15.1 Araneta vs. de Joya GR No.

L-25172 May 24 1974

15.2 Coca-Cola Bottlers Philippines, Inc. vs CA GR No.
110295, Oct 18, 1993

15.3 American Express International Inc. vs. Cordero

473 SCRA 42, 47-48 (2002)

15.1:
G.R. No. L-25172 May 24, 1974
LUIS
MA.
vs.
ANTONIO R. DE JOYA, respondent.

ARANETA, petitioner,

Araneta, Mendoza & Papa for petitioner.

Jose F. Espinosa for respondent.

CASTRO, J.:p
Petition for review of the decision of the Court of Appeals in CA-G.R. 34277-R
ordering Luis Ma. Araneta (hereinafter referred to as the petitioner) to indemnify
Antonio R. de Joya (hereinafter referred to as the respondent) for one-third of the
sum of P5,043.20 which the latter was adjudged to pay the Ace Advertising
Agency, Inc., the plaintiff in the recovery suit below.
Sometime in November 1952 the respondent, then general manager of the Ace
Advertising, proposed to the board of directors 1 that an employee, Ricardo
Taylor, be sent to the United States to take up special studies in television. The
board, however, failed to act on the proposal. Nevertheless, in September 1953
the respondent sent Taylor abroad. J. Antonio Araneta, a company director,
inquired about the trip and was assured by the respondent that Taylor's expenses
would be defrayed not by the company but by other parties. This was thereafter
confirmed by the respondent in a memorandum.
While abroad, from September 1, 1953 to March 15, 1954, Taylor continued to
receive his salaries. The items corresponding to his salaries appeared in
vouchers prepared upon the orders of, and approved by, the respondent and were
included in the semi-monthly payroll checks for the employees of the
corporation. The petitioner signed three of these checks on November 27,
December 15 and December 29, 1953. The others were signed by either the
respondent, or Vicente Araneta (company treasurer) who put up part of the bill
connected with Taylor's trip and also handed him letters for delivery in the United
States. The Ace Advertising disbursed P5,043.20, all told, on account of Taylor's
travel and studies.

On August 23, 1954 the Ace Advertising filed a complaint with the court of first
instance of Manila against the respondent for recovery of the total sum disbursed
to Taylor, alleging that the trip was made without its knowledge, authority or
ratification. The respondent, in his answer, denied the charge and claimed that
the trip was nonetheless ratified by the company's board of directors, and that in
any event under the by-laws he had the discretion, as general manager, to
authorize the trip which was for the company's benefit..
A 3rd-party complaint was also filed by the respondent against Vicente Araneta
(COMPANY TREASURER), the petitioner and Ricardo Taylor. The respondent
proved that Vicente Araneta, as treasurer of the firm, signed a check representing
the company's share of the transportation expense of Taylor to the United States,
and that a series of payroll checks from September 15, 1953 to December 31,
1953, inclusive, which included the salaries of Taylor, was signed by Vicente
Araneta and the petitioner who is a vice-president of the company. Both Aranetas
disowned any personal liability, claiming that they signed the checks in good faith
as they were approved by the respondent..
On April 13, 1964 the trial court rendered judgment ordering the respondent to
pay the Ace Advertising "the sum of P5,043.20 with interest at the legal rate from
August 23, 1954 until full payment," and dismissing the 3rd-party complaint.
The respondent appealed to the Court of Appeals, which on August 2, 1965,
rendered a decision affirming the trial court's judgment in favor of the Ace
Advertising but reversing the dismissal of the 3rd-party complaint. The appellate
court found as a fact that Taylor's trip had been neither authorized nor ratified by
the company.
The appellate court's full statement of its categorical and unequivocal findings of
fact on the nature and extent of the participation of the petitioner as well as
Vicente Araneta is hereunder quoted:
The evidence not only is clear, but is even not disputed at all by
Vicente and Luis Araneta who neither of them took the witness stand
to refute appellant's evidence, that as to Vicente it was to him that
appellant first broached the subject-matter of sending Taylor to
America, that Vicente Araneta evinced unusual interest, and went to
the extent of entrusting Taylor with letters for delivery to certain
principals of Gregorio Araneta, Inc. in the United States, and he even
signed the check for P105.20 to cover expenses for his tax clearance,
documentary stamps and passport fees, in connection with the trip,
on 8 September, 1953, and then on 5 October, 1953, still another
check for P868.00 which was half the amount for his plane ticket; and
as to Luis Araneta, it not at all being disputed that when Taylor was
already in America, his salaries while abroad were paid on vouchers
and checks signed either by him or by Vicente, or by appellant
himself; because of all these, the conclusion is forced upon this
Court that it could not but have been but that both Vicente and Luis
were informed and gave their approval to Taylor's trip, and to the
payment of his trip expenses and salaries during his absence, from
corporate funds; if this was the case as it was, there can be no
question but that they two were also privy to the unauthorized
disbursement of the corporate moneys jointly with the appellant;

