, party dresses and other apparel for the
important occasion were purchased. Dresses for the maid of honor
and the flower girl were prepared. A matrimonial bed, with
 c. UNJUST ENRICHMENT (Arts. 22-23) between the parties for the employment of the plaintiff as
interpreter, or that any other innominate contract was entered into,
Article 22. Every person who through an act of performance by but whether the plaintiff’s services were solicited or whether they
another, or any other means, acquires or comes into possession of were offered to the defendant for his assistance, inasmuch as these
something at the expense of the latter without just or legal ground, services were accepted and made use of by the latter, there was a
shall return the same to him. tacit and mutual consent as to the rendition of services. This gives rise
to the delegation upon the person benefited by the services to make
Article 23. Even when an act or event causing damage to another's compensation thereof, since the bilateral obligation to render
property was not due to the fault or negligence of the defendant, the
services as interpreter, on the one hand, and on the other to pay for
latter shall be liable for indemnity if through the act or event he was
the services rendered is thereby incurred.
benefited.

As was held in the Supreme Court of Spain in its decision of February

12, 1889, it stated that “not only is there an express and tacit consent
• Perez vs. Pomar, 2 Phil 682 which produces real contract but there is also a presumptive consent
which is the basis of quasi-contracts this giving rise to the multiple
FACTS
judicial relations which result in obligations for the delivery of a thing
or the rendition of a service.
Perez filed in the Court of First Instance of Laguna a complaint asking
the Court to determine the amount due him for services rendered as
an interpreter for Pomar and for judgement to be rendered in his
favor. Pomar, on his part, denied having sought the services of Perez,
contending that, Perez being his friend, he only accepted the services
for they were rendered in a spontaneous, voluntary and officious
manner.

ISSUE

Whether or not consent has been given by the other party.

HELD

Yes. It does not appear that any written contract was entered into
 • Pacific Merchandising vs. Consolacion Insurance, Ruling:
73 SCRA 564
Principles:
Facts:
"it is only simple justice that Pajarillo should pay for the said claim,
That Atty. Greg V. Pajarillo was appointed on March 2, 1963 as otherwise he would be enriching himself by having the said building
Receiver of all the assets, properties and equipment of Paris Theatre, without paying plaintiff for the cost of certain materials that went
operated by Leo Enterprises, Inc... hat Atty. Greg V. Pajarillo was into its... construction";
appointed on March 2, 1963 as Receiver of all the assets, properties
In... order to bind the property or fund in his hands as receiver, he
and equipment of Paris Theatre, operated by Leo Enterprises, Inc.
should have applied for and obtained from the court authority to
under Civil Case No. 50201 entitled Gregorio V. Pajarillo vs. Leo
enter into the aforesaid contract.[9] Unauthorized contracts of a
Enterprises, Inc.;
receiver do not bind the court in charge of... receivership. They are
That on December 19, 1963, plaintiff's counsel demanded from the the receiver's own contracts and are not recognized by the courts as
defendant the payment of the unpaid obligation of the principal, contracts of the receivership.[10] Consequently, the aforesaid
Greg V. Pajarillo but refused and failed to pay the same in spite of agreement and undertaking entered into by appellant Pajarillo not
said demand having been approved or... authorized by the receivership court
should, therefore, be considered as his personal undertaking or
In the case at bar, appellant Pajarillo does not dispute the fact that obligation.
he never secured the court's approval of either the agreement of
March 11, 1963, with Pacific Merchandising Corporation or of his
Indemnity Agreement with the Consolacion Insurance Surety Co., Inc.
on March 14, 1963, in consideration of the performance bond
submitted by the latter to Pacific Merchandising Corporation to
guarantee the payment of the obligation. As the person to whom the
possession of the theater and its equipment... was awarded by the
court in Civil Case No. 50201, it was certainly to his personal profit
and advantage that the sale at public auction of the equipment of the
theater was prevented by his execution of the aforesaid agreement
and submission of the afore-mentioned bond.
Issues:
The legal question is whether or not third-party defendant-appellant
Gregorio V. Pajarillo is, under the facts and circumstances obtaining,
liable to plaintiff for the unpaid amount claimed.
 • CIR vs. Friedman’s Fund Ins., 148 SCRA 316 • The American corporation then sued CALI in the superior court of
californinia, USA for the amount of the credit thus assigned. And a
• Velayo vs Shell, 100 Phil 186
writ of attachment was issued against a C-54 PLANE in Ontario
FACTS International Airport. And on January 5, 1949, a judgment by default
had been issued by the American court against CALI.
• Commercial Air Lines (CALI) was supplied by Shell Co. of the
Philippines Islands (defendant) ever since it started its operations • The stockholders of CALI were unaware of this.