what had happened was in truth and in fact a venture by them given
their stamp of approval; and as it was an unauthorized act of
expenditure of corporate funds, and it was these three without
whose acts the same could not have happened, the juridical situation
was a simple quasi-delict by them committed upon the corporation,
for which solidary liability should have been imposed upon all in the
first place, Art. 2194, New Civil Code; and only De Joya having been
sued and made liable by the corporation, it was the right of the latter
to ask that his two joint tortfeasors be made to shoulder their
proportional responsibility. (emphasis supplied)
The basic legal issue is whether the petitioner is guilty of a quasi-delict as held
below.
It is our view, and we so hold, that the judgment of the Court of Appeals should
be upheld. The petitioner's assertion that he signed the questioned payroll
checks in good faith has not been substantiated, he in particular not having
testified or offered testimony to prove such claim. Upon the contrary, in spite of
his being a vice-president and director of the Ace Advertising, the petitioner
remained passive, throughout the period of Taylor's stay abroad, concerning the
unauthorized disbursements of corporate funds for the latter. This plus the fact
that he even approved thrice payroll checks for the payment of Taylor's salary,
demonstrate quite distinctly that the petitioner neglected to perform his duties
properly, to the damage of the firm of which he was an officer. The fact that he
was occupying a contractual position at the Ace Advertising is of no moment. The
existence of a contract between the parties, as has been repeatedly held by this
Court, constitutes no bar to the commission of a tort by one against the other and
the consequent recovery of damages. 2
ACCORDINGLY, the judgment of the Court of Appeals is affirmed, at petitioner's
cost.
Makalintal, C.J., Makasiar, Esguerra and Muoz Palma, JJ., concur.
Teehankee, J., took no part.

ARANETA VS DE JOYA

FACTS: This present petition for review stemmed from the recovery case filed by
Ace Advertising against Antonio R. de Joya, the general manager of the same
company. Ace Advertising prayed for the recovery of the total sum of Php5,043.20
disbursed to an employee named Ricardo Taylor, who was sent to the US to study
about television. The company alleged that the trip was made without its
knowledge, authority or ratification. The respondent, in his answer, denied the
charge and claimed that the trip was nonetheless ratified by the company's board
of directors, and that in any event under the by-laws he had the discretion, as
general manager, to authorize the trip which was for the company's benefit.
Along his answer, the respondent likewise filed a 3rd party complaint against the
Vicente Areneta (company treasurer), Ricardo Taylor, and herein petitioner. The
respondent proved that Vicente Araneta, as treasurer of the firm, signed a check
representing the company's share of the transportation expense of Taylor to the
United States, and that a series of payroll checks from September 15, 1953 to
December 31, 1953, inclusive, which included the salaries of Taylor, was signed
by Vicente Araneta and the petitioner who is a vice-president of the company.
CFI in its judgement, ordered respondent to pay the sum of php5,043.20 and
dismissed the 3rd party complaints.
Respondent appealed to CA, wherein it affirmed CFIs judgment as to the
recovery case, but reversed its decision with regard the third party complaints.
The appellate court found as a fact that Taylor's trip had been neither authorized
nor ratified by the company.
Petitioner averred in his defense that they signed the checks in good faith as they
were approved by the respondent.
ISSUE: Whether the petitioner is guilty of a quasi-delict.
RULING: YES. The judgment of the Court of Appeals should be upheld. The
petitioner's assertion that he signed the questioned payroll checks in good faith
has not been substantiated, he in particular not having testified or offered
testimony to prove such claim. Upon the contrary, in spite of his being a vicepresident and director of the Ace Advertising, the petitioner remained passive,
throughout the period of Taylor's stay abroad, concerning the unauthorized
disbursements of corporate funds for the latter. This plus the fact that he even
approved thrice payroll checks for the payment of Taylor's salary, demonstrate
quite distinctly that the petitioner neglected to perform his duties properly, to the
damage of the firm of which he was an officer. The fact that he was occupying a
contractual position at the Ace Advertising is of no moment. The existence of a
contract between the parties, as has been repeatedly held by this Court,
constitutes no bar to the commission of a tort by one against the other and the
consequent recovery of damages.

15.2 G.R. No. 110295 October 18, 1993

COCA-COLA
vs.

BOTTLERS

PHILIPPINES,

INC.,

THE HONORABLE COURT OF APPEALS (Fifth Division) and MS. LYDIA

GERONIMO, respondents.
Angara, Abello, Concepcion, Regala & Cruz Law Offices for petitioner.
Alejandro M. Villamil for private respondent.
DAVIDE, JR., J.:
This case concerns the proprietress of a school canteen which had to close down
as a consequence of the big drop in its sales of soft drinks triggered by the
discovery of foreign substances in certain beverages sold by it. The interesting
issue posed is whether the subsequent action for damages by the proprietress
against the soft drinks manufacturer should be treated as one for breach of
implied warranty against hidden defects or merchantability, as claimed by the
manufacturer, the petitioner herein which must therefore be filed within six
months from the delivery of the thing sold pursuant to Article 1571 of the Civil
Code, or one for quasi-delict, as held by the public respondent, which can be filed
within four years pursuant to Article 1146 of the same Code.
On 7 May 1990, Lydia L. Geronimo, the herein private respondent, filed a
complaint for damages against petitioner with the Regional Trial Court (RTC) of
Dagupan City. 1 The case was docketed as Civil Case No. D-9629. She alleges in
her complaint that she was the proprietress of Kindergarten Wonderland Canteen
docketed as located in Dagupan City, an enterprise engaged in the sale of soft
drinks (including Coke and Sprite) and other goods to the students of
Kindergarten Wonderland and to the public; on or about 12 August 1989, some
parents of the students complained to her that the Coke and Sprite soft drinks
sold by her contained fiber-like matter and other foreign substances or particles;
he then went over her stock of softdrinks and discovered the presence of some
fiber-like substances in the contents of some unopened Coke bottles and a
plastic matter in the contents of an unopened Sprite bottle; she brought the said
bottles to the Regional Health Office of the Department of Health at San
Fernando, La Union, for examination; subsequently, she received a letter from the
Department of Health informing her that the samples she submitted "are
adulterated;" as a consequence of the discovery of the foreign substances in the
beverages, her sales of soft drinks severely plummeted from the usual 10 cases
per day to as low as 2 to 3 cases per day resulting in losses of from P200.00 to
P300.00 per day, and not long after that she had to lose shop on 12 December
1989; she became jobless and destitute; she demanded from the petitioner the
payment of damages but was rebuffed by it. She prayed for judgment ordering
the petitioner to pay her P5,000.00 as actual damages, P72,000.00 as
compensatory damages, P500,000.00 as moral damages, P10,000.00 as exemplary
damages, the amount equal to 30% of the damages awarded as attorney's fees,
and the costs. 2
The petitioner moved to dismiss 3 the complaint on the grounds of failure to
exhaust administrative remedies and prescription. Anent the latter ground, the