• As per the books of the defendant, it had reasons to believe that • When the suit in the american court was found out, on the first
the financial condition of CALI was far from being satisfactory. weeks of September 1948, CALI immediately file for voluntary
insolvency and the court issued the order of insolvency accordingly
• The management of CALI informally convened its principal creditors on the same day. The court appointed Mr. Velayo as Assignee.
on August 6, 1948, and informed them that CALI was in a state of
insolvency and had to stop operations. • On December 17, 1948, Velayo filed for a writ of injuction to stop
the foreign court from prosecuting the claim, and in the alternative,
• The creditors present agreed to the formation of a working he prayed for damages in double the amount of the plane which was
committee to continue the discussion of the payment of claims and attached.
preferences alleged by certain creditors, and it was further agreed
that said working committee would supervise the preservation of the • The plaintiff having failed to restrain the progress of the attachment
properties of the corporation while the creditors attempted to come suit in the US by denial of the application of the writ of injuction and
to an under standing as a fair distribution of the assets among them. the consequences on execution of the C-54 plane in the state of
California, USA, he confines his action to the recovery of damages
• To this committee, Mr. Fitzgerald the credit manager of the against the defendant.
defendant, Mr. Agcaoili of the National airports corporation and Atty
Alexander Sycip were appointed. • The complaint was dismissed, hence this petition.

• It was agreed upon that the creditors would not file suit to achieve ISSUES & ARGUMENTS
a fair pro-rata distribution, although CALI announced that in the event
• W/N the defendant acted in bad faith and btrayed the trust and
of non-agreement, it was to file for insolvency proceedings.
confidence of the other creditors of CALI.
• However, on the very day of the meeting of the working committee,
• W/N by reason of the betrayal,, defendant may be made to answer
which Mr. Fitzgerald attended, the defendant effected a telegraphic
for the damages prayed for by the plaintiff.
transfer of its credit against CALI to the American corporation Shell
Oil Company, Inc., assigning its credit, which was subsequently
followed by a deed of assignment of credit dated August 10, 1948.
HOLDING & RATIO DECIDENDI

• Moreover, we might say that DEFENDANT could not have

accomplished the transfer of its credit to its sister corporation if all
the shell companies throughout the wworld would not have a sort of
union, relation or understanding among themselves to come to the
aid of each other. The telegraphic transfer made without the
knowledge and at the back of the other creditors of CALI may be a
shrewd and surprise move that enabled the DEFENDANT to collect
almost allif not the entire amount of its credit, but the Court of Justice
cannot countenance cuch attitude at all, and much less a foreign
corporation to the detriment of our Government and local business.

• Chapter 2 of the preliminary title of the civil code on human

relations, proveides the following; 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.

• It maybe said that this article only contains a mere declaration of

principles and while such statement is essentially correct, yet We find
that such declaration is implemented by Article 21and the sequence
of the same chapter, which prescribe the following: Article 21. Any
person who wilfully causes loss or injury to another in manner that is
contrary to morals, good customs or public policy shall compensate
the latter for the damage.