petitioner argued that since the complaint is for breach of warranty under Article
1561 of the said Code. In her Comment 4 thereto, private respondent alleged that
the complaint is one for damages which does not involve an administrative action
and that her cause of action is based on an injury to plaintiff's right which can be
brought within four years pursuant to Article 1146 of the Civil Code; hence, the
complaint was seasonably filed. Subsequent related pleadings were thereafter
filed by the parties. 5
In its Order of 23 January 1991, 6 the trial court granted the motion to dismiss. It
ruled that the doctrine of exhaustion of administrative remedies does not apply
as the existing administrative remedy is not adequate. It also stated that the
complaint is based on a contract, and not on quasi-delict, as there exists preexisting contractual relation between the parties; thus, on the basis of Article
1571, in relation to Article 1562, the complaint should have been filed within six
months from the delivery of the thing sold.
Her motion for the reconsideration of the order having been denied by the trial
court in its Order of 17 April 1991, 7the private respondent came to this Court via a
petition for review on certiorari which we referred to the public respondent "for
proper determination and disposition. 8 The public respondent docketed the case
as CA-G.R. SP No. 25391.
In a decision promulgated on 28 January 1992, 9 the public respondent annulled
the questioned orders of the RTC and directed it to conduct further proceedings
in Civil Case No. D-9629. In holding for the private respondent, it ruled that:
Petitioner's complaint being one for quasi-delict, and not for breach
of warranty as respondent contends, the applicable prescriptive
period is four years.
It should be stressed that the allegations in the complaint plainly
show that it is an action or damages arising from respondent's act of
"recklessly and negligently manufacturing adulterated food items
intended to be sold or public consumption" (p. 25, rollo). It is truism
in legal procedure that what determines the nature of an action are
the facts alleged in the complaint and those averred as a defense in
the defendant's answer (I Moran 126; Calo v. Roldan, 76 Phil. 445;
Alger Electric, Inc. v. CA, 135 SCRA 340).
Secondly, despite the literal wording of Article 2176 of the Civil code,
the existence of contractual relations between the parties does not
absolutely preclude an action by one against the other for quasidelict arising from negligence in the performance of a contract.
In Singson v. Court of Appeals (23 SCRA 1117), the Supreme Court ruled:
It has been repeatedly held: that the existence of a
contract between the parties does not bar the
commission of a tort by the one against the other and
the consequent recovery of damages therefor
. . . . Thus in Air France vs. Carrascoso, . . . (it was held
that) although the relation between a passenger and a

carrier is "contractual both in origin and in nature the

act that breaks the contract may also be a tort.
Significantly, in American jurisprudence, from which Our law on
Sales was taken, the authorities are one in saying that he availability
of an action or breach of warranty does not bar an action for torts in
a sale of defective goods. 10
Its motion for the reconsideration of the decision having been denied by the
public respondent in its Resolution of 14 May 1993, 11 the petitioner took his
recourse under Rule 45 of the Revised Rules of Court. It alleges in its petition
that:
I.
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND
REVERSIBLE ERROR IN RULING THAT ARTICLE 2176, THE
GENERAL PROVISION ON QUASI-DELICTS, IS APPLICABLE IN THIS
CASE WHEN THE ALLEGATIONS OF THE COMPLAINT CLEARLY
SHOW THAT PRIVATE RESPONDENT'S CAUSE OF ACTION IS
BASEDON BREACH OF A SELLER'S IMPLIED WARRANTIES UNDER
OUR LAW ON SALES.
II.
CORROLARILY, THE
HONORABLE
COURT OF APPEALS
COMMITTED A GRAVE AND REVERSIBLE ERROR IN OVERRULING
PETITIONER'S ARGUMENT THAT PRIVATE RESPONDENT'S CAUSE
OF ACTION HAD PRESCRIBED UNDER ARTICLE 1571 OF THE CIVIL
CODE. 12
The petitioner insists that a cursory reading of the complaint will reveal that the
primary legal basis for private respondent's cause of action is not Article 2176 of
the Civil Code on quasi-delict for the complaint does not ascribe any tortious
or wrongful conduct on its part but Articles 1561 and 1562 thereof on breach of
a seller's implied warranties under the law on sales. It contends the existence of a
contractual relation between the parties (arising from the contract of sale) bars
the application of the law on quasi-delicts and that since private respondent's
cause of action arose from the breach of implied warranties, the complaint should
have been filed within six months room delivery of the soft drinks pursuant to
Article 171 of the Civil Code.
In her Comment the private respondent argues that in case of breach of the
seller's implied warranties, the vendee may, under Article 1567 of the Civil Code,
elect between withdrawing from the contract or demanding a proportionate
reduction of the price, with damages in either case. She asserts that Civil Case
No. D-9629 is neither an action for rescission nor for proportionate reduction of
the price, but for damages arising from a quasi-delict and that the public
respondent was correct in ruling that the existence of a contract did not preclude
the action for quasi-delict. As to the issue of prescription, the private respondent
insists that since her cause of action is based on quasi-delict, the prescriptive
period therefore is four (4) years in accordance with Article 1144 of the Civil Code
and thus the filing of the complaint was well within the said period.

We find no merit in the petition. The public respondent's conclusion that the
cause of action in Civil Case No. D-9629 is found on quasi-delict and that,
therefore, pursuant to Article 1146 of the Civil Code, it prescribes in four (4) years
is supported by the allegations in the complaint, more particularly paragraph 12
thereof, which makes reference to the reckless and negligent manufacture of
"adulterated food items intended to be sold for public consumption."
The vendee's remedies against a vendor with respect to the warranties against
hidden defects of or encumbrances upon the thing sold are not limited to those
prescribed in Article 1567 of the Civil Code which provides:
Art. 1567. In the case of Articles 1561, 1562, 1564, 1565 and 1566, the
vendee may elect between withdrawing from the contract and
demanding a proportionate reduction of the price, with damages
either
case. 13
The vendee may also ask for the annulment of the contract upon proof of error or
fraud, in which case the ordinary rule on obligations shall be applicable. 14 Under
the law on obligations, responsibility arising from fraud is demandable in all
obligations and any waiver of an action for future fraud is void. Responsibility
arising from negligence is also demandable in any obligation, but such liability
may be regulated by the courts, according to the circumstances. 15 Those guilty of
fraud, negligence, or delay in the performance of their obligations and those who
in any manner contravene the tenor thereof are liable for damages. 16
The vendor could likewise be liable for quasi-delict under Article 2176 of the Civil
Code, and an action based thereon may be brought by the vendee. While it may
be true that the pre-existing contract between the parties may, as a general rule,
bar the applicability of the law on quasi-delict, the liability may itself be deemed
to arise fromquasi-delict, i.e., the acts which breaks the contract may also be
a quasi-delict. Thus, in Singson vs. Bank of the Philippine Islands, 17 this Court
stated:
We have repeatedly held, however, that the existence of a contract
between the parties does not bar the commission of a tort by the one
against the other and the consequent recovery of damages
therefor. 18 Indeed, this view has been, in effect, reiterated in a
comparatively
recent
case.
Thus,
in Air
France
vs. Carrascoso, 19 involving an airplane passenger who, despite hi
first-class ticket, had been illegally ousted from his first-class
accommodation and compelled to take a seat in the tourist
compartment, was held entitled to recover damages from the aircarrier, upon the ground of tort on the latter's part, for, although the
relation between the passenger and a carrier is "contractual both in
origin and nature . . . the act that breaks the contract may also be a
tort.
Otherwise put, liability for quasi-delict may still exist despite the presence
of contractual relations. 20
Under American law, the liabilities of a manufacturer or seller of injurycausing products may be based on negligence, 21 breach of

warranty, 22 tort, 23 or other grounds such as fraud, deceit, or

misrepresentation. 24Quasi-delict, as defined in Article 2176 of the Civil
Code, (which is known in Spanish legal treaties as culpa aquiliana, culpa
extra-contractual or cuasi-delitos) 25 is homologous but not identical to tort
under the common law, 26 which includes not only negligence, but also
intentional criminal acts, such as assault and battery, false imprisonment
and deceit. 27
It must be made clear that our affirmance of the decision of the public respondent
should by no means be understood as suggesting that the private respondent's
claims for moral damages have sufficient factual and legal basis.
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack
of merit, with costs against the petitioner.
SO ORDERED.
Cruz, Bellosillo and Quiason, JJ., concur.
Grio-Aquino, J., is on leave.

DIGEST:
15.3 COCA-COLA BOTTLERS PHILIPPINES, INC. vs. CA and MS. LYDIA
GERONIMO
FACTS: Private respondent was the proprietress of Kindergarten Wonderland
Canteen in Dagupan City. In August 1989, some parents of the students
complained to her that the Coke and Sprite soft drinks sold by her contained
fiber-like matter and other foreign substances. She brought the said bottles for
examination to DOH and it was found out that the soft drinks are adulterated.
As a result, her per day sales of soft drinks severely plummeted that she had to
close her shop on 12 December 1989 for losses. She demanded damages from
petitioner before the RTC which dismissed the same on motion by petitioner
based on the ground of Prescription. On appeal, the CA annulled the orders of the
RTC.
ISSUE: WON the action for damages by the proprietress against the soft drinks
manufacturer should be treated as one for breach of implied warranty under
article 1561 of the CC which prescribes after six months from delivery of the thing
sold.
RULING: Petition

Denied.

The SC agrees with the CAs conclusion that the cause of action in the case at bar
is found on quasi-delict under Article 1146 of the CC which prescribes in four
years and not on breach of warranty under article 1562 of the same code. This is
supported by the allegations in the complaint which makes reference to the
reckless and negligent manufacture of "adulterated food items intended to be
sold for public consumption."

AMERICAN EXPRESS G.R. No. 138550

INTERNATIONAL,
INC.,
Present:
Petitioner,
PANGANIBAN, J.,
Chairman,
SANDOVALGUTIERREZ,
CORONA,
CARPIO MORALES,
and
GARCIA, JJ.

- versus -

NOEL CORDERO,
Defendant.

Promulgated:
October 14, 2005

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

DECISION
SANDOVAL-GUTIERREZ, J.:
This is a petition for review on certiorari of
the Decision[1] of the Court of Appeals dated
April 30, 1999 in CA-G.R. CV No. 51671,
entitled, Noel
Cordero,
Plaintiff-Appellee
versus American Express International, Inc.,
Defendant-Appellant.
Petitioner is a foreign corporation that issues
charge cards to its customers, which the
latter then use to purchase goods and
services at accredited merchants worldwide.

Sometime in 1988, Nilda Cordero, wife of

respondent Noel Cordero, applied for and
was issued an American Express charge card
with No. 3769-895901-010020. The issuance
of the charge card was covered by an Amex
Cardmember Agreement. As cardholder,
Nilda, upon signing the back portion of the
card, manifested her acceptance of the terms
of the Agreement.
An extension charge card, with No. 3769895901-01010,
was
likewise issued
to
respondent Noel Cordero which he also
signed.[2]
On November 29, 1991, respondent, together
with his wife, Nilda, daughter, sisters-in-law
and uncle-in-law, went on a three-day holiday
trip to Hong Kong. In the early evening of
November 30, 1991, at about 7:00 oclock, the
group went to the Watsons Chemist Shop
located at 277C Ocean Gallery, Kowloon,
Hong Kong. Noel picked up some chocolate
candies and handed to the sales clerk his
American Express extension charge card to
pay for his purchases. The sales clerk verified
the card by making a telephone call to the
American Express Office in Hong Kong.
Moments later, Susan Chong, the store
manager, emerged from behind the counter
and informed respondent that she had to
confiscate the card. Thereupon, she cut
respondents American Express card in half

with a pair of scissors. This, according to

respondent, caused him embarrassment and
humiliation considering that it was done in
front of his family and the other customers
lined up at the check-out counter. Hence,
Nilda had to pay for the purchases using her
own American Express charge card.[3]
When they returned to the Excelsior Hotel,
Nilda called up petitioners Office in Hong
Kong. She was able to talk to Senior
Authorizer Johnny Chen, who informed her
that on November 1, 1991, a person in Hong
Kong attempted to use a charge card with
the same number as respondents card. The
Hong Kong American Express Office called up
respondent and after determining that he
was in Manila and not in Hong Kong, placed
his card in the Inspect Airwarn Support
System. This is the system utilized by
petitioner as a protection both for the
company and the cardholders against the
fraudulent use of their charge cards. Once a
card suspected of unauthorized use is placed
in the system, the person to whom the card
is tendered must verify the identity of the
holder. If the true identity of the card owner
is established, the card is honored and the
charges are approved. Otherwise, the card is
revoked or confiscated.[4]
When the Watsons sales clerk called up
petitioners
Hong
Kong
Office,
its

representative said he wants to talk to

respondent in order to verify the latters
identity, pursuant to the procedure observed
under the Inspect Airwarn Support System.
However, respondent refused. Consequently,
petitioners representative was unable to
establish the identity of the cardholder.
[5]
This led to the confiscation of respondents
card.
On March 31, 1992, respondent filed with
the Regional Trial Court, Branch V, Manila, a
complaint for damages against petitioner,
docketed as Civil Case No. 92-60807. He
prayed for the award of moral damages and
exemplary damages, as well as attorneys
fees as a result of the humiliation he
suffered.
The trial court found that the inexcusable
failure of defendant (petitioner herein) to
inform plaintiff (respondent herein) of the
November 1, 1991 incident despite sufficient
time was the proximate cause of the
confiscation
and
cutting
of
plaintiffs
extension card which exposed the latter to
public humiliation for which defendant
should be held liable.[6] On February 20,
1995, the trial court promulgated its
Decision, the dispositive portion of which
reads:

WHEREFORE, judgment is hereby rendered in

favor of the plaintiff and against the defendant,
ordering the latter to pay the former the following
amounts, namely:
a) The sum of P300,000.00 as and by way of
moral damages;
b) The sum of P200,000.00 as exemplary
damages;
c) The sum of P100,000.00
reasonable attorneys fees; and

as

and

for

d) The costs of the suit.

SO ORDERED.[7]

Upon appeal, the Court of Appeals

rendered the assailed Decision affirming the
trial courts Decision with modification in the
sense that the amounts of damages awarded
were reduced, thus:
WHEREFORE, in view of the foregoing, the
appealed decision dated February 20, 1995 of the
Regional Trial Court of Manila, Branch V, in Civil
Case No. 92-60807 is hereby AFFIRMED, subject to
modifications with respect to the amount of
damages awarded, which are reduced as follows:
(a)
Moral
damages
to P150,000.00; and

from P300,000.00

(b) Exemplary
to P100,000.00.

from P200,000.00

damages

No pronouncement as to costs.

SO ORDERED.

Hence, the instant petition raising the

following issues:
A. Whether the lower courts
gravely erred in attributing the public
humiliation allegedly suffered by
Cordero to Amex.
B. Whether the lower courts
gravely erred in holding Amex liable
to
Cordero
for
moral
damages,
exemplary damages and attorneys
fees.[8]
Respondent filed his comment contending
in the main that the petition raises questions
of fact beyond this Courts domain.
While it is true that under Rule 45 of the
1997 Rules of Civil Procedure, as amended,
this Court may review only errors of law,
however, this rule admits of well-known
recognized exceptions, thus:
. . . (1) the conclusion is a finding grounded
entirely on speculation, surmise and conjecture; (2)
the inference made is manifestly mistaken; (3) there
is grave abuse of discretion; (4) the judgment is
based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) the Court of
Appeals went beyond the issues of the case and its
findings are contrary to the admissions of both
parties; (7) the findings of fact of the Court of

Appeals are contrary to those of the trial court; (8)

said findings of fact are conclusions without
citation of specific evidence on which they are
based; (9) the facts set forth in the petition are not
disputed by the respondents; and (10) the findings
of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by
the evidence on record.[9]

In this case, the inference made by the

courts
below
is
manifestly
mistaken.
Therefore, we are justified in reviewing the
records of this case and rendering judgment
based on our own findings.
In his complaint, respondent claimed that
he suffered embarrassment and humiliation
because his card was unceremoniously
confiscated and cut in half by Susan Chong of
Watsons Chemist Shop.
Respondent anchors his cause of action
on the following provision of the Civil Code:
Art. 2176. Whoever by act or omission causes
damage to another, there being fault or negligence,
is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
[10]

In order that an obligation based on

quasi-delict may arise, there must be no pre-

existing contractual relation between the

parties. But there are exceptions. There may
be an action for quasi-delict notwithstanding
that there is a subsisting contract between
the parties. A liability for tort may arise even
under a contract, where tort is that which
breaches the contract. Stated differently,
when an act which constitutes a breach of
contract would have itself constituted the
source of a quasi-delictual liability, the
contract can be said to have been breached
by tort, thereby allowing the rules on tort to
apply.[11]
Furthermore, to constitute quasi-delict,
the fault or negligence must be the
proximate cause of the damage or injury
suffered by the plaintiff. Proximate cause is
that cause which, in natural and continuous
sequence,
unbroken
by
any
efficient
intervening cause, produces the injury and
without which the result would not have
occurred. Proximate cause is determined by
the facts of each case upon mixed
considerations of logic, common sense, policy
and precedent.[12]
According to the trial court, petitioner
should have informed respondent that on
November 1, 1991, a person in Hong Kong
attempted to use a charge card bearing
similar number to that of respondents card;
and that petitioners inexcusable failure to do

so is the proximate cause of the confiscation

and cutting of [respondents] extension card
which
exposed
the
latter
to
public
humiliation for which [petitioner] should be
held liable.[13]
We cannot
conclusion.

sustain

the

trial

courts

As explained by respondent himself, he

could have used his card upon verification by
the sales clerk of Watson that indeed he is
the authorized cardholder. This could have
been accomplished had respondent talked to
petitioners representative, enabling the
latter to determine that respondent is indeed
the true holder of the card. Clearly, no
negligence which breaches the contract can
be attributed to petitioner. If at all, the cause
of
respondents
humiliation
and
embarrassment was his refusal to talk to
petitioners representative.
That respondent refused to talk to
petitioners representative can be gleaned
from the testimony of Mr. Chen Heng Kun
a.k.a. Johnny Chen during the deposition in
Hong Kong,[14] thus:
Question No 9 : Was AEII required under its
existing policies and/or membership
agreement with its cardholders to
advise said cardholders of their card
have been put under the support

INSPECT
Strictly
Question
(for
identification) cardmembers before
approving any charge?
Mr. Johnny Chen : Under the existing
policies of AEII, we dont have to inform
the cardholders if they have to pass the
INSPECT
Strictly
Questions
(for
identification).
Question No 10 : If the answer to Q9 is in the
negative, please explain why not?
Mr. Johnny Chen : The reason why we dont
have to are because, first, we are not
terminating
the
service
to
the
cardholder. Second, it doesnt mean that
we are going to limit the service to the
cardholder. Third, as long as the
cardholder can present an identification
card of his membership, we allow him
to use the card. He can show this by
telephoning the company or by
presenting us his passport or travel
document. When Watson Company
called AEII for authorization, AEII
representative requested that he talk to
Mr. Cordero but he refused to talk to
any representative of AEII. AEII could
not prove then that he is really the real
card holder.

Mr. Chen Heng Kun was briefly crossexamined by respondents counsel, thus:
Question No 10 : Question 9 is objected to
since the best evidence would be the
membership
agreement
between
plaintiffs and AEII.

Significantly,
paragraph
Cardmember
Agreement
respondent provides:

16
of
signed

the
by

16. THE CARD REMAINS OUR PROPERTY

The Card remains our property and we can
revoke your right and the right of ay Additional
Cardmember to use it at any time, we can do this
with or without giving you notice. If we have
revoked the Card without cause, we will refund a
proportion of your annual Card Account fee. We
may list revoked Cards in our Cancellation Bulletin,
or otherwise inform Establishments that the Card
issued to you and, if you are the basic
Cardmember, any Additional Cards have been
revoked or cancelled.
If we revoke the card or it expires, you must
return it to us if we request. Also, if any
Establishment asks you to surrender an expired or
revoked Card, you must do so. You may not use the
Card after it has expired or after it has been
revoked.
The revocation, repossession or request for
the return of the Card is not, and shall not
constitute any reflection of your character or creditworthiness and we shall not be liable in any way for
any statement made by any person requesting the
return or surrender of the Card.[15]

To be sure, pursuant to the above

stipulation,
petitioner
can
revoke
respondents card without notice, as was
done here. It bears reiterating that the
subject card would not have been confiscated

and cut had respondent talked to petitioners

representative and identified himself as the
genuine cardholder. It is thus safe to
conclude that there was no negligence on the
part of petitioner and that, therefore, it
cannot be held liable to respondent for
damages.
WHEREFORE, the
petition
is GRANTED. The assailed Decision of the
Court of Appeals in CA-G.R. CV No. 51671
is REVERSED.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice