Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 157658 October 15, 2007

PHILIPPINE NATIONAL RAILWAYS and VIRGILIO J. BORJA, Petitioners,

vs.
COURT OF APPEALS (Second Division), CORAZON C. AMORES, MA. EMILIE A. MOJICA,
CECILE C. SISON, DINO C. AMORES, LARISA C. AMORES, ARMAND JINO C. AMORES and
JOHN C. AMORES,Respondents.

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, seeking to annul and set aside the Decision 1 of the Court of Appeals (CA)
in CA-G.R. CV No. 54906 which reversed the Decision2 of the Regional Trial Court (RTC) of Manila,
Branch 28, in Civil Case No. 92-61987.

The factual antecedents are as follows:

In the early afternoon of April 27, 1992, Jose Amores (Amores) was traversing the railroad tracks in
Kahilum II Street, Pandacan, Manila. Before crossing the railroad track, he stopped for a while then
proceeded accordingly.3Unfortunately, just as Amores was at the intersection, a Philippine National
Railways (PNR) train with locomotive number T-517 turned up and collided with the car.4

At the time of the mishap, there was neither a signal nor a crossing bar at the intersection to warn
motorists of an approaching train. Aside from the railroad track, the only visible warning sign at that
time was the defective standard signboard "STOP, LOOK and LISTEN" wherein the sign "Listen"
was lacking while that of "Look" was bent.5 No whistle blow from the train was likewise heard before
it finally bumped the car of Amores.6 After impact, the car was dragged about ten (10) meters beyond
the center of the crossing.7 Amores died as a consequence thereof.

On July 22, 1992, the heirs of Amores, consisting of his surviving wife and six children, herein
respondents, filed a Complaint for Damages8 against petitioners PNR and Virgilio J. Borja (Borja),
PNRs locomotive driver at the time of the incident, before the RTC of Manila. The case was raffled
to Branch 28 and was docketed as Civil Case No. 92-61987. In their complaint, respondents averred
that the trains speedometer was defective, and that the petitioners negligence was the proximate
cause of the mishap for their failure to take precautions to prevent injury to persons and property
despite the dense population in the vicinity. They then prayed for actual and moral damages, as well
as attorneys fees.9

In their Answer,10 the petitioners denied the allegations, stating that the train was railroad-worthy and
without any defect. According to them, the proximate cause of the death of Amores was his own
carelessness and negligence, and Amores wantonly disregarded traffic rules and regulations in
crossing the railroad tracks and trying to beat the approaching train. They admitted that there was no
crossing bar at the site of the accident because it was merely a barangay road.11 PNR stressed that it
exercised the diligence of a good father of a family in the selection and supervision of the locomotive
driver and train engineer, Borja, and that the latter likewise used extraordinary diligence and caution
to avoid the accident. Petitioners further asserted that respondents had the last clear chance to
avoid the accident but recklessly failed to do so.

After trial on the merits, on August 22, 1996, the RTC rendered judgment in favor of the petitioners,
the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered dismissing the complaint of the plaintiffs and the
defendants counterclaim.

The costs shall be halved and paid equally by the parties.

The counsel for the defendants is hereby ordered to inform this court who is the legal representative
of the deceased defendant, Virgilio Borja, within ten (10) days from receipt of a copy of this decision.

SO ORDERED.12

The RTC rationalized that the proximate cause of the collision was Amores fatal misjudgment and
the reckless course of action he took in crossing the railroad track even after seeing or hearing the
oncoming train.

On appeal, the CA reversed the RTC decision, as follows:

WHEREFORE, the assailed Decision of the Regional Trial Court of Manila, Branch 28 is hereby
REVERSED. The defendants PNR and the estate of Virgilio J. Borja are jointly and severally liable to
pay plaintiffs the following:

1) The amount of P122,300.00 for the cost of damage to the car; and,

2) The amount of P50,000 as moral damages.

For lack of official receipts for funeral expenses and specimen of the last pay slip of the deceased,
the claim for reimbursement of funeral expenses and claim for payment of support is hereby
DENIED for lack of basis. Costs against Defendants.

SO ORDERED.13

In reversing the trial courts decision, the appellate court found the petitioners negligent. The court
based the petitioners negligence on the failure of PNR to install a semaphore or at the very least, to
post a flagman, considering that the crossing is located in a thickly populated area. Moreover, the
signboard "Stop, Look and Listen" was found insufficient because of its defective condition as
described above. Lastly, no negligence could be attributed to Amores as he exercised reasonable
diligence in crossing the railroad track.

Aggrieved by this reversal, the petitioners filed the present petition for review on certiorari, raising
the following grounds:
 I

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

RENDERING ITS DECISION REVERSING THE DECISION OF THE REGIONAL TRIAL
COURT OF MANILA BRANCH 28, IN NOT TAKING INTO CONSIDERATION THE
PROVISION OF SECTION 42, R.A. 4136 OF THE LAND TRANSPORTATION AND
TRAFFIC CODE.

II

THE DECISION OF THE COURT OF APPEALS IS CONTRARY TO THE EVIDENCE ON

RECORD ADDUCED IN THE TRIAL ON THE MERIT IN CIVIL CASE NO. 92-61987.14

The petitioners insist that Amores must have heard the trains whistle and heeded the warning but,
noting that the train was still a distance away and moving slowly, he must have calculated that he
could beat it to the other side of the track before the train would arrive at the intersection. The
petitioners likewise add that the train was railroad-worthy and that its defective speedometer did not
affect the trains operation. Lastly, they insist that evidence showed sufficient warning signs
strategically installed at the crossing to alert both motorists and pedestrians.

Respondents, on the other hand, argue that the cause of the accident was petitioners carelessness,
imprudence and laxity in failing to provide a crossing bar and keeper at the Kahilum II railway
intersection. Considering that Kahilum II Street is in the middle of a thickly populated squatters area,
and many pedestrians cross the railroad track, notwithstanding the fact that it is a public street and a
main thoroughfare utilized in going to Herran Street, the presence of adequate warning signals
would have prevented the untimely death of Amores. Another crucial point raised by the respondents
is the manner in which Borja applied the brakes of the train only when the locomotive was already
very near Amores car, as admitted by witness Querimit. Finally, respondents claim that Borjas
failure to blow the locomotives horn, pursuant to the usual practice of doing the same 100 meters
before reaching the Kahilum II crossing point is an earmark of recklessness on the part of the
petitioners.

The petition must fail.

The only issue to be resolved in the present case is whether the appellate court was correct in
ascribing negligence on the part of the petitioners. It was ascertained beyond quandary that the
proximate cause of the collision is the negligence and imprudence of the petitioner PNR and its
locomotive driver, Borja, in operating the passenger train.

As the action is predicated on negligence, the relevant provision is Article 2176 of the New Civil
Code, which states that:

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 was no pre-existing contractual relation
between the parties, is called quasi-delict and is governed by the provisions of this chapter.

We have thoroughly reviewed the records of the case and we find no cogent reason to reverse the
appellate courts decision. Negligence has been defined as "the failure to observe for the protection
of the interests of another person that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury."15 Using the aforementioned
philosophy, it may be reliably concluded that there is no hard and fast rule whereby such degree of
care and vigilance is calibrated; it is dependent upon the circumstances in which a person finds
himself. All that the law requires is that it is perpetually compelling upon a person to use that care
and diligence expected of sensible men under comparable circumstances. 16

We hold that the petitioners were negligent when the collision took place. The transcript of
stenographic notes reveals that the train was running at a fast speed because notwithstanding the
application of the ordinary and emergency brakes, the train still dragged the car some distance away
from the point of impact. Evidence likewise unveils the inadequate precautions taken by petitioner
PNR to forewarn the public of the impending danger. Aside from not having any crossing bar, no
flagman or guard to man the intersection at all times was posted on the day of the incident. A reliable
signaling device in good condition, not just a dilapidated "Stop, Look and Listen" signage because of
many years of neglect, is needed to give notice to the public. It is the responsibility of the railroad
company to use reasonable care to keep the signal devices in working order. Failure to do so would
be an indication of negligence.

As held in the case of Philippine National Railway v. Brunty,17 it may broadly be stated that railroad
companies owe to the public a duty of exercising a reasonable degree of care to avoid injury to
persons and property at railroad crossings, which duties pertain both to the operation of trains and to
the maintenance of the crossings. Moreover, every corporation constructing or operating a railway
shall make and construct at all points where such railway crosses any public road, good, sufficient,
and safe crossings, and erect at such points, at sufficient elevation from such road as to admit a free
passage of vehicles of every kind, a sign with large and distinct letters placed thereon, to give notice
of the proximity of the railway, and warn persons of the necessity of looking out for trains. 18 The
failure of the PNR to put a cross bar, or signal light, flagman or switchman, or semaphore is
evidence of negligence and disregard of the safety of the public, even if there is no law or ordinance
requiring it, because public safety demands that said device or equipment be installed.

The petitioners insist that a train has a right-of-way in a railroad crossing under the existing laws.
They derive their theory from Section 42 (d), Article III of R.A. 4136, otherwise known as the Land
Transportation and Traffic Code, which states that:

The driver of a vehicle upon a highway shall bring to a full stop such vehicle before traversing any
"through highway" or railroad crossing: Provided, That when it is apparent that no hazard exists, the
vehicle may be slowed down to five miles per hour instead of bringing it to a full stop.

They claim that motorists are enjoined by law to stop, look and listen before crossing railroad tracks
and that a heavier responsibility rests upon the motorists in avoiding accidents at level crossings.

It is true that one driving an automobile must use his faculties of seeing and hearing when nearing a
railroad crossing. However, the obligation to bring to a full stop vehicles moving in public highways
1wphi1

before traversing any "through street" only accrues from the time the said "through street" or
crossing is so designated and sign-posted. From the records of the case, it can be inferred that
Amores exercised all the necessary precautions required of him as to avoid injury to himself and to
others. The witnesses testimonies showed that Amores slackened his speed, made a full stop, and
1wphi1

then proceeded to cross the tracks when he saw that there was no impending danger to his life.
Under these circumstances, we are convinced that Amores did everything, with absolute care and
caution, to avoid the collision.
It is settled that every person or motorist crossing a railroad track should use ordinary prudence and
alertness to determine the proximity of a train before attempting to cross. We are persuaded that the
circumstances were beyond the control of Amores for no person would sacrifice his precious life if he
had the slightest opportunity to evade the catastrophe. Besides, the authority in this jurisdiction is
that the failure of a railroad company to install a semaphore or at the very least, to post a flagman or
watchman to warn the public of the passing train amounts to negligence. 19 1wphi1

In view of the foregoing, We will now discuss the liability of petitioner PNR. Article 2180 20 of the New
Civil Code discusses the liability of the employer once negligence or fault on the part of the
employee has been established. The employer is actually liable on the assumption of juris tantum
that the employer failed to exercise diligentissimi patris families in

the selection and supervision of its employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the employee, a factual matter that has not
been demonstrated.21Even the existence of hiring procedures and supervisory employees cannot be
incidentally invoked to overturn the presumption of negligence on the part of the employer.22

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated March 31, 2003
in CA-G.R. CV No. 54906 is hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 180880-81 September 25, 2009

KEPPEL CEBU SHIPYARD, INC., Petitioner,

vs.
PIONEER INSURANCE AND SURETY CORPORATION, Respondent.

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

G.R. Nos. 180896-97

PIONEER INSURANCE AND SURETY CORPORATION, Petitioner,

vs.
KEPPEL CEBU SHIPYARD, INC., Respondent.

DECISION

NACHURA, J.:

Before us are the consolidated petitions filed by the partiesPioneer Insurance and Surety
Corporation1(Pioneer) and Keppel Cebu Shipyard, Inc.2 (KCSI)to review on certiorari the
Decision3 dated December 17, 2004 and the Amended Decision4 dated December 20, 2007 of the
Court of Appeals (CA) in CA-G.R. SP Nos. 74018 and 73934.

On January 26, 2000, KCSI and WG&A Jebsens Shipmanagement, Inc. (WG&A) executed a
Shiprepair Agreement5 wherein KCSI would renovate and reconstruct WG&As M/V "Superferry 3"
using its dry docking facilities pursuant to its restrictive safety and security rules and regulations.
Prior to the execution of the Shiprepair Agreement, "Superferry 3" was already insured by WG&A
with Pioneer for US$8,472,581.78. The Shiprepair Agreement reads

SHIPREPAIR AGREEMENT6

Company: WG & A JEBSENS SHIPMANAGEMENT INC.

Address: Harbour Center II, Railroad & Chicago Sts.
Port Area, City of Manila

We, WG & A JEBSENS SHIPMGMT. Owner/Operator of M/V "SUPERFERRY 3" and KEPPEL CEBU
SHIPYARD, INC. (KCSI) enter into an agreement that the Drydocking and Repair of the above-
named vessel ordered by the Owners Authorized Representative shall be carried out under the
Keppel Cebu Shipyard Standard Conditions of Contract for Shiprepair, guidelines and regulations on
safety and security issued by Keppel Cebu Shipyard. In addition, the following are mutually agreed
upon by the parties:

1. The Owner shall inform its insurer of Clause 207 and 22 (a)8 (refer at the back
hereof) and shall include Keppel Cebu Shipyard as a co-assured in its insurance
policy.

2. The Owner shall waive its right to claim for any loss of profit or loss of use or
damages consequential on such loss of use resulting from the delay in the redelivery
of the above vessel.

3. Owners sub-contractors or workers are not permitted to work in the yard without
the written approval of the Vice President Operations.

4. In consideration of Keppel Cebu Shipyard allowing Owner to carry out own repairs
onboard the vessel, the Owner shall indemnify and hold Keppel Cebu Shipyard
harmless from any or all claims, damages, or liabilities arising from death or bodily
injuries to Owners workers, or damages to the vessel or other property however
caused.

5. On arrival, the Owner Representative, Captain, Chief Officer and Chief Engineer
will be invited to attend a conference with our Production, Safety and Security
personnel whereby they will be briefed on, and given copies of Shipyard safety
regulations.

6. An adequate number of officers and crew must remain on board at all times to
ensure the safety of the vessel and compliance of safety regulations by crew and
owner employed workmen.

7. The ships officers/crew or owner appointed security personnel shall maintain

watch against pilferage and acts of sabotage.
 8. The yard must be informed and instructed to provide the necessary security
arrangement coverage should there be inadequate or no crew on board to provide
the expressed safety and security enforcement.

9. The Owner shall be liable to Keppel Cebu Shipyard for any death and/or bodily
injuries for the [K]eppel Cebu Shipyards employees and/or contract workers; theft
and/or damages to Keppel Cebu Shipyards properties and other liabilities which are
caused by the workers of the Owner.

10. The invoice shall be based on quotation reference 99-KCSI-211 dated December
20, 1999tariff dated March 15, 1998.

11. Payment term shall be as follows:

12. The Owner and Keppel Cebu Shipyard shall endeavor to settle amicably any
dispute that may arise under this Agreement. Should all efforts for an amicable
settlement fail, the disputes shall be submitted for arbitration in Metro Manila in
accordance with provisions of Executive Order No. 1008 under the auspices of the
Philippine Arbitration Commission.

(Signed)
(Signed)
BARRY CHIA SOO HOCK
(Printed Name/Signature Above Name)
(Printed Name/Signature Above Name)
Authorized Representative
Vice President Operations
for and in behalf of:
Keppel Cebu Shipyard, Inc.
WG & A Jebsens Shipmgmt.
JAN. 26, 2000.
Date
Date

On February 8, 2000, in the course of its repair, M/V "Superferry 3" was gutted by fire. Claiming that
the extent of the damage was pervasive, WG&A declared the vessels damage as a "total
constructive loss" and, hence, filed an insurance claim with Pioneer.

On June 16, 2000, Pioneer paid the insurance claim of WG&A in the amount of US$8,472,581.78.
WG&A, in turn, executed a Loss and Subrogation Receipt9 in favor of Pioneer, to wit:

LOSS AND SUBROGATION RECEIPT

16 June 2000

Our Claim Ref: MH-NIL-H0-99-00018

US$8,472,581.78
------------------------------------------------

RECEIVED from PIONEER INSURANCE & SURETY CORPORATION the sum of U.S. DOLLARS
EIGHT MILLION FOUR HUNDRED SEVENTY-TWO THOUSAND FIVE HUNDRED EIGHTY-ONE &
78/100 (US$ 8,472,581.78) equivalent to PESOS THREE HUNDRED SIXTY MILLION & 00/100
(Php 360,000,000.00), in full satisfaction, compromise and discharge of all claims for loss and
expenses sustained to the vessel "SUPERFERRY 3" insured under Policy Nos. MH-H0-99-0000168-
00-D (H&M) and MH-H0-99-0000169 (I.V.) by reason as follows:

Fire on board at Keppel Cebu Shipyard

on 08 February 2000

and in consideration of which the undersigned hereby assigns and transfers to the said company
each and all claims and demands against any person, persons, corporation or property arising from
or connected with such loss or damage and the said company is subrogated in the place of and to
the claims and demands of the undersigned against said person, persons, corporation or property in
the premises to the extent of the amount above-mentioned.

WILLIAM, GOTHONG & ABOITIZ, INC.

&/OR ABOITIZ SHIPPING CORP.
By:

(Signed)
______________________________________

Witnesses:

(Signed)
______________________________________
(Signed)
______________________________________

Armed with the subrogation receipt, Pioneer tried to collect from KCSI, but the latter denied any
responsibility for the loss of the subject vessel. As KCSI continuously refused to pay despite
repeated demands, Pioneer, on August 7, 2000, filed a Request for Arbitration before the
Construction Industry Arbitration Commission (CIAC) docketed as CIAC Case No. 21-2000, seeking
the following reliefs:

1. To pay to the claimant Pioneer Insurance and Surety Corporation the sum of U.S.
$8,472,581.78 or its equivalent amount in Philippine Currency, plus interest thereon
computed from the date of the "Loss and Subrogation Receipt" on 16 June 2000 or from the
date of filing of [the] "Request for Arbitration," as may be found proper;

2. To pay to claimant WG&A, INC. and/or Aboitiz Shipping Corporation and WG&A Jebsens
Shipmanagement, Inc. the sum of P500,000,000.00 plus interest thereon from the date of
filing [of the] "Request for Arbitration" or date of the arbitral award, as may be found proper;

3. To pay to the claimants herein the sum of P3,000,000.00 for and as attorneys fees; plus
other damages as may be established during the proceedings, including arbitration fees and
other litigation expenses, and the costs of suit.

It is likewise further prayed that Clauses 1 and 2 on the unsigned page 1 of the "Shiprepair
Agreement" (Annex "A") as well as the hardly legible Clauses 20 and 22 (a) and other similar
clauses printed in very fine print on the unsigned dorsal page thereof, be all declared illegal and void
ab initio and without any legal effect whatsoever.10

KCSI and WG&A reached an amicable settlement, leading the latter to file a Notice of Withdrawal of
Claim on April 17, 2001 with the CIAC. The CIAC granted the withdrawal on October 22, 2001,
thereby dismissing the claim of WG&A against KCSI. Hence, the arbitration proceeded with Pioneer
as the remaining claimant.

In the course of the proceedings, Pioneer and KCSI stipulated, among others, that: (1) on January
26, 2000, M/V "Superferry 3" arrived at KCSI in Lapu-Lapu City, Cebu, for dry docking and repairs;
(2) on the same date, WG&A signed a ship repair agreement with KCSI; and (3) a fire broke out on
board M/V "Superferry 3" on February 8, 2000, while still dry docked in KCSIs shipyard. 11

As regards the disputed facts, below are the respective positions of the parties, viz.:

Pioneers Theory of the Case:

First, Pioneer (as Claimant) is the real party in interest in this case and that Pioneer has been
subrogated to the claim of its assured. The Claimant claims that it has the preponderance of
evidence over that of the Respondent. Claimant cited documentary references on the Statutory
Source of the Principle of Subrogation. Claimant then proceeded to explain that the Right of
Subrogation:

Is by Operation of Law
exists in Property Insurance
is not Dependent Upon Privity of Contract.

Claimant then argued that Payment Operates as Equitable Assignment of Rights to Insurer and that
the Right of Subrogation Entitles Insurer to Recover from the Liable Party.

Second, Respondent Keppel had custody of and control over the M/V "Superferry 3" while said
vessel was in Respondent Keppels premises. In its Draft Decision, Claimant stated:

A. The evidence presented during the hearings indubitably proves that respondent not only
took custody but assumed responsibility and control over M/V Superferry 3 in carrying out
the dry-docking and repair of the vessel.

B. The presence on board the M/V Superferry 3 of its officers and crew does not relieve the
respondent of its responsibility for said vessel.

C. Respondent Keppel assumed responsibility over M/V Superferry 3 when it brought the
vessel inside its graving dock and applied its own safety rules to the dry-docking and repairs
of the vessel.

D. The practice of allowing a shipowner and its sub-contractors to perform maintenance

works while the vessel was within respondents premises does not detract from the fact that
control and custody over M/V Superferry 3 was transferred to the yard.

From the preceding statements, Claimant claims that Keppel is clearly liable for the loss of M/V
Superferry 3.
Third, the Vessels Safety Manual cannot be relied upon as proof of the Masters continuing control
over the vessel.

Fourth, the Respondent Yard is liable under the Doctrine of Res Ipsa Loquitur. According to
Claimant, the Yard is liable under the ruling laid down by the Supreme Court in the "Manila City"
case. Claimant asserts that said ruling is applicable hereto as The Law of the Case.

Fifth, the liability of Respondent does not arise merely from the application of the Doctrine of Res
Ipsa Loquitur, but from its negligence in this case.

Sixth, the Respondent Yard was the employer responsible for the negligent acts of the welder.
According to Claimant;

In contemplation of law, Sevillejo was not a loaned servant/employee. The yard, being his employer,
is solely and exclusively liable for his negligent acts. Claimant proceeded to enumerate its reasons:

A. The "Control Test" The yard exercised control over Sevillejo. The power of control is not
diminished by the failure to exercise control.

B. There was no independent work contract between Joniga and Sevillejo Joniga was not
the employer of Sevillejo, as Sevillejo remained an employee of the yard at the time the loss
occurred.

C. The mere fact that Dr. Joniga requested Sevillejo to perform some of the Owners hot
works under the 26 January 2000 work order did not make Dr. Joniga the employer of
Sevillejo.

Claimant proffers that Dr. Joniga was not a Contractor of the Hot Work Done on Deck A. Claimant
argued that:

A. The yard, not Dr. Joniga, gave the welders their marching orders, and

B. Dr. Jonigas authority to request the execution of owners hot works in the passenger
areas was expressly recognized by the Yard Project Superintendent Orcullo.

Seventh, the shipowner had no legal duty to apply for a hotworks permit since it was not required by
the yard, and the owners hotworks were conducted by welders who remained employees of the
yard. Claimant contends that the need, if any, for an owners application for a hot work permit was
canceled out by the yards actual knowledge of Sevillejos whereabouts and the fact that he was in
deck A doing owners hotworks.

Eight[h], in supplying welders and equipment as per The Work Order Dated 26 January 2000, the
Yard did so at its own risk, and acted as a Less Than Prudent Ship Repairer. 1avvphi1

The Claimant then disputed the statements of Manuel Amagsila by claiming that Amagsila was a
disgruntled employee. Nevertheless, Claimant claims that Amagsila affirmed that the five yard
welders never became employees of the owner so as to obligate the latter to be responsible for their
conduct and performance.

Claimant enumerated further badges of yard negligence.

According to Claimant:

A. Yards water supply was inadequate.

B. Yard Fire Fighting Efforts and Equipment Were Inadequate.

C. Yard Safety Practices and Procedures Were Unsafe or Inadequate.

D. Yard Safety Assistants and Firewatch-Men were Overworked.

Finally, Claimant disputed the theories propounded by the Respondent (The Yard). Claimant
presented its case against:

(i) Non-removal of the life jackets theory.

(ii) Hole-in-the[-]floor theory.

(iii) Need for a plan theory.

(iv) The unauthorized hot works theory.

(v) The Marina report theory.

The Claimant called the attention of the Tribunal (CIAC) on the non-appearance of the welder
involved in the cause of the fire, Mr. Severino Sevillejo. Claimant claims that this is suppression of
evidence by Respondent.

KCSIs Theory of the Case

1. The Claimant has no standing to file the Request for Arbitration and the Tribunal has no
jurisdiction over the case:

(a) There is no valid arbitration agreement between the Yard and the Vessel Owner.
On January 26, 2000, when the ship repair agreement (which includes the arbitration
agreement) was signed by WG&A Jebsens on behalf of the Vessel, the same was
still owned by Aboitiz Shipping. Consequently, when another firm, WG&A, authorized
WG&A Jebsens to manage the MV Superferry 3, it had no authority to do so. There
is, as a result, no binding arbitration agreement between the Vessel Owner and the
Yard to which the Claimant can claim to be subrogated and which can support CIAC
jurisdiction.

(b) The Claimant is not a real party in interest and has no standing because it has not
been subrogated to the Vessel Owner. For the reason stated above, the insurance
policies on which the Claimant bases its right of subrogation were not validly
obtained. In any event, the Claimant has not been subrogated to any rights which the
Vessel may have against the Yard because:

i. The Claimant has not proved payment of the proceeds of the policies to
any specific party. As a consequence, it has also not proved payment to the
Vessel Owner.
 ii. The Claimant had no legally demandable obligation to pay under the
policies and did so only voluntarily. Under the policies, the Claimant and the
Vessel agreed that there is no Constructive Total Loss "unless the expense of
recovering and repairing the vessel would exceed the Agreed Value" of P360
million assigned by the parties to the Vessel, a threshold which the actual
repair cost for the Vessel did not reach. Since the Claimant opted to pay
contrary to the provisions of the policies, its payment was voluntary, and
there was no resulting subrogation to the Vessel.

iii. There was also no subrogation under Article 1236 of the Civil Code. First,
if the Claimant asserts a right of payment only by virtue of Article 1236, then
there is no legal subrogation under Article 2207 and it does not succeed to
the Vessels rights under the Ship [R]epair Agreement and the arbitration
agreement. It does not have a right to demand arbitration and will have only a
purely civil law claim for reimbursement to the extent that its payment
benefited the Yard which should be filed in court. Second, since the Yard is
not liable for the fire and the resulting damage to the Vessel, then it derived
no benefit from the Claimants payment to the Vessel Owner. Third, in any
event, the Claimant has not proved payment of the proceeds to the Vessel
Owner.

2. The Ship [R]epair Agreement was not imposed upon the Vessel. The Vessel knowingly
and voluntarily accepted that agreement. Moreover, there are no signing or other formal
defects that can invalidate the agreement.

3. The proximate cause of the fire and damage to the Vessel was not any negligence
committed by Angelino Sevillejo in cutting the bulkhead door or any other shortcoming by the
Yard. On the contrary, the proximate cause of the fire was Dr. Jonigas and the Vessels
deliberate decision to have Angelino Sevillejo undertake cutting work in inherently dangerous
conditions created by them.

(a) The Claimants material witnesses lied on the record and the Claimant presented
no credible proof of any negligence by Angelino Sevillejo.

(b) Uncontroverted evidence proved that Dr. Joniga neglected or decided not to
obtain a hot work permit for the bulkhead cutting and also neglected or refused to
have the ceiling and the flammable lifejackets removed from underneath the area
where he instructed Angelino Sevillejo to cut the bulkhead door. These decisions or
oversights guaranteed that the cutting would be done in extremely hazardous
conditions and were the proximate cause of the fire and the resulting damage to the
Vessel.

(c) The Yards expert witness, Dr. Eric Mullen gave the only credible account of the
cause and the mechanics of ignition of the fire. He established that: i) the fire started
when the cutting of the bulkhead door resulted in sparks or hot molten slag which fell
through pre-existing holes on the deck floor and came into contact with and ignited
the flammable lifejackets stored in the ceiling void directly below; and ii) the bottom
level of the bulkhead door was immaterial, because the sparks and slag could have
come from the cutting of any of the sides of the door. Consequently, the cutting itself
of the bulkhead door under the hazardous conditions created by Dr. Joniga, rather
than the positioning of the doors bottom edge, was the proximate cause of the fire.
 (d) The Manila City case is irrelevant to this dispute and in any case, does not
establish governing precedent to the effect that when a ship is damaged in dry dock,
the shipyard is presumed at fault. Apart from the differences in the factual setting of
the two cases, the Manila City pronouncements regarding the res ipsa loquitur
doctrine are obiter dicta without value as binding precedent. Furthermore, even if the
principle were applied to create a presumption of negligence by the Yard, however,
that presumption is conclusively rebutted by the evidence on record.

(e) The Vessels deliberate acts and its negligence created the inherently hazardous
conditions in which the cutting work that could otherwise be done safely ended up
causing a fire and the damage to the Vessel. The fire was a direct and logical
consequence of the Vessels decisions to: (1) take Angelino Sevillejo away from his
welding work at the Promenade Deck restaurant and instead to require him to do
unauthorized cutting work in Deck A; and (2) to have him do that without satisfying
the requirements for and obtaining a hot work permit in violation of the Yards Safety
Rules and without removing the flammable ceiling and life jackets below, contrary to
the requirements not only of the Yards Safety Rules but also of the demands of
standard safe practice and the Vessels own explicit safety and hot work policies.

(f) The vessel has not presented any proof to show that the Yard was remiss in its fire
fighting preparations or in the actual conduct of fighting the 8 February 2000 fire. The
Yard had the necessary equipment and trained personnel and employed all those
resources immediately and fully to putting out the 8 February 2000 fire.

4. Even assuming that Angelino Sevillejo cut the bulkhead door close to the deck floor, and
that this circumstance rather than the extremely hazardous conditions created by Dr. Joniga
and the Vessel for that activity caused the fire, the Yard may still not be held liable for the
resulting damage.

(a) The Yards only contractual obligation to the Vessel in respect of the 26 January
2000 Work Order was to supply welders for the Promenade Deck restaurant who
would then perform welding work "per owner[s] instruction." Consequently, once it
had provided those welders, including Angelino Sevillejo, its obligation to the Vessel
was fully discharged and no claim for contractual breach, or for damages on account
thereof, may be raised against the Yard.

(b) The Yard is also not liable to the Vessel/Claimant on the basis of quasi-delict.

i. The Vessel exercised supervision and control over Angelino Sevillejo when
he was doing work at the Promenade Deck restaurant and especially when
he was instructed by Dr. Joniga to cut the bulkhead door. Consequently, the
Vessel was the party with actual control over his tasks and is deemed his true
and effective employer for purposes of establishing Article 2180 employer
liability.

ii. Even assuming that the Yard was Angelino Sevillejos employer, the Yard
may nevertheless not be held liable under Article 2180 because Angelino
Sevillejo was acting beyond the scope of his tasks assigned by the Yard
(which was only to do welding for the Promenade Deck restaurant) when he
cut the bulkhead door pursuant to instructions given by the Vessel.
 iii. The Yard is nonetheless not liable under Article 2180 because it exercised
due diligence in the selection and supervision of Angelino Sevillejo.

5. Assuming that the Yard is liable, it cannot be compelled to pay the full amount of P360
million paid by the Claimant.

(a) Under the law, the Yard may not be held liable to the Claimant, as subrogee, for
an amount greater than that which the Vessel could have recovered, even if the
Claimant may have paid a higher amount under its policies. In turn, the right of the
Vessel to recover is limited to actual damage to the MV Superferry 3, at the time of
the fire.

(b) Under the Ship [R]epair Agreement, the liability of the Yard is limited to P50
million a stipulation which, under the law and decisions of the Supreme Court, is
valid, binding and enforceable.

(c) The Vessel breached its obligation under Clause 22 (a) of the Yards Standard
Terms to name the Yard as co-assured under the policies a breach which makes
the Vessel liable for damages. This liability should in turn be set-off against the
Claimants claim for damages.

The Respondent listed what it believes the Claimant wanted to impress upon the Tribunal.
Respondent enumerated and disputed these as follows:

1. Claimants counsel contends that the cutting of the bulkhead door was covered by the 26
January 2000 Work Order.

2. Claimants counsel contends that Dr. Joniga told Gerry Orcullo about his intention to have
Angelino Sevillejo do cutting work at the Deck A bulkhead on the morning of 8 February
2000.

3. Claimants counsel contends that under Article 1727 of the Civil Code, "The contractor is
responsible for the work done by persons employed by him."

4. Claimants counsel contends that "[t]he second reason why there was no job spec or job
order for this cutting work, [is] the cutting work was known to the yard and coordinated with
Mr. Gerry Orcullo, the yard project superintendent."

5. Claimants counsel also contends, to make the Vessels unauthorized hot works activities
seem less likely, that they could easily be detected because Mr. Avelino Aves, the Yard
Safety Superintendent, admitted that "No hot works could really be hidden from the Yard,
your Honors, because the welding cables and the gas hoses emanating from the dock will
give these hotworks away apart from the assertion and the fact that there were also safety
assistants supposedly going around the vessel."

Respondent disputed the above by presenting its own argument in its Final Memorandum. 12

On October 28, 2002, the CIAC rendered its Decision13 declaring both WG&A and KCSI guilty of
negligence, with the following findings and conclusions
The Tribunal agrees that the contractual obligation of the Yard is to provide the welders and
equipment to the promenade deck. [The] Tribunal agrees that the cutting of the bulkhead door was
not a contractual obligation of the Yard. However, by requiring, according to its own regulations, that
only Yard welders are to undertake hotworks, it follows that there are certain qualifications of Yard
welders that would be requisite of yard welders against those of the vessel welders. To the Tribunal,
this means that yard welders are aware of the Yard safety rules and regulations on hotworks such as
applying for a hotwork permit, discussing the work in a production meeting, and complying with the
conditions of the hotwork permit prior to implementation. By the requirement that all hotworks are to
be done by the Yard, the Tribunal finds that Sevillejo remains a yard employee. The act of Sevillejo is
however mitigated in that he was not even a foreman, and that the instructions to him was (sic) by
an authorized person. The Tribunal notes that the hotworks permit require[s] a request by at least a
foreman. The fact that no foreman was included in the five welders issued to the Vessel was never
raised in this dispute. As discussed earlier by the Tribunal, with the fact that what was ask (sic) of
Sevillejo was outside the work order, the Vessel is considered equally negligent. This Tribunal finds
the concurrent negligence of the Yard through Sevillejo and the Vessel through Dr. Joniga as both
contributory to the cause of the fire that damaged the vessel.14

Holding that the liability for damages was limited to P50,000,000.00, the CIAC ordered KCSI to pay
Pioneer the amount of P25,000,000.00, with interest at 6% per annum from the time of the filing of
the case up to the time the decision is promulgated, and 12% interest per annum added to the
award, or any balance thereof, after it becomes final and executory. The CIAC further ordered that
the arbitration costs be imposed on both parties on a pro rata basis. 15

Pioneer appealed to the CA and its petition was docketed as CA-G.R. SP No. 74018. KCSI likewise
filed its own appeal and the same was docketed as CA-G.R. SP No. 73934. The cases were
consolidated.

On December 17, 2004, the Former Fifteenth Division of the CA rendered its Decision, disposing as
follows:

WHEREFORE, premises considered, the Petition of Pioneer (CA-G.R. SP No. 74018) is

DISMISSED while the Petition of the Yard (CA-G.R. SP No. 73934) is GRANTED, dismissing
petitioners claims in its entirety. No costs.

The Yard and The WG&A are hereby ordered to pay the arbitration costs pro-rata.

SO ORDERED.16

Aggrieved, Pioneer sought reconsideration of the December 17, 2004 Decision, insisting that it
suffered from serious errors in the appreciation of the evidence and from gross misapplication of the
law and jurisprudence on negligence. KCSI, for its part, filed a motion for partial reconsideration of
the same Decision.

On December 20, 2007, an Amended Decision was promulgated by the Special Division of Five
Former Fifteenth Division of the CA in light of the dissent of Associate Justice Lucas P.
Bersamin,17 joined by Associate Justice Japar B. Dimaampao. The fallo of the Amended Decision
reads

WHEREFORE, premises considered, the Court hereby decrees that:

 1. Pioneers Motion for Reconsideration is PARTIALLY GRANTED, ordering The Yard to pay
Pioneer P25 Million, without legal interest, within 15 days from the finality of this Amended
Decision, subject to the following modifications:

1.1 Pioneers Petition (CA-G.R. SP No. 74018) is PARTIALLY GRANTED as the

Yard is hereby ordered to pay Pioneer P25 Million without legal interest;

2. The Yard is hereby declared as equally negligent, thus, the total GRANTING of its Petition
(CA-G.R. SP No. 73934) is now reduced to PARTIALLY GRANTED, in so far as it is ordered
to pay Pioneer P25 Million, without legal interest, within 15 days from the finality of this
Amended Decision; and

3. The rest of the disposition in the original Decision remains the same.

SO ORDERED.18

Hence, these petitions. Pioneer bases its petition on the following grounds:

THE COURT OF APPEALS ERRED IN BASING ITS ORIGINAL DECISION ON NON-FACTS

LEADING IT TO MAKE FALSE LEGAL CONCLUSIONS; NON-FACTS REMAIN TO INVALIDATE
THE AMENDED DECISION. THIS ALSO VIOLATES SECTION 14, ARTICLE VIII OF THE
CONSTITUTION.

II

THE COURT OF APPEALS ERRED IN LIMITING THE LEGAL LIABILITY OF THE YARD TO THE
SUM OF P50,000,000.00, IN THAT:

A. STARE DECISIS RENDERS INAPPLICABLE ANY INVOCATION OF LIMITED

LIABILITY BY THE YARD.

B. THE LIMITATION CLAUSE IS CONTRARY TO PUBLIC POLICY.

C. THE VESSEL OWNER DID NOT AGREE THAT THE YARDS LIABILITY FOR
LOSS OR DAMAGE TO THE VESSEL ARISING FROM YARDS NEGLIGENCE IS
LIMITED TO THE SUM OF P50,000,000.00 ONLY.

D. IT IS INIQUITOUS TO ALLOW THE YARD TO LIMIT LIABILITY, IN THAT:

(i) THE YARD HAD CUSTODY AND CONTROL OVER THE VESSEL (M/V
"SUPERFERRY 3") ON 08 FEBRUARY 2000 WHEN IT WAS GUTTED BY
FIRE;

(ii) THE DAMAGING FIRE INCIDENT HAPPENED IN THE COURSE OF

THE REPAIRS EXCLUSIVELY PERFORMED BY YARD WORKERS.

III
THE COURT OF APPEALS ERRED IN ITS RULING THAT WG&A WAS CONCURRENTLY
NEGLIGENT, CONSIDERING THAT:

A. DR. JONIGA, THE VESSELS PASSAGE TEAM LEADER, DID NOT SUPERVISE
OR CONTROL THE REPAIRS.

B. IT WAS THE YARD THROUGH ITS PROJECT SUPERINTENDENT

GERMINIANO ORCULLO THAT SUPERVISED AND CONTROLLED THE REPAIR
WORKS.

C. SINCE ONLY YARD WELDERS COULD PERFORM HOT WORKS IT FOLLOWS

THAT THEY ALONE COULD BE GUILTY OF NEGLIGENCE IN DOING THE SAME.

D. THE YARD AUTHORIZED THE HOT WORK OF YARD WELDER ANGELINO

SEVILLEJO.

E. THE NEGLIGENCE OF ANGELINO SEVILLEJO WAS THE PROXIMATE CAUSE

OF THE LOSS.

F. WG&A WAS NOT GUILTY OF NEGLIGENCE, BE IT DIRECT OR

CONTRIBUTORY TO THE LOSS.

IV

THE COURT OF APPEALS CORRECTLY RULED THAT WG&A SUFFERED A CONSTRUCTIVE

TOTAL LOSS OF ITS VESSEL BUT ERRED BY NOT HOLDING THAT THE YARD WAS LIABLE
FOR THE VALUE OF THE FULL CONSTRUCTIVE TOTAL LOSS.

THE COURT OF APPEALS ERRED IN NOT HOLDING THE YARD LIABLE FOR INTEREST.

VI

THE COURT OF APPEALS ERRED IN NOT HOLDING THE YARD SOLELY LIABLE FOR
ARBITRATION COSTS.19

On the other hand, KCSI cites the following grounds for the allowance of its petition, to wit:

1. ABSENCE OF YARD RESPONSIBILITY

IT WAS GRIEVOUS ERROR FOR THE COURT OF APPEALS TO ADOPT, WITHOUT

EXPLANATION, THE CIACS RULING THAT THE YARD WAS EQUALLY NEGLIGENT BECAUSE
OF ITS FAILURE TO REQUIRE A HOT WORKS PERMIT FOR THE CUTTING WORK DONE BY
ANGELINO SEVILLEJO, AFTER THE COURT OF APPEALS ITSELF HAD SHOWN THAT RULING
TO BE COMPLETELY WRONG AND BASELESS.

2. NO CONSTRUCTIVE TOTAL LOSS

IT WAS EQUALLY GRIEVOUS ERROR FOR THE COURT OF APPEALS TO RULE, WITHOUT
EXPLANATION, THAT THE VESSEL WAS A CONSTRUCTIVE TOTAL LOSS AFTER HAVING
ITSELF EXPLAINED WHY THE VESSEL COULD NOT BE A CONSTRUCTIVE TOTAL LOSS.

3. FAILURE OR REFUSAL TO ADDRESS

KEPPELS MOTION FOR RECONSIDERATION

FINALLY, IT WAS ALSO GRIEVOUS ERROR FOR THE COURT OF APPEALS TO HAVE
EFFECTIVELY DENIED, WITHOUT ADDRESSING IT AND ALSO WITHOUT EXPLANATION,
KEPPELS PARTIAL MOTION FOR RECONSIDERATION OF THE ORIGINAL DECISION WHICH
SHOWED: 1) WHY PIONEER WAS NOT SUBROGATED TO THE RIGHTS OF THE VESSEL
OWNER AND SO HAD NO STANDING TO SUE THE YARD; 2) WHY KEPPEL MAY NOT BE
REQUIRED TO REIMBURSE PIONEERS PAYMENTS TO THE VESSEL OWNER IN VIEW OF
THE CO-INSURANCE CLAUSE IN THE SHIPREPAIR AGREEMENT; AND 3) WHY PIONEER
ALONE SHOULD BEAR THE COSTS OF ARBITRATION.

4. FAILURE TO CREDIT FOR SALVAGE RECOVERY

EVEN IF THE COURT OF APPEALS RULINGS ON ALL OF THE FOREGOING ISSUES WERE
CORRECT AND THE YARD MAY PROPERLY BE HELD EQUALLY LIABLE FOR THE DAMAGE TO
THE VESSEL AND REQUIRED TO PAY HALF OF THE DAMAGES AWARDED (P25 MILLION),
THE COURT OF APPEALS STILL ERRED IN NOT DEDUCTING THE SALVAGE VALUE OF THE
VESSEL RECOVERED AND RECEIVED BY THE INSURER, PIONEER, TO REDUCE ANY
LIABILITY ON THE PART OF THE YARD TO P9.874 MILLION.20

To our minds, these errors assigned by both Pioneer and KCSI may be summed up in the following
core issues:

A. To whom may negligence over the fire that broke out on board M/V "Superferry 3" be
imputed?

B. Is subrogation proper? If proper, to what extent can subrogation be made?

C. Should interest be imposed on the award of damages? If so, how much?

D. Who should bear the cost of the arbitration?

To resolve these issues, it is imperative that we digress from the general rule that in petitions for
review under Rule 45 of the Rules of Court, only questions of law shall be entertained. Considering
the disparate findings of fact of the CIAC and the CA which led them to different conclusions, we are
constrained to revisit the factual circumstances surrounding this controversy.21

The Courts Ruling

A. The issue of negligence

Undeniably, the immediate cause of the fire was the hot work done by Angelino Sevillejo (Sevillejo)
on the accommodation area of the vessel, specifically on Deck A. As established before the CIAC
The fire broke out shortly after 10:25 and an alarm was raised (Exh. 1-Ms. Aini Ling, 22 p. 20).
Angelino Sevillejo tried to put out the fire by pouring the contents of a five-liter drinking water
container on it and as he did so, smoke came up from under Deck A. He got another container of
water which he also poured whence the smoke was coming. In the meantime, other workers in the
immediate vicinity tried to fight the fire by using fire extinguishers and buckets of water. But because
the fire was inside the ceiling void, it was extremely difficult to contain or extinguish; and it spread
rapidly because it was not possible to direct water jets or the fire extinguishers into the space at the
source. Fighting the fire was extremely difficult because the life jackets and the construction
materials of the Deck B ceiling were combustible and permitted the fire to spread within the ceiling
void. From there, the fire dropped into the Deck B accommodation areas at various locations, where
there were combustible materials. Respondent points to cans of paint and thinner, in addition to the
plywood partitions and foam mattresses on deck B (Exh. 1-Mullen,23 pp. 7-8, 18; Exh. 2-Mullen, pp.
11-12).24

Pioneer contends that KCSI should be held liable because Sevillejo was its employee who, at the
time the fire broke out, was doing his assigned task, and that KCSI was solely responsible for all the
hot works done on board the vessel. KCSI claims otherwise, stating that the hot work done was
beyond the scope of Sevillejos assigned tasks, the same not having been authorized under the
Work Order25 dated January 26, 2000 or under the Shiprepair Agreement. KCSI further posits that
WG&A was itself negligent, through its crew, particularly Dr. Raymundo Joniga (Dr. Joniga), for
failing to remove the life jackets from the ceiling void, causing the immediate spread of the fire to the
other areas of the ship.

We rule in favor of Pioneer.

First. The Shiprepair Agreement is clear that WG&A, as owner of M/V "Superferry 3," entered into a
contract for the dry docking and repair of the vessel under KCSIs Standard Conditions of Contract
for Shiprepair, and its guidelines and regulations on safety and security. Thus, the CA erred when it
said that WG&A would renovate and reconstruct its own vessel merely using the dry docking
facilities of KCSI.

Second. Pursuant to KCSIs rules and regulations on safety and security, only employees of KCSI
may undertake hot works on the vessel while it was in the graving dock in Lapu-Lapu City, Cebu.
This is supported by Clause 3 of the Shiprepair Agreement requiring the prior written approval of
KCSIs Vice President for Operations before WG&A could effect any work performed by its own
workers or sub-contractors. In the exercise of this authority, KCSIs Vice-President for Operations, in
the letter dated January 2, 1997, banned any hot works from being done except by KCSIs workers,
viz.:

The Yard will restrict all hot works in the engine room, accommodation cabin, and fuel oil tanks to be
carried out only by shipyard workers x x x.26

WG&A recognized and complied with this restrictive directive such that, during the arrival conference
on January 26, 2000, Dr. Joniga, the vessels passage team leader in charge of its hotel department,
specifically requested KCSI to finish the hot works started by the vessels contractors on the
passenger accommodation decks.27 This was corroborated by the statements of the vessels hotel
manager Marcelo Rabe28 and the vessels quality control officer Joselito Esteban.29 KCSI knew of the
unfinished hot works in the passenger accommodation areas. Its safety supervisor Esteban
Cabalhug confirmed that KCSI was aware "that the owners of this vessel (M/V Superferry 3) had
undertaken their own (hot) works prior to arrival alongside (sic) on 26th January," and that no hot
work permits could thereafter be issued to WG&As own workers because "this was not allowed for
the Superferry 3."30 This shows that Dr. Joniga had authority only to request the performance of hot
works by KCSIs welders as needed in the repair of the vessel while on dry dock.

Third. KCSI welders covered by the Work Order performed hot works on various areas of the M/V
"Superferry 3," aside from its promenade deck. This was a recognition of Dr. Jonigas authority to
request the conduct of hot works even on the passenger accommodation decks, subject to the
provision of the January 26, 2000 Work Order that KCSI would supply welders for the promenade
deck of the ship.

At the CIAC proceedings, it was adequately shown that between February 4 and 6, 2000, the
welders of KCSI: (a) did the welding works on the ceiling hangers in the lobby of Deck A; (b) did the
welding and cutting works on the deck beam to access aircon ducts; and (c) did the cutting and
welding works on the protection bars at the tourist dining salon of Deck B, 31 at a rate
ofP150.00/welder/hour.32 In fact, Orcullo, Project Superintendent of KCSI, admitted that "as early as
February 3, 2000 (five days before the fire) [the Yard] had acknowledged Dr. Jonigas authority to
order such works or additional jobs."33

It is evident, therefore, that although the January 26, 2000 Work Order was a special order for the
supply of KCSI welders to the promenade deck, it was not restricted to the promenade deck only.
The Work Order was only a special arrangement between KCSI and WG&A that meant additional
cost to the latter.

Fourth. At the time of the fire, Sevillejo was an employee of KCSI and was subject to the latters
direct control and supervision.

Indeed, KCSI was the employer of Sevillejopaying his salaries; retaining the power and the right to
discharge or substitute him with another welder; providing him and the other welders with its
equipment; giving him and the other welders marching orders to work on the vessel; and monitoring
and keeping track of his and the other welders activities on board, in view of the delicate nature of
their work.34 Thus, as such employee, aware of KCSIs Safety Regulations on Vessels Afloat/Dry,
which specifically provides that "(n)o hotwork (welding/cutting works) shall be done on board [the]
vessel without [a] Safety Permit from KCSI Safety Section," 35 it was incumbent upon Sevillejo to
obtain the required hot work safety permit before starting the work he did, including that done on
Deck A where the fire started.

Fifth. There was a lapse in KCSIs supervision of Sevillejos work at the time the fire broke out.

It was established that no hot works could be hidden from or remain undetected by KCSI because
the welding cables and the gas hoses emanating from the dock would give the hot works away.
Moreover, KCSI had roving fire watchmen and safety assistants who were moving around the
vessel.36 This was confirmed by Restituto Rebaca (Rebaca), KCSIs Safety Supervisor, who actually
spotted Sevillejo on Deck A, two hours before the fire, doing his cutting work without a hot work
permit, a fire watchman, or a fire extinguisher. KCSI contends that it did its duty when it prohibited
Sevillejo from continuing the hot work. However, it is noteworthy that, after purportedly scolding
Sevillejo for working without a permit and telling him to stop until the permit was acquired and the
other safety measures were observed, Rebaca left without pulling Sevillejo out of the work area or
making sure that the latter did as he was told. Unfortunately for KCSI, Sevillejo reluctantly proceeded
with his cutting of the bulkhead door at Deck A after Rebaca left, even disregarding the 4-inch
marking set, thus cutting the door level with the deck, until the fire broke out.
This conclusion on the failure of supervision by KCSI was absolutely supported by Dr. Eric Mullen of
the Dr. J.H. Burgoyne & Partners (International) Ltd., Singapore, KCSIs own fire expert, who
observed that

4.3. The foregoing would be compounded by Angelino Sevillejo being an electric arc welder, not a
cutter. The dangers of ignition occurring as a result of the two processes are similar in that both
electric arc welding and hot cutting produce heat at the work area and sparks and incendive material
that can travel some distance from the work area. Hence, the safety precautions that are expected to
be applied by the supervisor are the same for both types of work. However, the quantity and
incendivity of the spray from the hot cutting are much greater than those of sparks from electric arc
welding, and it may well be that Angelino Sevillejo would not have a full appreciation of the dangers
involved. This made it all the more important that the supervisor, who should have had such an
appreciation, ensured that the appropriate safety precautions were carried out.37

In this light, therefore, Sevillejo, being one of the specially trained welders specifically authorized by
KCSI to do the hot works on M/V "Superferry 3" to the exclusion of other workers, failed to comply
with the strict safety standards of KCSI, not only because he worked without the required permit, fire
watch, fire buckets, and extinguishers, but also because he failed to undertake other precautionary
measures for preventing the fire. For instance, he could have, at the very least, ensured that
whatever combustible material may have been in the vicinity would be protected from the sparks
caused by the welding torch. He could have easily removed the life jackets from the ceiling void, as
well as the foam mattresses, and covered any holes where the sparks may enter.

Conjunctively, since Rebaca was already aware of the hazard, he should have taken all possible
precautionary measures, including those above mentioned, before allowing Sevillejo to continue with
his hot work on Deck A. In addition to scolding Sevillejo, Rebaca merely checked that no fire had
started yet. Nothing more. Also, inasmuch as KCSI had the power to substitute Sevillejo with another
electric arc welder, Rebaca should have replaced him.

There is negligence when an act is done without exercising the competence that a reasonable
person in the position of the actor would recognize as necessary to prevent an unreasonable risk of
harm to another. Those who undertake any work calling for special skills are required to exercise
reasonable care in what they do.38 Verily, there is an obligation all persons have to take due care
which, under ordinary circumstances of the case, a reasonable and prudent man would take. The
omission of that care constitutes negligence. Generally, the degree of care required is graduated
according to the danger a person or property may be subjected to, arising from the activity that the
actor pursues or the instrumentality that he uses. The greater the danger, the greater the degree of
care required. Extraordinary risk demands extraordinary care. Similarly, the more imminent the
danger, the higher degree of care warranted.39 In this aspect,

KCSI failed to exercise the necessary degree of caution and foresight called for by the
circumstances.

We cannot subscribe to KCSIs position that WG&A, through Dr. Joniga, was negligent.

On the one hand, as discussed above, Dr. Joniga had authority to request the performance of hot
works in the other areas of the vessel. These hot works were deemed included in the January 26,
2000 Work Order and the Shiprepair Agreement. In the exercise of this authority, Dr. Joniga asked
Sevillejo to do the cutting of the bulkhead door near the staircase of Deck A. KCSI was aware of
what Sevillejo was doing, but failed to supervise him with the degree of care warranted by the
attendant circumstances.
Neither can Dr. Joniga be faulted for not removing the life jackets from the ceiling void for two
reasons (1) the life jackets were not even contributory to the occurrence of the fire; and (2) it was
not incumbent upon him to remove the same. It was shown during the hearings before the CIAC that
the removal of the life jackets would not have made much of a difference. The fire would still have
occurred due to the presence of other combustible materials in the area. This was the uniform
conclusion of both WG&As40 and KCSIs41 fire experts. It was also proven during the CIAC
proceedings that KCSI did not see the life jackets as being in the way of the hot works, thus, making
their removal from storage unnecessary.42

These circumstances, taken collectively, yield the inevitable conclusion that Sevillejo was negligent
in the performance of his assigned task. His negligence was the proximate cause of the fire on board
M/V "Superferry 3." As he was then definitely engaged in the performance of his assigned tasks as
an employee of KCSI, his negligence gave rise to the vicarious liability of his employer 43 under Article
2180 of the Civil Code, which provides

Art. 2180. The obligation imposed by article 2176 is demandable not only for ones own act or
omission, but also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.

xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage.

KCSI failed to prove that it exercised the necessary diligence incumbent upon it to rebut the legal
presumption of its negligence in supervising Sevillejo.44 Consequently, it is responsible for the
damages caused by the negligent act of its employee, and its liability is primary and solidary. All that
is needed is proof that the employee has, by his negligence, caused damage to another in order to
make the employer responsible for the tortuous act of the former.45 From the foregoing disquisition,
there is ample proof of the employees negligence.

B. The right of subrogation

Pioneer asseverates that there existed a total constructive loss so that it had to pay WG&A the full
amount of the insurance coverage and, by operation of law, it was entitled to be subrogated to the
rights of WG&A to claim the amount of the loss. It further argues that the limitation of liability clause
found in the Shiprepair Agreement is null and void for being iniquitous and against public policy.

KCSI counters that a total constructive loss was not adequately proven by Pioneer, and that there is
no proof of payment of the insurance proceeds. KCSI insists on the validity of the limited-liability
clause up to P50,000,000.00, because WG&A acceded to the provision when it executed the
Shiprepair Agreement. KCSI also claims that the salvage value of the vessel should be deducted
from whatever amount it will be made to pay to Pioneer.

We find in favor of Pioneer, subject to the claim of KCSI as to the salvage value of M/V "Superferry
3."
In marine insurance, a constructive total loss occurs under any of the conditions set forth in Section
139 of the Insurance Code, which provides

Sec. 139. A person insured by a contract of marine insurance may abandon the thing insured, or any
particular portion hereof separately valued by the policy, or otherwise separately insured, and
recover for a total loss thereof, when the cause of the loss is a peril insured against:

(a) If more than three-fourths thereof in value is actually lost, or would have to be
expended to recover it from the peril;

(b) If it is injured to such an extent as to reduce its value more than three-fourths; x x
x.

It appears, however, that in the execution of the insurance policies over M/V "Superferry 3," WG&A
and Pioneer incorporated by reference the American Institute Hull Clauses 2/6/77, the Total Loss
Provision of which reads

Total Loss

In ascertaining whether the Vessel is a constructive Total Loss the Agreed Value shall be taken as
the repaired value and nothing in respect of the damaged or break-up value of the Vessel or wreck
shall be taken into account.

There shall be no recovery for a constructive Total Loss hereunder unless the expense of recovering
and repairing the Vessel would exceed the Agreed Value in policies on Hull and Machinery. In
making this determination, only expenses incurred or to be incurred by reason of a single accident or
a sequence of damages arising from the same accident shall be taken into account, but expenses
incurred prior to tender of abandonment shall not be considered if such are to be claimed separately
under the Sue and Labor clause. x x x.

In the course of the arbitration proceedings, Pioneer adduced in evidence the estimates made by
three (3) disinterested and qualified shipyards for the cost of the repair of the vessel, specifically:
(a)P296,256,717.00, based on the Philippine currency equivalent of the quotation dated April 17,
2000 turned in by Tsuneishi Heavy Industries (Cebu) Inc.; (b) P309,780,384.15, based on the
Philippine currency equivalent of the quotation of Sembawang Shipyard Pte. Ltd., Singapore; and
(c)P301,839,974.00, based on the Philippine currency equivalent of the quotation of Singapore
Technologies Marine Ltd. All the estimates showed that the repair expense would
exceedP270,000,000.00, the amount equivalent to of the vessels insured value
of P360,000,000.00. Thus, WG&A opted to abandon M/V "Superferry 3" and claimed from Pioneer
the full amount of the policies. Pioneer paid WG&As claim, and now demands from KCSI the full
amount ofP360,000,000.00, by virtue of subrogation. 1avvphi1

KCSI denies the liability because, aside from its claim that it cannot be held culpable for negligence
resulting in the destructive fire, there was no constructive total loss, as the amount of damage was
only US$3,800,000.00 or P170,611,260.00, the amount of repair expense quoted by Simpson,
Spence & Young.

In the face of this apparent conflict, we hold that Section 139 of the Insurance Code should govern,
because (1) Philippine law is deemed incorporated in every locally executed contract; and (2) the
marine insurance policies in question expressly provided the following:
I M P O R TAN T

This insurance is subject to English jurisdiction, except in the event that loss or losses are payable in
the Philippines, in which case if the said laws and customs of England shall be in conflict with the
laws of the Republic of the Philippines, then the laws of the Republic of the Philippines shall govern.
(Underscoring supplied.)

The CA held that Section 139 of the Insurance Code is merely permissive on account of the word
"may" in the provision. This is incorrect. Properly considered, the word "may" in the provision is
intended to grant the insured (WG&A) the option or discretion to choose the abandonment of the
thing insured (M/V "Superferry 3"), or any particular portion thereof separately valued by the policy,
or otherwise separately insured, and recover for a total loss when the cause of the loss is a peril
insured against. This option or discretion is expressed as a right in Section 131 of the same Code, to
wit:

Sec. 131. A constructive total loss is one which gives to a person insured a right to abandon under
Section one hundred thirty-nine.

It cannot be denied that M/V "Superferry 3" suffered widespread damage from the fire that occurred
on February 8, 2000, a covered peril under the marine insurance policies obtained by WG&A from
Pioneer. The estimates given by the three disinterested and qualified shipyards show that the
damage to the ship would exceed P270,000,000.00, or of the total value of the policies
P360,000,000.00. These estimates constituted credible and acceptable proof of the extent of the
damage sustained by the vessel. It is significant that these estimates were confirmed by the
Adjustment Report dated June 5, 2000 submitted by Richards Hogg Lindley (Phils.), Inc., the
average adjuster that Pioneer had enlisted to verify and confirm the extent of the damage. The
Adjustment Report verified and confirmed that the damage to the vessel amounted to a constructive
total loss and that the claim for P360,000,000.00 under the policies was compensable.46 It is also
noteworthy that KCSI did not cross-examine Henson Lim, Director of Richards Hogg, whose
affidavit-direct testimony submitted to the CIAC confirmed that the vessel was a constructive total
loss.

Considering the extent of the damage, WG&A opted to abandon the ship and claimed the value of its
policies. Pioneer, finding the claim compensable, paid the claim, with WG&A issuing a Loss and
Subrogation Receipt evidencing receipt of the payment of the insurance proceeds from Pioneer. On
this note, we find as unacceptable the claim of KCSI that there was no ample proof of payment
simply because the person who signed the Receipt appeared to be an employee of Aboitiz Shipping
Corporation.47 The Loss and Subrogation Receipt issued by WG&A to Pioneer is the best evidence
of payment of the insurance proceeds to the former, and no controverting evidence was presented
by KCSI to rebut the presumed authority of the signatory to receive such payment.

On the matter of subrogation, Article 2207 of the Civil Code provides

Art. 2207. If the plaintiffs property has been insured and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or
the person who has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the
person causing the loss or injury.

Subrogation is the substitution of one person by another with reference to a lawful claim or right, so
that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including
its remedies or securities. The principle covers a situation wherein an insurer has paid a loss under
an insurance policy is entitled to all the rights and remedies belonging to the insured against a third
party with respect to any loss covered by the policy. It contemplates full substitution such that it
places the party subrogated in the shoes of the creditor, and he may use all means that the creditor
could employ to enforce payment.48

We have held that payment by the insurer to the insured operates as an equitable assignment to the
insurer of all the remedies that the insured may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out
of, any privity of contract. It accrues simply upon payment by the insurance company of the
insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and to
accomplish justice; and is the mode that equity adopts to compel the ultimate payment of a debt by
one who, in justice, equity, and good conscience, ought to pay.49

We cannot accept KCSIs insistence on upholding the validity Clause 20, which provides that the
limit of its liability is only up to P50,000,000.00; nor of Clause 22(a), that KCSI stands as a co-
assured in the insurance policies, as found in the Shiprepair Agreement.

Clauses 20 and 22(a) of the Shiprepair Agreement are without factual and legal foundation. They are
unfair and inequitable under the premises. It was established during arbitration that WG&A did not
voluntarily and expressly agree to these provisions. Engr. Elvin F. Bello, WG&As fleet manager,
testified that he did not sign the fine-print portion of the Shiprepair Agreement where Clauses 20 and
22(a) were found, because he did not want WG&A to be bound by them. However, considering that it
was only KCSI that had shipyard facilities large enough to accommodate the dry docking and repair
of big vessels owned by WG&A, such as M/V "Superferry 3," in Cebu, he had to sign the front
portion of the Shiprepair Agreement; otherwise, the vessel would not be accepted for dry docking. 50

Indeed, the assailed clauses amount to a contract of adhesion imposed on WG&A on a "take-it-or-
leave-it" basis. A contract of adhesion is so-called because its terms are prepared by only one party,
while the other party merely affixes his signature signifying his adhesion thereto. Although not
invalid, per se, a contract of adhesion is void when the weaker party is imposed upon in dealing with
the dominant bargaining party, and its option is reduced to the alternative of "taking it or leaving it,"
completely depriving such party of the opportunity to bargain on equal footing. 51

Clause 20 is also a void and ineffectual waiver of the right of WG&A to be compensated for the full
insured value of the vessel or, at the very least, for its actual market value. There was clearly no
intention on the part of WG&A to relinquish such right. It is an elementary rule that a waiver must be
positively proved, since a waiver by implication is not normally countenanced. The norm is that a
waiver must not only be voluntary, but must have been made knowingly, intelligently, and with
sufficient awareness of the relevant circumstances and likely consequences. There must be
persuasive evidence to show an actual intention to relinquish the right. 52 This has not been
demonstrated in this case.

Likewise, Clause 20 is a stipulation that may be considered contrary to public policy. To allow KCSI
to limit its liability to only P50,000,000.00, notwithstanding the fact that there was a constructive total
loss in the amount of P360,000,000.00, would sanction the exercise of a degree of diligence short of
what is ordinarily required. It would not be difficult for a negligent party to escape liability by the
simple expedient of paying an amount very much lower than the actual damage or loss sustained by
the other.53

Along the same vein, Clause 22(a) cannot be upheld. The intention of the parties to make each other
a co-assured under an insurance policy is to be gleaned principally from the insurance contract or
policy itself and not from any other contract or agreement, because the insurance policy
denominates the assured and the beneficiaries of the insurance contract. Undeniably, the hull and
machinery insurance procured by WG&A from Pioneer named only the former as the assured. There
was no manifest intention on the part of WG&A to constitute KCSI as a co-assured under the
policies. To have deemed KCSI as a co-assured under the policies would have had the effect of
nullifying any claim of WG&A from Pioneer for any loss or damage caused by the negligence of
KCSI. No ship owner would agree to make a ship repairer a co-assured under such insurance policy.
Otherwise, any claim for loss or damage under the policy would be rendered nugatory. WG&A could
not have intended such a result.54

Nevertheless, we concur with the position of KCSI that the salvage value of the damaged M/V
"Superferry 3" should be taken into account in the grant of any award. It was proven before the CIAC
that the machinery and the hull of the vessel were separately sold for P25,290,000.00 (or
US$468,333.33) and US$363,289.50, respectively. WG&As claim for the upkeep of the wreck until
the same were sold amounts to P8,521,737.75 (or US$157,809.96), to be deducted from the
proceeds of the sale of the machinery and the hull, for a net recovery of US$673,812.87, or
equivalent to P30,252,648.09, at P44.8977/$1, the prevailing exchange rate when the Request for
Arbitration was filed. Not considering this salvage value in the award would amount to unjust
enrichment on the part of Pioneer.

C. On the imposition of interest

Pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, 55 the award in favor of
Pioneer in the amount of P350,146,786.89 should earn interest at 6% per annum from the filing of
the case until the award becomes final and executory. Thereafter, the rate of interest shall be 12%
per annum from the date the award becomes final and executory until its full satisfaction.

D. On the payment for the cost of arbitration

It is only fitting that both parties should share in the burden of the cost of arbitration, on a pro rata
basis. We find that Pioneer had a valid reason to institute a suit against KCSI, as it believed that it
was entitled to claim reimbursement of the amount it paid to WG&A. However, we disagree with
Pioneer that only KCSI should shoulder the arbitration costs. KCSI cannot be faulted for defending
itself for perceived wrongful acts and conditions. Otherwise, we would be putting a price on the right
to litigate on the part of Pioneer.

WHEREFORE, the Petition of Pioneer Insurance and Surety Corporation in G.R. No. 180896-97 and
the Petition of Keppel Cebu Shipyard, Inc. in G.R. No. 180880-81 are PARTIALLY GRANTED and
the Amended Decision dated December 20, 2007 of the Court of Appeals is MODIFIED. Accordingly,
KCSI is ordered to pay Pioneer the amount of P360,000,000.00 less P30,252,648.09, equivalent to
the salvage value recovered by Pioneer from M/V "Superferry 3," or the net total amount
of P329,747,351.91, with six percent (6%) interest per annum reckoned from the time the Request
for Arbitration was filed until this Decision becomes final and executory, plus twelve percent (12%)
interest per annum on the said amount or any balance thereof from the finality of the Decision until
the same will have been fully paid. The arbitration costs shall be borne by both parties on a pro rata
basis. Costs against KCSI.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
 SECOND DIVISION

G.R. No. 171636 April 7, 2009

NORMAN A. GAID, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

TINGA, J.:

Before the Court is a petition for review on certiorari 1 assailing the 12 July 2005 Decision2 of the
Court of Appeals and its subsequent Resolution3 denying petitioners motion for reconsideration.

Petitioner Norman A. Gaid was charged with the crime of reckless imprudence resulting in homicide
in an information which reads as follow:

That on or about 12:00 high noon of October 25, 2001, infront of the Laguindingan National High
School, Poblacion, Laguindingan, Misamis Oriental, Philippines and within the jurisdiction of this
Honorable Court, the said accused mentioned above while driving a passengers jeepney color white
bearing plate no. KVG-771 owned by barangay captain Levy Etom has no precautionary measure to
preempt the accident, did then and there willfully, unlawfully and feloniously ran [sic] over Michael
Dayata resulting of [sic] his untimely death as pronounced by the attending physician of Northern
Mindanao Medical Center Hospital, Cagayan de Oro City.

CONTRARY TO LAW.4

Petitioner entered a not guilty plea. Thereafter, trial ensued.

The antecedent facts are undisputed.

At around 12:00 noon on 25 October 2001, petitioner was driving his passenger jeepney along a
two-lane road where the Laguindingan National High School is located toward the direction of Moog
in Misamis Oriental. His jeepney was filled to seating capacity.5 At the time several students were
coming out of the school premises.6Meanwhile, a fourteen year-old student, Michael Dayata
(Dayata), was seen by eyewitness Artman Bongolto (Bongolto) sitting near a store on the left side of
the road. From where he was at the left side of the road, Dayata raised his left hand to flag down
petitioners jeepney7 which was traveling on the right lane of the road. 8 However, neither did
petitioner nor the conductor, Dennis Mellalos (Mellalos), saw anybody flagging down the jeepney to
ride at that point.9

The next thing Bongalto saw, Dayatas feet was pinned to the rear wheel of the jeepney, after which,
he laid flat on the ground behind the jeepney.10 Another prosecution witness, Usaffe Actub (Actub),
who was also situated on the left side of the street but directly in front of the school gate, heard "a
strong impact coming from the jeep sounding as if the driver forced to accelerate in order to hurdle
an obstacle."11 Dayata was then seen lying on the ground12 and caught in between the rear
tires.13 Petitioner felt that the left rear tire of the jeepney had bounced and the vehicle tilted to the
right side.14
Mellalos heard a shout that a boy was run over, prompting him to jump off the jeepney to help the
victim. Petitioner stopped and saw Mellalos carrying the body of the victim. 15 Mellalos loaded the
victim on a motorcycle and brought him to the hospital. Dayata was first brought to the Laguindingan
Health Center, but it was closed. Mellalos then proceeded to the El Salvador Hospital. Upon advice
of its doctors, however, Dayata was brought to the Northern Mindanao Medical Center where he was
pronounced dead on arrival.16

Dr. Tammy Uy issued an autopsy report stating cranio-cerebral injuries as the cause of death. 17 She
testified that the head injuries of Dayata could have been caused by having run over by the
jeepney.18

The Municipal Circuit Trial Court (MCTC) of Laguindingan19 found petitioner guilty beyond
reasonable doubt of the crime charged. The lower court held petitioner negligent in his driving
considering that the victim was dragged to a distance of 5.70 meters from the point of impact. He
was also scored for "not stopping his vehicle after noticing that the jeepneys left rear tire jolted
causing the vehicle to tilt towards the right."20 On appeal, the Regional Trial Court (RTC)21 affirmed in
toto the decision of the MCTC.

The Court of Appeals affirmed the trial courts judgment with modification in that it found petitioner
guilty only of simple negligence resulting in homicide. 1avvphi1.zw+

The Court of Appeals exonerated petitioner from the charge of reckless imprudence resulting to
homicide on the ground that he was not driving recklessly at the time of the accident. However, the
appellate court still found him to be negligent when he failed "to promptly stop his vehicle to check
what caused the sudden jotting of its rear tire."22

In its 6 February 2006 Resolution, the Court of Appeals denied petitioners motion for
reconsideration.23

Hence, the instant petition.

Petitioner submits that the Court of Appeals erred in finding that "there is (sic) absolutely lack of
precaution on the part of the petitioner when he continued even after he had noticed that the left rear
tire and the jeep tilted to its right side."24 Petitioner stressed that he, in fact, stopped his jeep when its
left rear tire bounced and upon hearing that somebody had been ran over.

Moreover, petitioner asserts that the Court of Appeals committed a grave abuse of discretion in
convicting him of the offense of simple negligence resulting in homicide. Assuming arguendo that he
failed to promptly stop his vehicle, petitioner maintains that no prudent man placed in the same
situation could have foreseen the vehicular accident or could have stopped his vehicle in time when
its left rear tire bounced due to the following reasons: (1) the victim was only a trespasser; (2)
petitioners attention was focused on the road and the students outside the schools gate; and (3) the
jeepney was fully loaded with passengers and cargoes and it was impossible for the petitioner to
promptly stop his vehicle.25

The Office of the Solicitor-General (OSG) maintained that petitioner was negligent when he
continued to run towards the direction of Moog, Laguindingan, dragging the victim a few meters from
the point of impact, despite hearing that a child had been run over.26
The presence or absence of negligence on the part of petitioner is determined by the operative
events leading to the death of Dayata which actually comprised of two phases or stages. The first
stage began when Dayata flagged down the jeepney while positioned on the left side of the road and
ended when he was run over by the jeepney. The second stage covered the span between the
moment immediately after the victim was run over and the point when petitioner put the jeepney to a
halt.

During the first stage, petitioner was not shown to be negligent.

Reckless imprudence consists of voluntarily doing or failing to do, without malice, an act from which
material damage results by reason of an inexcusable lack of precaution on the part of the person
performing or failing to perform such act.27

In Manzanares v. People,28 this Court convicted petitioner of the crime of reckless imprudence
resulting in multiple homicide and serious physical injuries when he was found driving the Isuzu truck
very fast before it smashed into a jeepney.29 Likewise, in Pangonorom v. People,30 a public utility
driver, who was driving very fast, failed to slow down and hit a swerving car. He was found negligent
by this Court.

In the instant case, petitioner was driving slowly at the time of the accident, as testified to by two
eyewitnesses. Prosecution witness Actub affirmed this fact on cross-examination, thus:

ATTY. MACUA:

(to the witness)

Q Mr. Witness, when the passenger jeepney passed by the gate of the Laguindingan
National High School, is it running slowly, am I correct?

A Yes, he was running slowly.31

The slow pace of the jeepney was seconded by Mellalos:

Q You testified that you heard somebody outside from the vehicle shouting that a boy was
ran over, am I correct?

A Yes, Sir.

Q Now, before you heard that shouting, did you observe any motion from the vehicle?

A The jeep was moving slowly and I noticed that there was something that [sic] the jeep a
little bit bounced up as if a hump thats the time I heard a shout from outside. 32

Petitioner stated that he was driving at no more than 15 kilometers per hour.33

It appears from the evidence Dayata came from the left side of the street. Petitioner, who was driving
the jeepney on the right lane, did not see the victim flag him down. He also failed to see him go near
the jeepney at the left side. Understandably, petitioner was focused on the road ahead. In Dayatas
haste to board the jeep which was then running, his feet somehow got pinned to the left rear tire, as
narrated by Bongolto. Actub only saw Dayata after he heard a strong impact coming from the jeep.

With the foregoing facts, petitioner can not be held liable during the first stage. Specifically, he
cannot be held liable for reckless imprudence resulting in homicide, as found by the trial court. The
proximate cause of the accident and the death of the victim was definitely his own negligence in
trying to catch up with the moving jeepney to get a ride.

In the instant case, petitioner had exercised extreme precaution as he drove slowly upon reaching
the vicinity of the school. He cannot be faulted for not having seen the victim who came from behind
on the left side.

However, the Court of Appeals found petitioner guilty of simple negligence resulting in homicide for
failing to stop driving at the time when he noticed the bouncing of his vehicle. Verily, the appellate
court was referring to the second stage of the incident.

Negligence has been defined as the failure to observe for the protection of the interests of another
person that degree of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury.34

The elements of simple negligence: are (1) that there is lack of precaution on the part of the
offender; and (2) that the damage impending to be caused is not immediate or the danger is not
clearly manifest.35

The standard test in determining whether a person is negligent in doing an act whereby injury or
damage results to the person or property of another is this: could a prudent man, in the position of
the person to whom negligence is attributed, foresee harm to the person injured as a reasonable
consequence of the course actually pursued? If so, the law imposes a duty on the actor to refrain
from that course or to take precautions to guard against its mischievous results, and the failure to do
so constitutes negligence. Reasonable foresight of harm, followed by the ignoring of the admonition
born of this provision, is always necessary before negligence can be held to exist. 36

In Philippine National Construction Corporation v. Court of Appeals, 37 the petitioner was the
franchisee that operates and maintains the toll facilities in the North and South Luzon Toll
Expressways. It failed to exercise the requisite diligence in maintaining the NLEX safe for motorists.
The lighted cans and lane dividers on the highway were removed even as flattened sugarcanes lay
scattered on the ground. The highway was still wet from the juice and sap of the flattened
sugarcanes. The petitioner should have foreseen that the wet condition of the highway would
endanger motorists passing by at night or in the wee hours of the morning. 38 Consequently, it was
held liable for damages.

In an American case, Hernandez v. Lukas,39 a motorist traveling within the speed limit and did all was
possible to avoid striking a child who was then six years old only. The place of the incident was a
neighborhood where children were playing in the parkways on prior occasions. The court ruled that it
must be still proven that the driver did not exercise due care. The evidence showed that the driver
was proceeding in lawful manner within the speed limit when the child ran into the street and was
struck by the drivers vehicle. Clearly, this was an emergency situation thrust upon the driver too
suddenly to avoid.
In this case, the courts below zeroed in on the fact that petitioner did not stop the jeepney when he
felt the bouncing of his vehicle, a circumstance which the appellate court equates with negligence.
Petitioner contends that he did not immediately stop because he did not see anybody go near his
vehicle at the time of the incident.40

Assuming arguendo that petitioner had been negligent, it must be shown that his negligence was the
proximate cause of the accident. Proximate cause is defined as that which, in the natural and
continuous sequence, unbroken by any efficient, intervening cause, produces the injury, and without
which the result would not have

occurred.41 In order to establish a motorist's liability for the negligent operation of a vehicle, it must be
shown that there was a direct causal connection between such negligence and the injuries or
damages complained of. Thus, negligence that is not a substantial contributing factor in the
causation of the accident is not the proximate cause of an injury.42

The head injuries sustained by Dayata at the point of impact proved to be the immediate cause of
his death, as indicated in the post-mortem findings. 43 His skull was crushed as a result of the
accident. Had petitioner immediately stopped the jeepney, it would still not have saved the life of the
victim as the injuries he suffered were fatal.

The evidence on record do not show that the jeepney dragged the victim after he was hit and run
over by the jeepney. Quite the contrary, the evidence discloses that the victim was not dragged at all.
In fact, it is the other way around. Bongolto narrated that after the impact, he saw Dayata left behind
the jeepney.44 Actub saw Dayata in a prone position and bleeding within seconds after impact. 45 Right
after the impact, Mellalos immediately jumped out of the jeepney and saw the victim lying on the
ground.46 The distance of 5.70 meters is the length of space between the spot where the victim fell to
the ground and the spot where the jeepney stopped as observed by the trial judge during the ocular
inspection at the scene of the accident.47

Moreover, mere suspicions and speculations that the victim could have lived had petitioner stopped
can never be the basis of a conviction in a criminal case.48 The Court must be satisfied that the guilt
of the accused had been proven beyond reasonable doubt. 49 Conviction must rest on nothing less
than a moral certainty of the guilt of the accused. The overriding consideration is not whether the
court doubts the innocence of the accused but whether it entertains doubt as to his guilt. 50

Clearly then, the prosecution was not able to establish that the proximate cause of the victims death
was petitioners alleged negligence, if at all, even during the second stage of the incident.

If at all again, petitioners failure to render assistance to the victim would constitute abandonment of
ones victim punishable under Article 275 of the Revised Penal Code. However, the omission is not
covered by the information. Thus, to hold petitioner criminally liable under the provision would be
tantamount to a denial of due process.

Therefore, petitioner must be acquitted at least on reasonable doubt. The award of damages must
also be deleted pursuant to Article 2179 of the Civil Code which states that when the plaintiffs own
negligence was the immediate and proximate cause of his injury, he cannot recover damages.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated 12 July 2005 is
REVERSED and SET ASIDE. Petitioner Norman A. Gaid is ACQUITTED of the crime of Simple
Negligence Resulting in Homicide as found by the Court of Appeals and of the charge of Reckless
Imprudence Resulting in Homicide in Criminal Case No. 1937 of the MCTC of Laguindingan,
Misamis Oriental.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 180440 December 5, 2012

DR. GENEVIEVE L. HUANG, Petitioner,

vs.
PHILIPPINE HOTELIERS, INC., DUSIT THANI PUBLIC CO., LTD. And FIRST LEPANTO TAISHO
INSURANCE CORPORATION, Respondents.

DECISION

PEREZ, J.:

For this Courts resolution is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision1 of the Court of Appeals in CA-G.R. CV No. 87065 dated 9 August 2007,
affirming the Decision2 of Branch 56 of the Regional Trial Court (RTC) of Makati City in Civil Case
No. 96-1367 dated 21 February 2006, dismissing for lack of merit herein petitioner Dr. Genevieve L.
Huangs Complaint for Damages. Assailed as well is the Court of Appeals Resolution 3 dated 5
November 2007 denying for lack of merit petitioners Motion for Reconsideration.

This case stemmed from a Complaint for Damages filed on 28 August 1996 by petitioner Dr.
Genevieve L. Huang4 against herein respondents Philippine Hoteliers, Inc. (PHI)5 and Dusit Thani
Public Co., Ltd. (DTPCI),6 as owners of Dusit Thani Hotel Manila (Dusit Hotel);7 and co-respondent
First Lepanto Taisho Insurance Corporation (First Lepanto), 8 as insurer of the aforesaid hotel. The
said Complaint was premised on the alleged negligence of respondents PHI and DTPCIs staff, in
the untimely putting off all the lights within the hotels swimming pool area, as well as the locking of
the main entrance door of the area, prompting petitioner to grope for a way out. While doing so, a
folding wooden counter top fell on her head causing her serious brain injury. The negligence was
allegedly compounded by respondents PHI and DTPCIs failure to render prompt and adequate
medical assistance.

Petitioners version of the antecedents of this case is as follows:

On 11 June 1995, Delia Goldberg (Delia), a registered guest of Dusit Hotel, invited her friend,
petitioner Dr. Genevieve L. Huang, for a swim at the hotels swimming pool facility. They started
bathing at around 5:00 p.m. At around 7:00 p.m., the hotels swimming pool attendant informed them
that the swimming pool area was about to be closed. The two subsequently proceeded to the
shower room adjacent to the swimming pool to take a shower and dress up. However, when they
came out of the bathroom, the entire swimming pool area was already pitch black and there was no
longer any person around but the two of them. They carefully walked towards the main door leading
to the hotel but, to their surprise, the door was locked. 9

Petitioner and Delia waited for 10 more minutes near the door hoping someone would come to their
rescue but they waited in vain. Delia became anxious about their situation so petitioner began to
walk around to look for a house phone. Delia followed petitioner. After some time, petitioner saw a
phone behind the lifeguards counter. While slowly walking towards the phone, a hard and heavy
object, which later turned out to be the folding wooden counter top, fell on petitioners head that
knocked her down almost unconscious.10

Delia immediately got hold of the house phone and notified the hotel telephone operator of the
incident. Not long after, the hotel staff arrived at the main entrance door of the swimming pool area
but it took them at least 20 to 30 minutes to get inside. When the door was finally opened, three
hotel chambermaids assisted petitioner by placing an ice pack and applying some ointment on her
head. After petitioner had slightly recovered, she requested to be assisted to the hotels coffee shop
to have some rest. Petitioner demanded the services of the hotel physician. 11

Dr. Violeta Dalumpines (Dr. Dalumpines) arrived. She approached petitioner and introduced herself
as the hotel physician. However, instead of immediately providing the needed medical assistance,
Dr. Dalumpines presented a "Waiver" and demanded that it be signed by petitioner, otherwise, the
hotel management will not render her any assistance. Petitioner refused to do so. 12

After eating her dinner and having rested for a while, petitioner left the hotels coffee shop and went
home. Thereupon, petitioner started to feel extraordinary dizziness accompanied by an
uncomfortable feeling in her stomach, which lasted until the following day. Petitioner was constrained
to stay at home, thus, missing all her important appointments with her patients. She also began
experiencing "on" and "off" severe headaches that caused her three (3) sleepless nights. 13

Petitioner, thus, decided to consult a certain Dr. Perry Noble (Dr. Noble), a neurologist from Makati
Medical Center, who required her to have an X-ray and a Magnetic Resonance Imaging (MRI)
tests.14 The MRI Report15dated 23 August 1995 revealed the following findings:

CONSULTATION REPORT:

MRI examination of the brain shows scattered areas of intraparenchymal contusions and involving
mainly the left middle and posterior temporal and slightly the right anterior temporal lobe.

Other small areas of contusions with suggestive pertechiae are seen in the left fronto-parietal, left
parieto-occipital and with deep frontal periventricular subcortical and cortical regions. There is no
mass effect nor signs of localized hemorrhagic extravasation.

The ventricles are not enlarged, quite symmetrical without shifts or deformities; the peripheral sulci
are within normal limits.

The C-P angles, petromastoids, sella, extrasellar and retro orbital areas appear normal.

The brainstem is unremarkable.

IMPRESSION: Scattered small intraparenchymal contusions mainly involving the left middle-
posterior temporal lobe and also right medial anterior temporal, both deep frontal subcortical, left
parieto-occipital subcortical and cortical regions. Ischemic etiology not ruled out. No localized intra -
or extracerebral hemorrhage.16

Petitioner claimed that the aforesaid MRI result clearly showed that her head was bruised. Based
also on the same MRI result, Dr. Noble told her that she has a very serious brain injury. In view
thereof, Dr. Noble prescribed the necessary medicine for her condition. 17

Petitioner likewise consulted a certain Dr. Ofelia Adapon, also a neurologist from Makati Medical
Center, who required her to undergo an Electroencephalogram examination (EEG) to measure the
electrostatic in her brain.18Based on its result,19 Dr. Ofelia Adapon informed her that she has a
serious conditiona permanent one. Dr. Ofelia Adapon similarly prescribed medicines for her brain
injury.20

Petitioners condition did not get better. Hence, sometime in September 1995, she consulted another
neuro-surgeon by the name of Dr. Renato Sibayan (Dr. Sibayan), who required her to have an X-ray
test.21 According to petitioner, Dr. Sibayans finding was the same as those of the previous doctors
that she had consultedshe has a serious brain injury.22

By reason of the unfortunate 11 June 1995 incident inside the hotels swimming pool area, petitioner
also started to feel losing her memory, which greatly affected and disrupted the practice of her
chosen profession.23 Thus, on 25 October 1995, petitioner, through counsel, sent a demand letter 24 to
respondents PHI and DTPCI seeking payment of an amount not less than P100,000,000.00
representing loss of earnings on her remaining life span. But, petitioners demand was unheeded.

In November 1995, petitioner went to the United States of America (USA) for further medical
treatment. She consulted a certain Dr. Gerald Steinberg and a certain Dr. Joel Dokson 25 from Mount
Sinai Hospital who both found that she has "post traumatic-post concussion/contusion cephalgias-
vascular and neuralgia."26 She was then prescribed to take some medications for severe pain and to
undergo physical therapy. Her condition did not improve so she returned to the Philippines. 27

Petitioner, once again, consulted Dr. Sibayan, who simply told her to just relax and to continue taking
her medicines. Petitioner also consulted other neurologists, who all advised her to just continue her
medications and to undergo physical therapy for her neck pain. 28

Sometime in 1996, petitioner consulted as well a certain Dr. Victor Lopez (Dr. Lopez), an
ophthalmologist from the Makati Medical Center, because of her poor vision, which she has
experienced for several months.29 Petitioners Eye Report dated 5 March 199630 issued by Dr. Lopez
stated: "IMPRESSION: Posterior vitreous detachment, right eye of floaters." Dr. Lopez told petitioner
that her detached eye is permanent and very serious. Dr. Lopez then prescribed an eye drop to
petitioner.31

For petitioners frustration to dissipate and to regain her former strength and physical well-being, she
consulted another neuro-surgeon from Makati Medical Center by the name of Dr. Leopoldo P. Pardo,
Jr. (Dr. Pardo, Jr.).32She disclosed to Dr. Pardo, Jr. that at the age of 18 she suffered a stroke due to
mitral valve disease and that she was given treatments, which also resulted in thrombocytopenia. In
Dr. Pardo, Jr.s medical evaluation of petitioner dated 15 May 1996, 33 he made the following
diagnosis and opinion:
DIAGNOSIS AND OPINION:

This patient sustained a severe head injury in (sic) 11 June 1995 and as a result of which she
developed the following injuries:

1. Cerebral Concussion and Contusion

2. Post-traumatic Epilepsy

3. Post-concussional Syndrome

4. Minimal Brain Dysfunction

5. Cervical Sprain, chronic recurrent

It is my opinion that the symptoms she complained of in the foregoing history are all related to and a
result of the injury sustained on 11 June 1995.

It is further my opinion that the above diagnosis and complaints do materially affect her duties and
functions as a practicing physician and dermatologist, and that she will require treatment for an
undetermined period of time.

The percentage of disability is not calculated at this time and will require further evaluation and
observation.34

Dr. Pardo, Jr. then advised petitioner to continue her medications.35

Petitioner likewise consulted a certain Dr. Tenchavez36 for her follow-up EEG.37 He similarly
prescribed medicine for petitioners deep brain injury. He also gave her pain killer for her headache
and advised her to undergo physical therapy. Her symptoms, however, persisted all the more. 38

In 1999, petitioner consulted another neurologist at the Makati Medical Center by the name of Dr.
Martesio Perez (Dr. Perez) because of severe fleeting pains in her head, arms and legs; difficulty in
concentration; and warm sensation of the legs, which symptoms also occurred after the 11 June
1995 incident. Upon examination, Dr. Perez observed that petitioner has been experiencing severe
pains and she has a slight difficulty in concentration. He likewise noted that there was a slight spasm
of petitioners neck muscle but, otherwise, there was no objective neurologic finding. The rest of
petitioners neurologic examination was essentially normal.39

Dr. Perezs neurologic evaluation40 of petitioner reflected, among others: (1) petitioners past medical
history, which includes, among others, mitral valve stenosis; (2) an interpretation of petitioners EEG
results in October 1995 and in January 1999, i.e., the first EEG showed sharp waves seen bilaterally
more on the left while the second one was normal; and (3) interpretation of petitioners second MRI
result, i.e., petitioner has a permanent damage in the brain, which can happen either after a head
injury or after a stroke. Dr. Perez concluded that petitioner has post-traumatic or post concussion
syndrome.41

Respondents, on the other hand, denied all the material allegations of petitioner and, in turn,
countered the latters statement of facts, thus:
According to respondents PHI and DTPCI, a sufficient notice had been posted on the glass door of
the hotel leading to the swimming pool area to apprise the people, especially the hotel guests, that
the swimming pool area is open only from 7:00 a.m. to 7:00 p.m. 42 Though the hotels swimming pool
area is open only between the aforestated time, the lights thereon are kept on until 10:00 p.m. for,
(1) security reasons; (2) housekeeping personnel to do the cleaning of the swimming pool
surroundings; and (3) people doing their exercise routine at the Slimmers World Gym adjacent to
the swimming pool area, which was then open until 10:00 p.m., to have a good view of the hotels
swimming pool. Even granting that the lights in the hotels swimming pool area were turned off, it
would not render the area completely dark as the Slimmers World Gym near it was well-
illuminated.43

Further, on 11 June 1995, at round 7:00 p.m., the hotels swimming pool attendant advised petitioner
and Delia to take their showers as it was already closing time. Afterwards, at around 7:40 p.m.,
Pearlie Benedicto-Lipana (Ms. Pearlie), the hotel staff nurse, who was at the hotel clinic located at
the mezzanine floor, received a call from the hotel telephone operator informing her that there was a
guest requiring medical assistance at the hotels swimming pool area located one floor above the
clinic.44

Immediately, Ms. Pearlie got hold of her medical kit and hurriedly went to the hotels swimming pool
area. There she saw Delia and petitioner, who told her that she was hit on the head by a folding
wooden counter top. Although petitioner looked normal as there was no indication of any blood or
bruise on her head, Ms. Pearlie still asked her if she needed any medical attention to which
petitioner replied that she is a doctor, she was fine and she did not need any medical attention.
Petitioner, instead, requested for a hirudoid cream to which Ms. Pearlie acceded. 45

At about 8:00 p.m., after attending to petitioner, Ms. Pearlie went back to the hotel clinic to inform Dr.
Dalumpines of the incident at the hotels swimming pool area. But before she could do that, Dr.
Dalumpines had already chanced upon Delia and petitioner at the hotels coffee shop and the latter
reported to Dr. Dalumpines that her head was hit by a folding wooden counter top while she was
inside the hotels swimming pool area. When asked by Dr. Dalumpines how she was, petitioner
responded she is a doctor, she was fine and she was already attended to by the hotel nurse, who
went at the hotels swimming pool area right after the accident. Dr. Dalumpines then called Ms.
Pearlie to verify the same, which the latter confirmed. 46

Afterwards, Dr. Dalumpines went back to petitioner and checked the latters condition. Petitioner
insisted that she was fine and that the hirudoid cream was enough. Having been assured that
everything was fine, Dr. Dalumpines requested petitioner to execute a handwritten
certification47 regarding the incident that occurred that night. Dr. Dalumpines then suggested to
petitioner to have an X-ray test. Petitioner replied that it was not necessary. Petitioner also refused
further medical attention.48

On 13 June 1995, petitioner called up Dr. Dalumpines. The call, however, had nothing to do with the
11 June 1995 incident. Instead, petitioner merely engaged in small talk with Dr. Dalumpines while
having her daily massage. The two talked about petitioners personal matters, i.e., past medical
history, differences with siblings and family over inheritance and difficulty in practice. Petitioner even
disclosed to Dr. Dalumpines that she once fell from a horse; that she had a stroke; had hysterectomy
and is incapable of having children for her uterus had already been removed; that she had blood
disorder, particularly lack of platelets, that can cause bleeding; and she had an "on" and "off"
headaches. Petitioner oftentimes called Dr. Dalumpines at the hotel clinic to discuss topics similar to
those discussed during their 13 June 1995 conversation. 49

Also, during one of their telephone conversations, petitioner requested for a certification regarding
the 11 June 1995 incident inside the hotels swimming pool area. Dr. Dalumpines accordingly issued
Certification dated 7 September 1995, which states that: 50

C E R TI F I C ATI O N

This is to certify that as per Clinic records, duty nurse Pearlie was called to attend to an accident at
the poolside at 7:45PM on 11 June 1995.

Same records show that there, she saw petitioner who claimed the folding countertop fell on her
head when she lifted it to enter the lifeguards counter to use the phone. She asked for Hirudoid.

The same evening petitioner met Dr. Dalumpines at the Coffee Shop. After narrating the poolside
incident and declining Dr. Dalumpines offer of assistance, she reiterated that the Hirudoid cream
was enough and that petitioner being a doctor herself, knew her condition and she was all right.

This certification is given upon the request of petitioner for whatever purpose it may serve, 7
September 1995 at Makati City.51 (Emphasis supplied).

Petitioner personally picked up the afore-quoted Certification at the hotel clinic without any objection
as to its contents.52

From 11 June 1995 until 7 September 1995, the hotel clinic never received any complaint from
petitioner regarding the latters condition. The hotel itself neither received any written complaint from
petitioner.53

After trial, the court a quo in its Decision dated 21 February 2006 dismissed petitioners Complaint
for lack of merit.

The trial court found petitioners testimony self-serving, thus, devoid of credibility. Petitioner failed to
present any evidence to substantiate her allegation that the lights in the hotels swimming pool area
were shut off at the time of the incident. She did not even present her friend, Delia, to corroborate
her testimony. More so, petitioners testimony was contradicted by one of the witnesses presented
by the respondents who positively declared that it has been a normal practice of the hotel
management not to put off the lights until 10:00 p.m. to allow the housekeepers to do the cleaning of
the swimming pool surroundings, including the toilets and counters. Also, the lights were kept on for
security reasons and for the people in the nearby gym to have a good view of the swimming pool
while doing their exercise routine. Besides, there was a remote possibility that the hotels swimming
pool area was in complete darkness as the aforesaid gym was then open until 10:00 p.m., and the
lights radiate to the hotels swimming pool area. As such, petitioner would not have met the accident
had she only acted with care and caution.54

The trial court further struck down petitioners contention that the hotel management did not extend
medical assistance to her in the aftermath of the accident. Records showed that the hotel
management immediately responded after being notified of the accident. The hotel nurse and the
two chambermaids placed an ice pack on petitioners head. They were willing to extend further
emergency assistance but petitioner refused and merely asked for a hirudoid cream. Petitioner even
told them she is a doctor and she was fine. Even the medical services offered by the hotel physician
were turned down by petitioner. Emphatically, petitioner cannot fault the hotel for the injury she
sustained as she herself did not heed the warning that the swimming pool area is open only from
7:00 a.m. to 7:00 p.m. As such, since petitioners own negligence was the immediate and proximate
cause of her injury, she cannot recover damages.55

The trial court similarly observed that the records revealed no indication that the head injury
complained of by petitioner was the result of the alleged 11 June 1995 accident. Firstly, petitioner
had a past medical history which might have been the cause of her recurring brain injury. Secondly,
the findings of Dr. Perez did not prove a causal relation between the 11 June 1995 accident and the
brain damage suffered by petitioner. Even Dr. Perez himself testified that the symptoms being
experienced by petitioner might have been due to factors other than the head trauma she allegedly
suffered. It bears stressing that petitioner had been suffering from different kinds of brain problems
since she was 18 years old, which may have been the cause of the recurring symptoms of head
injury she is experiencing at present. Absent, therefore, of any proof establishing the causal relation
between the injury she allegedly suffered on 11 June 1995 and the head pains she now suffers, her
claim must fail. Thirdly, Dr. Teresita Sanchezs (Dr. Sanchez) testimony cannot be relied upon since
she testified on the findings and conclusions of persons who were never presented in court. Ergo,
her testimony thereon was hearsay. Fourthly, the medical reports/evaluations/certifications issued by
myriads of doctors whom petitioner sought for examination or treatment were neither identified nor
testified to by those who issued them. Being deemed as hearsay, they cannot be given probative
value. Even assuming that petitioner suffered head injury as a consequence of the 11 June 1995
accident, she cannot blame anyone but herself for staying at the hotels swimming pool area beyond
its closing hours and for lifting the folding wooden counter top that eventually hit her head. 56

For petitioners failure to prove that her serious and permanent injury was the result of the 11 June
1995 accident, thus, her claim for actual or compensatory damages, loss of income, moral damages,
exemplary damages and attorneys fees, must all fail. 57

With regard to respondent First Lepantos liability, the trial court ruled that under the contract of
insurance, suffice it to state that absent any cause for any liability against respondents PHI and
DTPCI, respondent First Lepanto cannot be made liable thereon.

Dissatisfied, petitioner elevated the matter to the Court of Appeals with the following assignment of
errors: (1) the trial court erred in finding that the testimony of petitioner is self-serving and thus void
of credibility; (2) the trial court erred in applying the doctrine of proximate cause in cases of breach of
contract and even assuming arguendo that the doctrine is applicable, petitioner was able to prove by
sufficient evidence the causal connection between her injuries and respondents PHI and DTPCIs
negligent act; and (3) the trial court erred in holding that petitioner is not entitled to damages. 58

On 9 August 2007, the Court of Appeals rendered a Decision affirming the findings and conclusions
of the trial court.

The Court of Appeals ratiocinated in this wise:

At the outset, it is necessary for our purpose to determine whether to decide this case on the theory
that herein respondents PHI and DTPCI are liable for breach of contract or on the theory of quasi-
delict.
 xxxx

It cannot be gainsaid that herein petitioners use of the hotels pool was only upon the invitation of
Delia, the hotels registered guest. As such, she cannot claim contractual relationship between her
and the hotel. Since the circumstances of the present case do not evince a contractual relation
between petitioner and respondents, the rules on quasi-delict , thus, govern.

The pertinent provision of Art. 2176 of the Civil Code which states: "Whoever by act or omission
causes damage to another, there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called
quasi-delict."

A perusal of Article 2176 shows that obligations arising from quasi-delict or tort, also known as extra-
contractual obligations, arise only between parties not otherwise bound by contract, whether express
or implied. Thus, to sustain a claim liability under quasi-delict, the following requisites must concur:
(a) damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person
for whose acts he must respond; and (c) the connection of cause and effect between the fault or
negligence of the defendant and the damages incurred by the plaintiff.

Viewed from the foregoing, the question now is whether respondents PHI and DTPCI and its
employees were negligent? We do not think so. Several factors militate against petitioners
contention.

One. Petitioner recognized the fact that the pool areas closing time is 7:00 p.m.. She,
herself, admitted during her testimony that she was well aware of the sign when she and
Delia entered the pool area. Hence, upon knowing, at the outset, of the pools closing time,
she took the risk of overstaying when she decided to take shower and leave the area beyond
the closing hour. In fact, it was only upon the advise of the pool attendants that she
thereafter took her shower.

Two. She admitted, through her certification that she lifted the wooden bar countertop, which
then fell onto her head. The admission in her certificate proves the circumstances
surrounding the occurrence that transpired on the night of 11 June 1995. This is contrary to
her assertion in the complaint and testimony that, while she was passing through the counter
door, she was suddenly knocked out by a hard and heavy object. In view of the fact that she
admitted having lifted the counter top, it was her own doing, therefore, that made the counter
top fell on to her head.

Three. We cannot likewise subscribe to petitioners assertion that the pool area was totally
dark in that she herself admitted that she saw a telephone at the counter after searching for
one. It must be noted that petitioner and Delia had walked around the pool area with ease
since they were able to proceed to the glass entrance door from shower room, and back to
the counter area where the telephone was located without encountering any untoward
incident. Otherwise, she could have easily stumbled over, or slid, or bumped into something
while searching for the telephone. This negates her assertion that the pool area was
completely dark, thereby, totally impairing her vision.

xxxx
The aforementioned circumstances lead us to no other conclusion than that the proximate and
immediate cause of the injury of petitioner was due to her own negligence.

Moreover, petitioner failed to sufficiently substantiate that the medical symptoms she is currently
experiencing are the direct result of the head injury she sustained on 11 June 1995 as was aptly
discussed in the lower courts findings.

xxxx

It bears stressing that in civil cases, the law requires that the party who alleges a fact and
substantially asserts the affirmative of the issue has the burden of proving it. Hence, for petitioner to
be entitled to damages, she must show that she had suffered an actionable injury. Regrettably,
petitioner failed in this regard.59 (Emphasis supplied).

Petitioners Motion for Reconsideration was denied for lack of merit in a Resolution dated 5
November 2007.

Hence, this Petition raising the following issues:

(1) Whether or not the findings of fact of the trial court and of the Court of Appeals are
conclusive in this case.

(2) Whether or not herein respondents PHI and DTPCI are responsible by implied contract to
exercise due care for the safety and welfare of the petitioner.

(3) Whether or not the cause of action of the petitioner can be based on both breach of
contract and tort.

(4) Whether or not it is respondents PHI and DTPCI and its employees who are liable to the
petitioner for negligence, applying the well-established doctrines of res ipsa loquitur and
respondeat superior.

(5) Whether the petitioners debilitating and permanent injuries were a result of the accident
she suffered at the hotel on 11 June 1995.

(6) Whether or not the petitioner is entitled to the payment of damages, attorneys fees,
interest, and the costs of suit.

(7) Whether or not the respondent insurance company is liable, even directly, to the
petitioner.

(8) Whether or not petitioners motion for reconsideration of the decision of the Court of
Appeals is pro forma.60

Petitioner argues that the rule that "findings of fact of the lower courts are conclusive and must be
respected on appeal" finds no application herein because this case falls under the jurisprudentially
established exceptions. Moreover, since the rationale behind the afore-mentioned rule is that "the
trial judge is in a vantage point to appreciate the conduct and behavior of the witnesses and has the
unexcelled opportunity to evaluate their testimony," one logical exception to the rule that can be
deduced therefrom is when the judge who decided the case is not the same judge who heard and
tried the case.

Petitioner further faults the Court of Appeals in ruling that no contractual relationship existed
between her and respondents PHI and DTPCI since her use of the hotels swimming pool facility was
only upon the invitation of the hotels registered guest. On the contrary, petitioner maintains that an
implied contract existed between them in view of the fact that the hotel guest status extends to all
those who avail of its servicesits patrons and invitees. It follows then that all those who patronize
the hotel and its facilities, including those who are invited to partake of those facilities, like petitioner,
are generally regarded as guests of the hotel. As such, respondents PHI and DTPCI are responsible
by implied contract for the safety and welfare of petitioner while the latter was inside their premises
by exercising due care, which they failed to do.

Petitioner even asserts that the existence of a contract between the parties does not bar any liability
for tort since the act that breaks a contract may also be a tort. Hence, the concept of change of
theory of cause of action pointed to by respondents is irrelevant.

Petitioner similarly avows that the doctrines of res ipsa loquitur and respondeat superior are
applicable in this case. She argues that a person who goes in a hotel without a "bukol" or hematoma
and comes out of it with a "bukol" or hematoma is a clear case of res ipsa loquitur. It was an accident
caused by the fact that the hotel staff was not present to lift the heavy counter top for petitioner as is
normally expected of them because they negligently locked the main entrance door of the hotels
swimming pool area. Following the doctrine of res ipsa loquitur, respondents PHI and DTPCIs
negligence is presumed and it is incumbent upon them to prove otherwise but they failed to do so.
Further, respondents PHI and DTPCI failed to observe all the diligence of a good father of a family in
the selection and supervision of their employees, hence, following the doctrine of respondeat
superior, they were liable for the negligent acts of their staff in not verifying if there were still people
inside the swimming pool area before turning off the lights and locking the door. Had respondents
PHI and DTPCIs employees done so, petitioner would not have been injured. Since respondents
PHI and DTPCIs negligence need not be proved, the lower courts erred in shifting the burden to
petitioner and, thereafter, holding the hotel and its employees not negligent for petitioners failure to
prove their negligence. Moreover, petitioner alleges that there was no contributory negligence on her
part for she did not do anything that could have contributed to her injury. And, even if there was, the
same does not bar recovery.

Petitioner equally declares that the evidence on record, including the objective medical findings, had
firmly established that her permanent debilitating injuries were the direct result of the 11 June 1995
accident inside the hotels swimming pool area. This fact has not been totally disputed by the
respondents. Further, the medical experts who had been consulted by petitioner were in unison in
their diagnoses of her condition. Petitioner was also able to prove that the falling of the folding
wooden counter top on her head while she was at the hotels swimming pool area was the cause of
her head, eye and neck injuries.

Petitioner reiterates her claim for an award of damages, to wit: actual, including loss of income;
moral, exemplary; as well as attorneys fees, interest and costs of suit. She states that respondents
PHI and DTPCI are liable for quasi-delict under Articles 19, 2176 and 2180 of the New Civil Code. At
the same time, they are liable under an implied contract for they have a public duty to give due
courtesy, to exercise reasonable care and to provide safety to hotel guests, patrons and invitees.
Respondent First Lepanto, on the other hand, is directly liable under the express contract of
insurance.

Lastly, petitioner contends that her Motion for Reconsideration before the Court of Appeals was not
pro forma for it specifically pointed out the alleged errors in the Court of Appeals Decision.

The instant Petition is devoid of merit.

Primarily, only errors of law and not of facts are reviewable by this Court in a Petition for Review on
Certiorari under Rule 45 of the Rules of Court.61 This Court is not a trier of facts and it is beyond its
function to re-examine and weigh anew the respective evidence of the parties. 62 Besides, this Court
adheres to the long standing doctrine that the factual findings of the trial court, especially when
affirmed by the Court of Appeals, are conclusive on the parties and this Court. 63 Nonetheless, this
Court has, at times, allowed exceptions thereto, to wit:

(a) When the findings are grounded entirely on speculation, surmises, or conjectures;

(b) When the inference made is manifestly mistaken, absurd, or impossible;

(c) When there is grave abuse of discretion;

(d) When the judgment is based on a misapprehension of facts;

(e) When the findings of facts are conflicting;

(f) When in making its findings the Court of Appeals went beyond the issues of the case, or
its findings are contrary to the admissions of both the appellant and the appellee;

(g) When the Court of Appeals findings are contrary to those by the trial court;

(h) When the findings are conclusions without citation of specific evidence on which they are
based;

(i) When the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent;

(j) When the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; or

(k) When the Court of Appeals manifestly overlooked certain relevant facts not disputed by
the parties, which, if properly considered, would justify a different conclusion. 64

Upon meticulous perusal of the records, however, this Court finds that none of these exceptions is
obtaining in this case. No such justifiable or compelling reasons exist for this Court to depart from
the general rule. This Court will not disturb the factual findings of the trial court as affirmed by the
Court of Appeals and adequately supported by the evidence on record.
Also, this Court will not review the factual findings of the trial court simply because the judge who
heard and tried the case was not the same judge who penned the decision. This fact alone does not
diminish the veracity and correctness of the factual findings of the trial court. 65 Indeed, "the efficacy
of a decision is not necessarily impaired by the fact that its writer only took over from a colleague
who had earlier presided at the trial, unless there is showing of grave abuse of discretion in the
factual findings reached by him."66 In this case, there was none.

It bears stressing that in this jurisdiction there is a disputable presumption that the trial courts
decision is rendered by the judge in the regular performance of his official duties. While the said
presumption is only disputable, it is satisfactory unless contradicted or overcame by other evidence.
Encompassed in this presumption of regularity is the presumption that the trial court judge, in
resolving the case and drafting the decision, reviewed, evaluated, and weighed all the evidence on
record. That the said trial court judge is not the same judge who heard the case and received the
evidence is of little consequence when the records and transcripts of stenographic notes (TSNs) are
complete and available for consideration by the former,67 just like in the present case.

Irrefragably, the fact that the judge who penned the trial courts decision was not the same judge who
heard the case and received the evidence therein does not render the findings in the said decision
erroneous and unreliable. While the conduct and demeanor of witnesses may sway a trial court
judge in deciding a case, it is not, and should not be, his only consideration. Even more vital for the
trial court judges decision are the contents and substance of the witnesses testimonies, as borne
out by the TSNs, as well as the object and documentary evidence submitted and made part of the
records of the case.68

This Court examined the records, including the TSNs, and found no reason to disturb the factual
findings of both lower courts. This Court, thus, upholds their conclusiveness.

In resolving the second and third issues, a determination of the cause of action on which petitioners
Complaint for Damages was anchored upon is called for.

Initially, petitioner was suing respondents PHI and DTPCI mainly on account of their negligence but
not on any breach of contract. Surprisingly, when the case was elevated on appeal to the Court of
Appeals, petitioner had a change of heart and later claimed that an implied contract existed between
her and respondents PHI and DTPCI and that the latter were liable for breach of their obligation to
keep her safe and out of harm. This allegation was never an issue before the trial court. It was not
the cause of action relied upon by the petitioner not until the case was before the Court of Appeals.
Presently, petitioner claims that her cause of action can be based both on quasi-delict and breach of
contract.

A perusal of petitioners Complaint evidently shows that her cause of action was based solely on
quasi-delict. Telling are the following allegations in petitioners Complaint:

6. THAT, in the evening of 11 June 1995, between the hours from 7:00 to 8:00 oclock, after
herein petitioner and her friend from New York, Delia, the latter being then a Hotel guest,
were taking their shower after having a dip in the hotels swimming pool, without any notice
or warning, the Hotels staff put off all the lights within the pool area including the lights on
the hallway and also locked the main entrance door of the pool area, x x x;
7. THAT, Hotel guest Delia started to panic while petitioner pacified her by telling her not to
worry as they would both find their way out. Petitioner knowing that within the area there is a
house phone, started to look around while Delia was following her, eventually petitioner saw
a phone behind the counter x x x, that while slowly moving on towards the phone on a
stooping manner due to the darkness CAUSED BY UNTIMELY AND NEGLIGENTLY
PUTTING OFF WITH THE LIGHTS BY THE HEREIN RESPONDENTS PHI AND DTPCIS
EMPLOYEE while passing through the open counter door with its Folding Counter Top also
opened, x x x, a hard and heavy object fell onto the head of the petitioner that knocked her
down almost unconscious which hard and heavy object turned out to be the Folding Counter
Top;

8. THAT, Delia immediately got hold of the house phone and notified the Hotel Telephone
Operator about the incident, immediately the hotel staffs (sic) arrived but they were stranded
behind the main door of the pool entrance and it too (sic) them more than twenty (20)
minutes to locate the hotel maintenance employee who holds the key of the said main
entrance door;

9. THAT, when the door was opened, two Hotel Chamber Maids assisted the petitioner to get
out of the counter door. Petitioner being a Physician tried to control her feelings although
groggy and requested for a HURIDOID, a medicine for HEMATOMA, as a huge lump
developed on her head while the two Chamber Maids assisted petitioner by holding the bag
of ice on her head and applying the medicine on the huge lump;

10. THAT, petitioner after having recovered slightly from her nightmare, though still feeling
weak, asked to be assisted to the Hotel Coffee Shop to take a rest but requested for the
hotels Physician. Despite her insistent requests, the Dusit Hotel refused to lift a finger to
assists petitioner who was then in distress until a lady approached and introduced herself as
the Hotels house Doctor. Instead however of assisting petitioner by asking her what kind of
assistance the Hotel could render, in a DISCOURTEOUS MANNER presented instead a
paper and demanding petitioner to affix her signature telling her that the Hotel Management
would only assists and answer for all expenses incurred if petitioner signs the paper
presented, but she refused and petitioner instead wrote a marginal note on the said paper
stating her reason therefore, said paper later on turned out to be a WAIVER OF RIGHT or
QUIT CLAIM;

xxxx

14. THAT, due to the unfortunate incident caused by respondents PHI and DTPCIs gross
negligence despite medical assistance, petitioner started to feel losing her memory that
greatly affected and disrupted the practice of her chosen profession x x x.

xxxx

19. THAT, due to respondents PHI and DTPCIs gross negligence as being narrated which
caused petitioner to suffer sleepless nights, depression, mental anguish, serious anxiety,
wounded feelings, and embarrassment with her Diplomate friends in the profession and
industry, her social standing in the community was greatly affected and hence, respondents
PHI and DTPCI must be imposed the hereunder damages, prayed for x x x and Artile (sic)
2176 and 2199 of the New Civil Code of the Philippines x x x.
 xxxx

22. THAT, as to Moral, Exemplary and Actual Damages, as well as petitioners Loss of
Income, the amounts are stated in its prayer hereunder.69

It is clear from petitioners allegations that her Complaint for Damages was predicated on the alleged
negligence of respondents PHI and DTPCIs staff in the untimely putting off of all the lights within the
hotels swimming pool area, as well as the locking of its main door, prompting her to look for a way
out leading to the fall of the folding wooden counter top on her head causing her serious brain injury.
The said negligence was allegedly compounded by respondents PHI and DTPCIs failure to render
prompt and adequate medical assistance. These allegations in petitioners Complaint constitute a
cause of action for quasi-delict, which under the New Civil Code is defined as an act, or omission
which causes damage to another, there being fault or negligence.70

It is evident from petitioners Complaint and from her open court testimony that the reliance was on
the alleged tortious acts committed against her by respondents PHI and DTPCI, through their
management and staff. It is now too late in the day to raise the said argument for the first time before
this Court.71

Petitioners belated reliance on breach of contract as her cause of action cannot be sanctioned by
this Court. Well-settled is the rule that a party is not allowed to change the theory of the case or the
cause of action on appeal. Matters, theories or arguments not submitted before the trial court cannot
be considered for the first time on appeal or certiorari.72 When a party adopts a certain theory in the
court below, he will not be permitted to change his theory on appeal for to permit him to do so would
not only be unfair to the other party but it would also be offensive to the basic rules of fair play,
justice and due process.73 Hence, a party is bound by the theory he adopts and by the cause of
action he stands on and cannot be permitted after having lost thereon to repudiate his theory and
cause of action and adopt another and seek to re-litigate the matter anew either in the same forum
or on appeal.74

In that regard, this Court finds it significant to take note of the following differences between quasi-
delict (culpa aquilina) and breach of contract (culpa contractual). In quasi-delict, negligence is direct,
substantive and independent, while in breach of contract, negligence is merely incidental to the
performance of the contractual obligation; there is a pre-existing contract or obligation. 75 In quasi-
delict, the defense of "good father of a family" is a complete and proper defense insofar as parents,
guardians and employers are concerned, while in breach of contract, such is not a complete and
proper defense in the selection and supervision of employees. 76 In quasi- delict , there is no
presumption of negligence and it is incumbent upon the injured party to prove the negligence of the
defendant, otherwise, the formers complaint will be dismissed, while in breach of contract,
negligence is presumed so long as it can be proved that there was breach of the contract and the
burden is on the defendant to prove that there was no negligence in the carrying out of the terms of
the contract; the rule of respondeat superior is followed. 77

Viewed from the foregoing, petitioners change of theory or cause of action from quasi-delict to
breach of contract only on appeal would necessarily cause injustice to respondents PHI and DTPCI.
First, the latter will have no more opportunity to present evidence to contradict petitioners new
argument. Second, the burden of proof will be shifted from petitioner to respondents PHI and DTPCI.
Petitioners change of theory from quasi-delict to breach ofcontract must be repudiated.
As petitioners cause of action is based on quasi-delict, it is incumbent upon her to prove the
presence of the following requisites before respondents PHI and DTPCI can be held liable, to wit: (a)
damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person for
whose acts he must respond; and (c) the connection of cause and effect between the fault or
negligence of the defendant and the damages incurred by the plaintiff. 78 Further, since petitioners
case is for quasi-delict , the negligence or fault should be clearly established as it is the basis of her
action.79 The burden of proof is upon petitioner. Section 1, Rule 131 of the Rules of Court provides
that "burden of proof is the duty of a party to present evidence on the facts in issue necessary to
establish his claim or defense by the amount of evidence required by law." It is then up for the
plaintiff to establish his cause of action or the defendant to establish his defense. Therefore, if the
plaintiff alleged in his complaint that he was damaged because of the negligent acts of the
defendant, he has the burden of proving such negligence. It is even presumed that a person takes
ordinary care of his concerns. The quantum of proof required is preponderance of evidence. 80

In this case, as found by the trial court and affirmed by the Court of Appeals, petitioner utterly failed
to prove the alleged negligence of respondents PHI and DTPCI. Other than petitioners self-serving
testimony that all the lights in the hotels swimming pool area were shut off and the door was locked,
which allegedly prompted her to find a way out and in doing so a folding wooden counter top fell on
her head causing her injury, no other evidence was presented to substantiate the same. Even her
own companion during the night of the accident inside the hotels swimming pool area was never
presented to corroborate her allegations. Moreover, petitioners aforesaid allegations were
successfully rebutted by respondents PHI and DTPCI. Here, we quote with conformity the
observation of the trial court, thus:

x x x Besides not being backed up by other supporting evidence, said statement is being
contradicted by the testimony of Engineer Dante L. Costas,81 who positively declared that it has been
a normal practice of the Hotel management not to put off the lights until 10:00P.M. in order to allow
the housekeepers to do the cleaning of the pools surrounding, the toilets and the counters. It was
also confirmed that the lights were kept on for security reasons and so that the people exercising in
the nearby gym may be able to have a good view of the swimming pool. This Court also takes note
that the nearby gymnasium was normally open until 10:00 P.M. so that there was a remote possibility
the pool area was in complete darkness as was alleged by herein petitioner, considering that the
illumination which reflected from the gym. Ergo, considering that the area were sufficient (sic)
illuminated when the alleged incident occurred, there could have been no reason for the petitioner to
have met said accident, much less to have been injured as a consequence thereof, if she only acted
with care and caution, which every ordinary person is expected to do. 82

More telling is the ratiocination of the Court of Appeals, to wit:

Viewed from the foregoing, the question now is whether respondents PHI and DTPCI and its
employees were negligent? We do not think so. Several factors militate against petitioners
contention.

One. Petitioner recognized the fact that the pool areas closing time is 7:00 p.m.. She, herself,
admitted during her testimony that she was well aware of the sign when she and Delia entered the
pool area. Hence, upon knowing, at the outset, of the pools closing time, she took the risk of
overstaying when she decided to take shower and leave the area beyond the closing hour. In fact, it
was only upon the advise of the pool attendants that she thereafter took her shower.
Two. She admitted, through her certification, that she lifted the wooden bar countertop, which then
fell on to her head. The admission in her certificate proves the circumstances surrounding the
occurrence that transpired on the night of 11 June 1995. This is contrary to her assertion in the
complaint and testimony that, while she was passing through the counter door, she was suddenly
knocked out by a hard and heavy object. In view of the fact that she admitted having lifted the
countertop, it was her own doing, therefore, that made the counter top fell on to her head.

Three. We cannot likewise subscribe to petitioners assertion that the pool area was totally dark in
that she herself admitted that she saw a telephone at the counter after searching for one. It must be
noted that petitioner and Delia had walked around the pool area with ease since they were able to
proceed to the glass entrance door from the shower room, and back to the counter area where the
telephone was located without encountering any untoward incident. Otherwise, she could have
easily stumbled over, or slid, or bumped into something while searching for the telephone. This
negates her assertion that the pool area was completely dark, thereby, totally impairing her vision.

xxxx

The aforementioned circumstances lead us to no other conclusion than that the proximate and
immediate cause of the injury of petitioner was due to her own negligence. 83 (Emphasis supplied).

Even petitioners assertion of negligence on the part of respondents PHI and DTPCI in not rendering
medical assistance to her is preposterous. Her own Complaint affirmed that respondents PHI and
DTPCI afforded medical assistance to her after she met the unfortunate accident inside the hotels
swimming pool facility. Below is the portion of petitioners Complaint that would contradict her very
own statement, thus:

14. THAT, due to the unfortunate incident caused by respondents PHI and DTPCIs gross negligence
despite medical assistance, petitioner started to feel losing her memory that greatly affected and
disrupted the practice of her chosen profession. x x x. 84 (Emphasis supplied).

Also, as observed by the trial court, respondents PHI and DTPCI, indeed, extended medical
assistance to petitioner but it was petitioner who refused the same. The trial court stated, thus:

Further, herein petitioners asseverations that the Hotel Management did not extend medical
assistance to her in the aftermath of the alleged accident is not true. Again, this statement was not
supported by any evidence other that the sole and self-serving testimony of petitioner. Thus, this
Court cannot take petitioners statement as a gospel truth. It bears stressing that the Hotel
Management immediately responded after it received notice of the incident. As a matter of fact, Ms.
Pearlie, the Hotel nurse, with two chambermaids holding an ice bag placed on petitioners head
came to the petitioner to extend emergency assistance when she was notified of the incident, but
petitioner merely asked for Hirudoid, saying she was fine, and that she was a doctor and know how
to take care of herself. Also, the Hotel, through its in-house physician, Dr. Dalumpines offered its
medical services to petitioner when they met at the Hotels coffee shop, but again petitioner declined
the offer. Moreover, the Hotel as a show of concern for the petitioners welfare, shouldered the
expenses for the MRI services performed on petitioner at the Makati Medical Center. Emphatically,
petitioner herself cannot fault the Hotel for the injury she allegedly suffered because she herself did
not heed the warning at the pool to the effect that it was only open from 7:00 to 7:00 P.M. Thus,
when the petitioners own negligence was the immediate and proximate cause of his injury,
shecannot recover damages x x x.85
With the foregoing, the following were clearly established, to wit: (1) petitioner stayed in the hotels
swimming pool facility beyond its closing hours; (2) she lifted the folding wooden counter top that
eventually hit her head; and (3) respondents PHI and DTPCI extended medical assistance to her. As
such, no negligence can be attributed either to respondents PHI and DTPCI or to their staff and/or
management. Since the question of negligence is one of fact, this Court is bound by the said factual
findings made by the lower courts. It has been repeatedly held that the trial court's factual findings,
when affirmed by the Court of Appeals, are conclusive and binding upon this Court, if they are not
tainted with arbitrariness or oversight of some fact or circumstance of significance and influence.
Petitioner has not presented sufficient ground to warrant a deviation from this rule. 86

With regard to petitioners contention that the principles of res ipsa loquitur and respondeat superior
are applicable in this case, this Court holds otherwise.

Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction speaks for
itself." It relates to the fact of an injury that sets out an inference to the cause thereof or establishes
the plaintiffs prima facie case. The doctrine rests on inference and not on presumption. The facts of
the occurrence warrant the supposition of negligence and they furnish circumstantial evidence of
negligence when direct evidence is lacking.87 Simply stated, this doctrine finds no application if there
is direct proof of absence or presence of negligence. If there is sufficient proof showing the
conditions and circumstances under which the injury occurred, then the creative reason for the said
doctrine disappears.88

Further, the doctrine of res ipsa loquitur applies where, (1) the accident was of such character as to
warrant an inference that it would not have happened except for the defendants negligence; (2) the
accident must have been caused by an agency or instrumentality within the exclusive management
or control of the person charged with the negligence complained of; and (3) the accident must not
have been due to any voluntary action or contribution on the part of the person injured. 89

In the case at bench, even granting that respondents PHI and DTPCIs staff negligently turned off
the lights and locked the door, the folding wooden counter top would still not fall on petitioners head
had she not lifted the same. Although the folding wooden counter top is within the exclusive
management or control of respondents PHI and DTPCI, the falling of the same and hitting the head
of petitioner was not due to the negligence of the former. As found by both lower courts, the folding
wooden counter top did not fall on petitioners head without any human intervention. Records
showed that petitioner lifted the said folding wooden counter top that eventually fell and hit her head.
The same was evidenced by the, (1) 11 June 1995 handwritten certification of petitioner herself; (2)
her Letter dated 30 August 1995 addressed to Mr. Yoshikazu Masuda (Mr. Masuda), General
Manager of Dusit Hotel; and, (3) Certification dated 7 September 1995 issued to her by Dr.
Dalumpines upon her request, which contents she never questioned.

Here, we, respectively, quote the 11 June 1995 handwritten certification of petitioner; her letter to Mr.
Masuda dated 30 August 1995; and Dr. Dalumpines Certification dated 7 September 1995, to wit:

Petitioners 11 June 1995 Handwritten Certification:

I was requested by Dr. Dalumpines to write that I was assured of assistance should it be necessary
with regard an accident at the pool. x x x The phone was in an enclosed area on a chair I lifted the
wooden bar counter top which then fell on my head producing a large hematoma x x x. 90
Petitioners Letter addressed to Mr. Masuda dated 30 August 1995:

Dear Mr. Masuda,

xxxx

x x x We searched and saw a phone on a chair behind a towel counter. However, in order to get
behind the counter I had to lift a hinged massive wooden section of the counter which subsequently
fell and knocked me on my head x x x.91

Dr. Dalumpines Certification dated 7 September 1995:

C E R TI F I C ATI O N

This is to certify that as per Clinic records, duty nurse Pearlie was called to attend to an accident at
the poolside at 7:45PM on 11 June 1995.

Same records show that there, she saw petitioner who claimed the folding countertop fell on her
head when she lifted it to enter the lifeguards counter to use the phone. She asked for Hirudoid.

The same evening petitioner met Dr. Dalumpnes at the Coffee Shop. After narrating the poolside
incident and declining Dr. Dalumpines offer of assistance, she reiterated that the Hirudoid cream
was enough and that petitioner]being a doctor herself, knew her condition and she was all right.

This certification is given upon the request of petitioner for whatever purpose it may serve, 7
September 1995 at Makati City.92 (Emphasis supplied).

This Court is not unaware that in petitioners Complaint and in her open court testimony, her
assertion was, "while she was passing through the counter door, she was suddenly knocked out by a
hard and heavy object, which turned out to be the folding wooden counter top." However, in her open
court testimony, particularly during cross-examination, petitioner confirmed that she made such
statement that "she lifted the hinge massive wooden section of the counter near the swimming
pool."93 In view thereof, this Court cannot acquiesce petitioners theory that her case is one of res
ipsa loquitur as it was sufficiently established how petitioner obtained that "bukol" or "hematoma."

The doctrine of respondeat superior finds no application in the absence of any showing that the
employees of respondents PHI and DTPCI were negligent. Since in this case, the trial court and the
appellate court found no negligence on the part of the employees of respondents PHI and DTPCI,
thus, the latter cannot also be held liable for negligence and be made to pay the millions of pesos
damages prayed for by petitioner.

The issue on whether petitioners debilitating and permanent injuries were the result of the accident
she suffered at the hotels swimming pool area on 11 June 1995 is another question of fact, which is
beyond the function of this Court to resolve. More so, this issue has already been properly passed
upon by the trial court and the Court of Appeals. To repeat, this Court is bound by the factual findings
of the lower courts and there is no cogent reason to depart from the said rule.

The following observations of the trial court are controlling on this matter:
Firstly, petitioner had a past medical history which might have been the cause of her recurring brain
injury.

Secondly, the findings of Dr. Perez did not prove a causal relation between the 11 June 1995
accident and the brain damage suffered by petitioner. Dr. Perez himself testified that the symptoms
being experienced by petitioner might have been due to factors other than the head trauma she
allegedly suffered. Emphasis must be given to the fact that petitioner had been suffering from
different kinds of brain problems since she was 18 years old, which may have been the cause of the
recurring symptoms of head injury she is experiencing at present.

Thirdly, Dr. Sanchezs testimony cannot be relied upon since she testified on the findings and
conclusions of persons who were never presented in court. Ergo, her testimony thereon was
hearsay. A witness can testify only with regard to facts of which they have personal knowledge.
Testimonial or documentary evidence is hearsay if it is based, not on the personal knowledge of the
witness, but on the knowledge of some other person not on the witness stand. Consequently,
hearsay evidence -- whether objected to or not -- has no probative value. 94

Fourthly, the medical reports/evaluations/certifications issued by myriads of doctors whom petitioner

sought for examination or treatment were neither identified nor testified to by those who issued them.
Being deemed as hearsay, they cannot be given probative value. 1wphi1

The aforesaid medical reports/evaluations/certifications of different doctors in favor of petitioner

cannot be given probative value and their contents cannot be deemed to constitute proof of the facts
stated therein. It must be stressed that a document or writing which is admitted not as independent
evidence but merely as part of the testimony of a witness does not constitute proof of the facts
related therein.95 In the same vein, the medical certificate which was identified and interpreted in
court by another doctor was not accorded probative value because the doctor who prepared it was
not presented for its identification. Similarly, in this case, since the doctors who examined petitioner
were not presented to testify on their findings, the medical certificates issued on their behalf and
identified by another doctor cannot be admitted as evidence. Since a medical certificate involves an
opinion of one who must first be established as an expert witness, it cannot be given weight or credit
unless the doctor who issued it is presented in court to show his qualifications. 96 Thus, an unverified
and unidentified private document cannot be accorded probative value. It is precluded because the
party against whom it is presented is deprived of the right and opportunity to cross-examine the
person to whom the statements or writings are attributed. Its executor or author should be presented
as a witness to provide the other party to the litigation the opportunity to question its contents. Being
mere hearsay evidence, failure to present the author of the letter renders its contents suspect and of
no probative value.97

All told, in the absence of negligence on the part of respondents PHI and DTPCI, as well as their
management and staff, they cannot be made Iiable to pay for the millions of damages prayed for by
the petitioner. Since respondents PHI and DTPCI arc not liable, it necessarily follows that
respondent First Lepanto cannot also be made liable under the contract or Insurance.

WHEREFORE, premises considered, the Decision and Resolution or the Court of Appeals in CA-
G.R. CV No. 87065 dated 9 August 2007 and 5 November 2007, respectively, are hereby
AFFIRMED. Costs against petitioner.

SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 162987 May 21, 2009

SOFIA M. GUILLANG, represented by SUSAN GUILLANG-CABATBAT, REYNALDO,

GERARDO, BIENVENIDO, DAWNA, and NELLIE, all surnamed GUILLANG, GENARO
GUILLANG, JOSE DIGNADICE, and ALVIN LLANILLO, Petitioners,
vs.
RODOLFO BEDANIA and RODOLFO DE SILVA, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 3 June 2003 Decision2 and the 23 March 2004 Resolution3 of the
Court of Appeals in CA-G.R. CV No. 69289. The 3 June 2003 Decision set aside the 5 December
2000 Decision4 of the Regional Trial Court, Branch 30, Manila (trial court). The 23 March 2004
Resolution denied the motion for reconsideration.

The Facts

On 25 October 1994, at about 5:45 in the afternoon, petitioner Genaro M. Guillang (Genaro) was
driving his brand new Toyota Corolla GLI sedan with conduction sticker no. 54-DFT (car) along
Emilio Aguinaldo Highway (highway) in Cavite. Genaro, Antero Guillang (Antero), Felipe Jurilla, Jose
Dignadice (Dignadice), and Alvin Llanillo (Llanillo) had all just left from Golden City, Dasmarias,
Cavite, and were on their way to Manila. At the other side of the highway, respondent Rodolfo A.
Bedania (Bedania) was driving a ten-wheeler Isuzu cargo truck with plate no. CAC-923 (truck)
towards Tagaytay City. The truck was owned by respondent Rodolfo de Silva (de Silva).

Along the highway and the road leading to the Orchard Golf Course, Bedania negotiated a U-turn.
When the truck entered the opposite lane of the highway, Genaros car hit the right portion of the
truck. The truck dragged Genaros car some five meters to the right of the road.

As a consequence, all the passengers of the car were rushed to the De La Salle University Medical
Center in Dasmarias, Cavite for treatment. Because of severe injuries, Antero was later transferred
to the Philippine General Hospital. However, on 3 November 1994, Antero died due to the injuries he
sustained from the collision. The car was a total wreck while the truck sustained minor damage.

On 24 April 1995, petitioners Genaro, Llanillo, Dignadice, and the heirs of Antero 5 instituted a
complaint for damages based on quasi-delict against respondents Bedania and de Silva.

On 5 December 2000, the trial court rendered a decision in favor of petitioners. The trial court found
Bedania grossly negligent for recklessly maneuvering the truck by making a sudden U-turn in the
highway without due regard to traffic rules and the safety of other motorists. The trial court also
declared de Silva grossly negligent in the selection and supervision of his driver, Bedania. The
dispositive portion of the decision provides:

WHEREFORE, judgment is hereby rendered ordering defendants Rodolfo A. Bedania and Rodolfo
de Silva, jointly and severally, to pay plaintiffs, as follows:

1. The sum of P508,566.03 representing the damage/repair costs of the Toyota to plaintiff
Genaro M. Guillang.

2. The sum of P50,000.00 for the death of Antero Guillang plus P185,000.00 for his burial
expenses, to the heirs of Antero Guillang.

3. For hospital and medical expenses as reflected in Exhibits E, E-1 to E-30 to plaintiffs
Genaro M. Guillang, Jose Dignadice and Alvin Llanillo.

4. The sum of P50,000.00 as moral damages for the heirs of the deceased Antero Guillang.

5. The sum of P50,000.00 as moral damages each to plaintiffs Jose Dignadice, Alvin Llanillo
and Genaro Guillang.

6. The sum of P50,000.00 as exemplary damages.

7. The sum of P100,000.00 as and for attorneys fess.

8. The costs of the suit.

SO ORDERED.6

Respondents appealed to the Court of Appeals.

On 3 June 2003, the Court of Appeals rendered its decision in favor of respondents. The dispositive
portion of the decision provides:

IN VIEW OF ALL THE FOREGOING, the appealed decision is REVERSED and SET ASIDE. The
complaint of the herein appellees in Civil Case No. 95-73666 is DISMISSED, for lack of merit. The
appellants counterclaims in the instant case are likewise DISMISSED. No pronouncement as to
cost.

SO ORDERED.7
Petitioners filed a motion for reconsideration. On 23 March 2004, the Court of Appeals denied the
motion.

Hence, this petition.

The Ruling of the Regional Trial Court

According to the trial court, there is a presumption that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation. 8 In this case, the trial
court found that the Traffic Accident Investigation Report (report),9 corroborated by the testimonies of
the witnesses, showed that the truck committed a traffic violation by executing a U-turn without
signal lights. The trial court also declared that Bedania violated Sections 45(b),10 48,11 and 5412 of
Republic Act No. 413613 when he executed the sudden U-turn. The trial court added that Bedania
violated another traffic rule when he abandoned the victims after the collision. 14The trial court
concluded that Bedania was grossly negligent in his driving and held him liable for damages.

Moreover, the trial court found that Bedania did not make the U-turn at an intersection. According to
the trial court, vehicles trying to maneuver to change directions must seek an intersection where it is
safer to maneuver and not recklessly make a U-turn in a highway. The trial court said Bedania
should have observed extreme caution in making a U-turn because it was unexpected that a long
cargo truck would execute a U-turn along the highway.

The trial court also said that Bedanias gross negligence raised the legal presumption that de Silva,
as Bedanias employer, was negligent in the selection and supervision of his employees. The trial
court said that, under Articles 217615 and 218016 of the Civil Code, de Silvas liability was based
on culpa aquiliana which holds the employer primarily liable for tortious acts of his employees,
subject to the defense that he exercised all the diligence of a good father of a family in the selection
and supervision of his employees. The trial court ruled that de Silva failed to prove this defense and,
consequently, held him liable for damages.

The Ruling of the Court of Appeals

The Court of Appeals reversed the trial courts decision and said that the trial court overlooked
substantial facts and circumstances which, if properly considered, would justify a different conclusion
and alter the results of the case.

The Court of Appeals dismissed the testimonies of the witnesses and declared that they were
"contrary to human observation, knowledge and experience." The Court of Appeals also said that the
following were the physical evidences in the case:

1. It was not yet dark when the incident transpired;

2. The four-lane highway the appellees were cruising on was wide, straight, dry, relatively
plain and with no obstructions to the drivers vision;

3. The point of impact of the collision is on the lane where the car was cruising and the car
hit the gas tank of the truck located at its right middle portion, which indicates that the truck
had already properly positioned itself and had already executed the U-turn before the impact
occurred;
 4. Genaro Guillang was not able to stop the car in time and the cars front portion was totally
wrecked. This negates appellees contention that they were traveling at a moderate speed;
and

5. The sheer size of the truck makes it improbable for the said vehicle to negotiate a U-turn
at a sudden and fast speed as appellees vigorously suggest without toppling over on its
side.17 (Citations omitted)

The Court of Appeals concluded that the collision was caused by Genaros negligence. The Court of
Appeals declared that the truck arrived at the intersection way ahead of the car and had already
executed the U-turn when the car, traveling at a fast speed, hit the trucks side. The Court of Appeals
added that considering the time and the favorable visibility of the road and the road conditions,
Genaro, if he was alert, had ample time to react to the changing conditions of the road. The Court of
Appeals found no reason for Genaro not to be prudent because he was approaching an intersection
and there was a great possibility that vehicles would be traversing the intersection either going to or
from Orchard Golf Course. The Court of Appeals said Genaro should have slowed down upon
reaching the intersection. The Court of Appeals concluded that Genaros failure to observe the
necessary precautions was the proximate cause of Anteros death and the injuries of the petitioners.

The Court of Appeals also relied on the testimony of Police Traffic Investigator Efren Videna (Videna)
that the car was running at a fast speed and overtook another vehicle just before the collision
occurred.18 The Court of Appeals concluded that Genaro did not see the truck as the other vehicle
temporarily blocked his view of the intersection. The Court of Appeals also gave weight to Videnas
testimony that it was normal for a ten-wheeler truck to make a U-turn on that part of the highway
because the entrance to Orchard Golf Course was spacious.19

The Issues

Petitioners raise the following issues:

1. Did the Court of Appeals decide a question of substance in this case in a way probably not
in accord with law or with the applicable decisions of the Honorable Supreme Court?

2. Did the Court of Appeals depart from the accepted and usual course of judicial
proceedings particularly when it revised, and recast the findings of facts of the trial court
pertaining to credibility of witnesses of which the trial court was at the vantage point to
evaluate?

3. Did the Court of Appeals act with grave abuse of discretion amounting to lack of
jurisdiction when it rendered the palpably questionable Court of Appeals Decision that
tampered with the findings of fact of the trial court for no justifiable reason?

4. Is the Court of Appeals judgment and resolution reversing the decision of the trial court
supported by the evidence and the law and jurisprudence applicable? 20

The issue in this case is who is liable for the damages suffered by petitioners. The trial court held
Bedania and de Silva, as Bedanias employer, liable because the proximate cause of the collision
was the sudden U-turn executed by Bedania without any signal lights. On the other hand, the Court
of Appeals reversed the trial courts decision and held Genaro liable because the proximate cause of
the collision was Genaros failure to stop the car despite seeing that Bedania was making a U-turn.

The Ruling of the Court

The principle is well-established that this Court is not a trier of facts. Therefore, in an appeal
by certiorari under Rule 45 of the Rules of Court, only questions of law may be raised. The resolution
of factual issues is the function of the lower courts whose findings on these matters are received with
respect and are, as a rule, binding on this Court.21

However, this rule is subject to certain exceptions. One of these is when the findings of the appellate
court are contrary to those of the trial court.22 Findings of fact of the trial court and the Court of
Appeals may also be set aside when such findings are not supported by the evidence or where the
lower courts conclusions are based on a misapprehension of facts. 23 Such is the situation in this
case and we shall re-examine the facts and evidence presented before the lower courts.

Article 2176 of the Civil Code provides that 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 relations between the parties, is called a quasi-delict. To sustain a
claim based on quasi-delict, the following requisites must concur: (a) damage suffered by the
plaintiff; (b) fault or negligence of defendant; and (c) connection of cause and effect between the
fault or negligence of defendant and the damage incurred by the plaintiff. 24

There is no dispute that petitioners suffered damages because of the collision. However, the issues
on negligence and proximate cause are disputed.

On the Presumption of Negligence and Proximate Cause

Negligence is defined as the failure to observe for the protection of the interest of another person
that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such
other person suffers injury. In Picart v. Smith,25 we held that the test of negligence is whether the
defendant in doing the alleged negligent act used that reasonable care and caution which an
ordinary person would have used in the same situation.

The conclusion of the Court of Appeals that Genaro was negligent is not supported by the evidence
on record. In ruling that Genaro was negligent, the Court of Appeals gave weight and credence to
Videnas testimony. However, we find that Videnas testimony was inconsistent with the police
records and report that he made on the day of the collision. First, Videna testified that the car was
running fast and overtook another vehicle that already gave way to the truck. 26 But this was not
indicated in either the report or the police records. Moreover, if the car was speeding, there should
have been skid marks on the road when Genaro stepped on the brakes to avoid the collision. But the
sketch of the accident showed no skid marks made by the car.27 Second, Videna testified that the
petitioners came from a drinking spree because he was able to smell liquor.28 But in the
report,29 Videna indicated that the condition of Genaro was "normal." Videna did not indicate in the
report that Genaro "had been drinking liquor" or that Genaro "was obviously drunk." Third, Videna
testified that when he arrived at the scene, Bedania was inside his truck. 30 This contradicts the police
records where Videna stated that after the collision Bedania escaped and abandoned the
victims.31 The police records also showed that Bedania was arrested by the police at his barracks in
Anabu, Imus, Cavite and was turned over to the police only on 26 October 1994. 32
Under Article 2185 of the Civil Code, unless there is proof to the contrary, a person driving a vehicle
is presumed negligent if at the time of the mishap, he was violating any traffic regulation.

In this case, the report33 showed that the truck, while making the U-turn, failed to signal, a violation of
traffic rules. The police records also stated that, after the collision, Bedania escaped and abandoned
the petitioners and his truck.34 This is another violation of a traffic regulation.35 Therefore, the
presumption arises that Bedania was negligent at the time of the mishap.

The evidence presented in this case also does not support the conclusion of the Court of Appeals
that the truck had already executed the U-turn before the impact occurred. If the truck had fully made
the U-turn, it should have been hit on its rear.36 If the truck had already negotiated even half of the
turn and is almost on the other side of the highway, then the truck should have been hit in the middle
portion of the trailer or cargo compartment. But the evidence clearly shows, and the Court of Appeals
even declared, that the car hit the trucks gas tank, located at the trucks right middle portion, which
disproves the conclusion of the Court of Appeals that the truck had already executed the U-turn
when it was hit by the car.

Moreover, the Court of Appeals said that the point of impact was on the lane where the car was
cruising. Therefore, the car had every right to be on that road and the car had the right of way over
the truck that was making a U-turn. Clearly, the truck encroached upon the cars lane when it
suddenly made the U-turn.

The Court of Appeals also concluded that Bedania made the U-turn at an intersection. Again, this is
not supported by the evidence on record. The police sketch37 does not indicate an intersection and
only shows that there was a road leading to the Orchard Golf Course near the place of the collision.
Furthermore, U-turns are generally not advisable particularly on major streets. 38 Contrary to Videnas
testimony, it is not normal for a truck to make a U-turn on a highway. We agree with the trial court
that if Bedania wanted to change direction, he should seek an intersection where it is safer to
maneuver the truck. Bedania should have also turned on his signal lights and made sure that the
highway was clear of vehicles from the opposite direction before executing the U-turn.

The finding of the Court of Appeals that it was not yet dark when the collision occurred is also not
supported by the evidence on record. The report stated that the daylight condition at the time of the
collision was "darkness."39

Contrary to the conclusion of the Court of Appeals, the sheer size of the truck does not make it
improbable for the truck to execute a sudden U-turn. The trial courts decision did not state that the
truck was traveling at a fast speed when it made the U-turn. The trial court said the truck made a
"sudden" U-turn, meaning the U-turn was made unexpectedly and with no warning, as shown by the
fact that the trucks signal lights were not turned on.

Clearly, Bedanias negligence was the proximate cause of the collision which claimed the life of
Antero and injured the petitioners. Proximate cause is that which, in the natural and continuous
sequence, unbroken by any efficient, intervening cause, produces the injury, and without which the
result would not have occurred.40 The cause of the collision is traceable to the negligent act of
Bedania for if the U-turn was executed with the proper precaution, the mishap in all probability would
not have happened. The sudden U-turn of the truck without signal lights posed a serious risk to
oncoming motorists. Bedania failed to prevent or minimize that risk. The trucks sudden U-turn
triggered a series of events that led to the collision and, ultimately, to the death of Antero and the
injuries of petitioners.

We agree with the trial court that de Silva, as Bedanias employer, is also liable for the damages
suffered by petitioners. De Silva failed to prove that he exercised all the diligence of a good father of
a family in the selection and supervision of his employees.

On the Award of Damages and Attorneys Fees

According to prevailing jurisprudence, civil indemnity for death caused by a quasi-delict is pegged
at P50,000.41Moral damages in the amount of P50,000 is also awarded to the heirs of the deceased
taking into consideration the pain and anguish they suffered. 42 Bienvenido Guillang (Bienvenido),
Anteros son, testified that Sofia, Anteros wife and his mother, became depressed after Anteros
death and that Sofia died a year after.43 Bienvenido also testified on the pain and anguish their family
suffered as a consequence of their fathers death.44 We sustain the trial courts award of P50,000 as
indemnity for death and P50,000 as moral damages to the heirs of Antero.

As to funeral and burial expenses, the court can only award such amount as are supported by
proper receipts.45In this case, petitioners proved funeral and burial expenses of P55,000 as
evidenced by Receipt No. 1082,46P65,000 as evidenced by Receipt No. 114647 and P15,000 as
evidenced by Receipt No. 1064,48 all issued by the Manila South Cemetery Association, Inc.,
aggregating P135,000. We reduce the trial courts award of funeral and burial expenses
from P185,000 to P135,000.

As to hospitalization expenses, only substantiated and proven expenses, or those that appear to
have been genuinely incurred in connection with the hospitalization of the victims will be recognized
in court.49 In this case, the trial court did not specify the amount of hospitalization expenses to be
awarded to the petitioners. Since petitioners presented receipts for hospitalization expenses during
the trial, we will determine the proper amounts to be awarded to each of them. We award
hospitalization expenses of P27,000.98 to the heirs of Antero,50P10,881.60 to Llanillo,51 P5,436.77 to
Dignadice,52 and P300 to Genaro53 because these are the amounts duly substantiated by receipts.

We affirm the trial courts award of P508,566.03 for the repair of the car. The Court notes that there
is no dispute that Genaro was driving a brand new Toyota Corolla GLI sedan and that, after the
collision, the car was a total wreck. In this case, the repair order presented by Genaro is sufficient
proof of the damages sustained by the car.54 1avvphi1.zw+

Moral damages may be recovered in quasi-delicts causing physical injuries. 55 However, in

accordance with prevailing jurisprudence, we reduce the award of moral damages from P50,000
to P30,000 each to Llanillo, Dignadice, and Genaro since they only suffered physical injuries brought
about by the collision.56

In quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.57 While the amount of exemplary damages need not be proved, the plaintiff must show
that he is entitled to moral, temperate or compensatory damages before the court may consider the
question of whether or not exemplary damages should be awarded. 58 In this case, Bedania was
grossly negligent in suddenly making a U-turn in the highway without signal lights. To serve as an
example for the public good, we affirm the trial courts award of exemplary damages in the amount
of P50,000.
Finally, we affirm the trial courts award of attorneys fees in the amount of P100,000. Under Article
2208 of the Civil Code, attorneys fees may be recovered when, as in this case, exemplary damages
are awarded.

WHEREFORE, we REVERSE the 3 June 2003 Decision and 23 March 2004 Resolution of the Court
of Appeals in CA-G.R. CV No. 69289. We REINSTATE with MODIFICATIONS the 5 December 2000
Decision of the Regional Trial Court, Branch 30, Manila. We ORDER Rodolfo Bedania and Rodolfo
de Silva, jointly and severally, to pay the following amounts:

1. Funeral and Burial Expenses of P135,000 to the heirs of Antero Guillang;

2. Hospitalization Expenses of P27,000.98 to the heirs of Antero Guillang, P10,881.60 to

Alvin Llanillo,P5,436.77 to Jose Dignadice, and P300 to Genaro Guillang; and

3. Moral damages of P30,000 each to Alvin Llanillo, Jose Dignadice, and Genaro Guillang.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the
COURT OF APPEALS Respondents.

DECISION

BERSAMIN, J.:

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to
observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when
death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if
the deceased passenger may only be an unemployed high school student at the time of the
accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the
adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed
with modification the decision rendered on December 3, 1999 by the Regional Trial Court (RTC),
Branch 260, in Paraaque City that had decreed them jointly and severally liable with Philippine
National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for
the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of Don
Bosco Technical Institute (Don Bosco).

Antecedents

The Pereas were engaged in the business of transporting students from their respective residences
in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the
Pereas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14
students at a time, two of whom would be seated in the front beside the driver, and the others in the
rear, with six students on either side. They employed Clemente Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On
August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the
Zarates residence. Aaron took his place on the left side of the van near the rear door. The van, with
its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student
riders on their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15
a.m., and that they were already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow
path underneath the Magallanes Interchange that was then commonly used by Makati-bound
vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of construction
materials and parked passenger jeepneys, and the railroad crossing in the narrow path had no
railroad warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train),
operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train blew its horn to warn motorists of
its approach. When the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a
collision was imminent. The passenger bus successfully crossed the railroad tracks, but the van
driven by Alfaro did not. The train hit the rear end of the van, and the impact threw nine of the 12
students in the rear, including Aaron, out of the van. Aaron landed in the path of the train, which
dragged his body and severed his head, instantaneously killing him. Alano fled the scene on board
the train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR filed their respective
answers, with cross-claims against each other, but Alfaro could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
 (2) Spouses Zarate engaged the services of spouses Perea for the adequate and safe
transportation carriage of the former spouses' son from their residence in Paraaque to his
school at the Don Bosco Technical Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron,
the minor son of spouses Zarate died in connection with a vehicular/train collision which
occurred while Aaron was riding the contracted carrier Kia Ceres van of spouses Perea,
then driven and operated by the latter's employee/authorized driver Clemente Alfaro, which
van collided with the train of PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity
of the Magallanes Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision
was a railroad crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate and safety
warning signs and railings at the site commonly used for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and private vehicles
used on a daily basis the site of the collision as an alternative route and short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the commuter train
involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact intended by
the railroad operator for railroad crossing at the time of the vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and

(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters
from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable
for negligence constituting the proximate cause of the vehicular collision, which resulted in
the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Perea being the employer of defendant Alfaro
are liable for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the railroad
system is liable for negligence in failing to provide adequate safety warning signs and
 railings in the area commonly used by motorists for railroad crossings, constituting the
proximate cause of the vehicular collision which resulted in the death of the plaintiff spouses'
son;

(4) Whether or not defendant spouses Perea are liable for breach of the contract of carriage
with plaintiff-spouses in failing to provide adequate and safe transportation for the latter's
son;

(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary
damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the
diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John
Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter train
involved in the accident, in allowing or tolerating the motoring public to cross, and its failure
to install safety devices or equipment at the site of the accident for the protection of the
public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any
and whatever amount the latter may be held answerable or which they may be ordered to
pay in favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts
claimed by the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and
exemplary damages and attorney's fees.2

The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.

In their defense, the Pereas adduced evidence to show that they had exercised the diligence of a
good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had
been issued a drivers license and had not been involved in any vehicular accident prior to the
collision; that their own son had taken the van daily; and that Teodoro Perea had sometimes
accompanied Alfaro in the vans trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless
crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path
traversed by the van had not been intended to be a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision, 3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorneys fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereas motion for reconsideration, 4 reiterating that the
cooperative gross negligence of the Pereas and PNR had caused the collision that led to the death
of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the
established circumstances.

The CAs Ruling

Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and severally liable
together with defendant-appellants spouses Teodorico and Nanette Perea and defendant-
appellant Clemente Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and
damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of defendants-
appellants Philippine National Railways.

The Pereas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and
exemplary damages and attorneys fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereas against the Philippine
National Railways and in not holding the latter and its train driver primarily responsible for the
incident.

The trial court erred in awarding excessive damages and attorneys fees.

The trial court erred in awarding damages in the form of deceaseds loss of earning capacity in the
absence of sufficient basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but
limited the moral damages to P 2,500,000.00; and deleted the attorneys fees because the RTC did
not state the factual and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260
of Paraaque City is AFFIRMED with the modification that the award of Actual Damages is reduced
to P59,502.76; Moral Damages is reduced to P 2,500,000.00; and the award for Attorneys Fees is
Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the ruling in
Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave
the heirs of Cariaga a sum representing the loss of the deceaseds earning capacity despite Cariaga
being only a medical student at the time of the fatal incident. Applying the formula adopted in the
American Expectancy Table of Mortality:

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy
from age of 21 (the age when he would have graduated from college and started working for his own
livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and
his salary at the time of Aarons death were unknown, it used the prevailing minimum wage
of P 280.00/day to compute Aarons gross annual salary to be P 110,716.65, inclusive of the
thirteenth month pay. Multiplying this annual salary by Aarons life expectancy of 39.3 years, his
gross income would aggregate to P 4,351,164.30, from which his estimated expenses in the sum
of P 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aarons
computed net income turning out to be higher than the amount claimed by the Zarates,
only P 2,109,071.00, the amount expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereas motion for reconsideration. 8

Issues

In this appeal, the Pereas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-claim
against the latter.
II. The lower court erred in affirming the trial courts decision awarding damages for loss of earning
capacity of a minor who was only a high school student at the time of his death in the absence of
sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.

Ruling

The petition has no merit.

1.
Were the Pereas and PNR jointly
and severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereas and the PNR,
basing their claim against the Pereas on breach of contract of carriage and against the PNR on
quasi-delict.

The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereas defense was that they exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a
drivers license and that he had not been involved in any vehicular accident prior to the fatal collision
with the train; that they even had their own son travel to and from school on a daily basis; and that
Teodoro Perea himself sometimes accompanied Alfaro in transporting the passengers to and from
school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the Pereas
operated as a common carrier; and that their standard of care was extraordinary diligence, not the
ordinary diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a
private carrier,9primarily because he only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use, the exact nature of the operation
of a school bus service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from
one place to another, gratuitously or for hire. The carrier is classified either as a private/special
carrier or as a common/public carrier.10 A private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public as ready to act for all who may desire
his or its services, undertakes, by special agreement in a particular instance only, to transport goods
or persons from one place to another either gratuitously or for hire.11The provisions on ordinary
contracts of the Civil Code govern the contract of private carriage.The diligence required of a private
carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common
carrier is a person, corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering such
services to the public.12Contracts of common carriage are governed by the provisions on common
carriers of the Civil Code, the Public Service Act,13 and other special laws relating to transportation. A
common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to
have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14

In relation to common carriers, the Court defined public use in the following terms in United States v.
Tan Piaco,15viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public, we must
look not only to the character of the business to be done, but also to the proposed mode of doing it.
If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a
public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be,
in general, a right which the law compels the owner to give to the general public. It is not enough that
the general prosperity of the public is promoted. Public use is not synonymous with public interest.
The true criterion by which to judge the character of the use is whether the public may enjoy it by
right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any
distinction between a person or an enterprise offering transportation on a regular or an isolated
basis; and has not distinguished a carrier offering his services to the general public, that is, the
general community or population, from one offering his services only to a narrow segment of the
general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides
neatly with the notion of public service under the Public Service Act, which supplements the law on
common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of
the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientle, whether permanent or occasional, and done
for the general business purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express service, steamboat,
or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services. x
x x.17

Given the breadth of the aforequoted characterization of a common carrier, the Court has considered
as common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge
operators20 even if they had limited clientle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity,
but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to
the general public as his business or occupation. If the undertaking is a single transaction, not a part
of the general business or occupation engaged in, as advertised and held out to the general public,
the individual or the entity rendering such service is a private, not a common, carrier. The question
must be determined by the character of the business actually carried on by the carrier, not by any
secret intention or mental reservation it may entertain or assert when charged with the duties and
obligations that the law imposes.21

Applying these considerations to the case before us, there is no question that the Pereas as the
operators of a school bus service were: (a) engaged in transporting passengers generally as a
business, not just as a casual occupation; (b) undertaking to carry passengers over established
roads by the method by which the business was conducted; and (c) transporting students for a fee.
Despite catering to a limited clientle, the Pereas operated as a common carrier because they held
themselves out as a ready transportation indiscriminately to the students of a particular school living
within or near where they operated the service and for a fee.

The common carriers standard of care and vigilance as to the safety of the passengers is defined by
law. Given the nature of the business and for reasons of public policy, the common carrier is bound
"to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case." 22 Article 1755 of
the Civil Code specifies that the common carrier should "carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would
stand.23 No device, whether by stipulation, posting of notices, statements on tickets, or otherwise,
may dispense with or lessen the responsibility of the common carrier as defined under Article 1755
of the Civil Code. 24

And, secondly, the Pereas have not presented any compelling defense or reason by which the
Court might now reverse the CAs findings on their liability. On the contrary, an examination of the
records shows that the evidence fully supported the findings of the CA.

As earlier stated, the Pereas, acting as a common carrier, were already presumed to be negligent
at the time of the accident because death had occurred to their passenger.25 The presumption of
negligence, being a presumption of law, laid the burden of evidence on their shoulders to establish
that they had not been negligent.26 It was the law no less that required them to prove their
observance of extraordinary diligence in seeing to the safe and secure carriage of the passengers to
their destination. Until they did so in a credible manner, they stood to be held legally responsible for
the death of Aaron and thus to be held liable for all the natural consequences of such death.

There is no question that the Pereas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a family in the
selection and supervision of their driver was not legally sufficient. According to Article 1759 of the
Civil Code, their liability as a common carrier did not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employee. This was the
reason why the RTC treated this defense of the Pereas as inappropriate in this action for breach of
contract of carriage.
The Pereas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier.27 In this
connection, the records showed their drivers actual negligence. There was a showing, to begin with,
that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists
going into the Makati area to cross the railroad tracks. Although that point had been used by
motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking that
route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the
risks to his passengers but he still disregarded the risks. Compounding his lack of care was that loud
music was playing inside the air-conditioned van at the time of the accident. The loudness most
probably reduced his ability to hear the warning horns of the oncoming train to allow him to correctly
appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus
on the left side as both vehicles traversed the railroad tracks. In so doing, he lost his view of the train
that was then coming from the opposite side of the passenger bus, leading him to miscalculate his
chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided
a collision with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not
slow down or go to a full stop before traversing the railroad tracks despite knowing that his
slackening of speed and going to a full stop were in observance of the right of way at railroad tracks
as defined by the traffic laws and regulations.28 He thereby violated a specific traffic regulation on
right of way, by virtue of which he was immediately presumed to be negligent. 29

The omissions of care on the part of the van driver constituted negligence, 30 which, according to
Layugan v. Intermediate Appellate Court,31 is "the omission to do something which a reasonable
man, guided by those considerations which ordinarily regulate the conduct of human affairs, would
do, or the doing of something which a prudent and reasonable man would not do, 32 or as Judge
Cooley defines it, (t)he failure to observe for the protection of the interests of another person, that
degree of care, precaution, and vigilance which the circumstances justly demand, whereby such
other person suffers injury."33

The test by which to determine the existence of negligence in a particular case has been aptly stated
in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of
negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case
is not determined by reference to the personal judgment of the actor in the situation before him. The
law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence
and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in
the particular case. Abstract speculation cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the circumstances which are before them
or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they
can be expected to take care only when there is something before them to suggest or warn of
danger. Could a prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this
prevision, is always necessary before negligence can be held to exist. Stated in these terms, the
proper criterion for determining the existence of negligence in a given case is this: Conduct is said to
be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect
harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against
its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent when he
traversed the railroad tracks at a point not allowed for a motorists crossing despite being fully aware
of the grave harm to be thereby caused to his passengers; and when he disregarded the foresight of
harm to his passengers by overtaking the bus on the left side as to leave himself blind to the
approach of the oncoming train that he knew was on the opposite side of the bus.

Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the
Court held the PNR solely liable for the damages caused to a passenger bus and its passengers
when its train hit the rear end of the bus that was then traversing the railroad crossing. But the
circumstances of that case and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory negligence was adduced against the
owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete with the showing of negligence on
the part of both the Pereas and the PNR. Another distinction is that the passenger bus in Philippine
National Railways v. Intermediate Appellate Court was traversing the dedicated railroad crossing
when it was hit by the train, but the Pereas school van traversed the railroad tracks at a point not
intended for that purpose.

At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally"
liable for damages arising from the death of Aaron. They had been impleaded in the same complaint
as defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the
alternative, in respect to or arising out of the accident, and questions of fact and of law were
common as to the Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of
contract of carriage) against the Pereas was distinct from the basis of the Zarates right to relief
against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held
jointly and severally liable by virtue of their respective negligence combining to cause the death of
Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence despite the school
van of the Pereas traversing the railroad tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR did not ensure the safety of others through
the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to prevent
vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard
had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was
aware of the risks to others as well as the need to control the vehicular and other traffic there. Verily,
the Pereas and the PNR were joint tortfeasors.

2.
Was the indemnity for loss of
Aarons earning capacity proper?

The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the RTC on
the liability, the CA modified the amount. Both lower courts took into consideration that Aaron, while
only a high school student, had been enrolled in one of the reputable schools in the Philippines and
that he had been a normal and able-bodied child prior to his death. The basis for the computation of
Aarons earning capacity was not what he would have become or what he would have wanted to be
if not for his untimely death, but the minimum wage in effect at the time of his death. Moreover, the
RTCs computation of Aarons life expectancy rate was not reckoned from his age of 15 years at the
time of his death, but on 21 years, his age when he would have graduated from college.

We find the considerations taken into account by the lower courts to be reasonable and fully
warranted.

Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and
unfounded. They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim
1wphi1

Jussi Leinos loss of earning capacity as a pilot for being speculative due to his having graduated
from high school at the International School in Manila only two years before the shooting, and was at
the time of the shooting only enrolled in the first semester at the Manila Aero Club to pursue his
ambition to become a professional pilot. That meant, according to the Court, that he was for all
intents and purposes only a high school graduate.

We reject the Pereas submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino
was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be
some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer).
Instead, the computation of Aarons earning capacity was premised on him being a lowly minimum
wage earner despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a
fact that would have likely ensured his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against
his parents and in favor of the defendants whose negligence not only cost Aaron his life and his right
to work and earn money, but also deprived his parents of their right to his presence and his services
as well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability
of the guilty party in favor of the heirs of the deceased, and shall in every case be assessed and
awarded by the court "unless the deceased on account of permanent physical disability not caused
by the defendant, had no earning capacity at the time of his death." 38Accordingly, we emphatically
hold in favor of the indemnification for Aarons loss of earning capacity despite him having been
unemployed, because compensation of this nature is awarded not for loss of time or earnings but for
loss of the deceaseds power or ability to earn money.39

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna Tayabas
Bus Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriagas
earning capacity, although he survived the accident but his injuries rendered him permanently
incapacitated, was computed to be that of the physician that he dreamed to become. The Court
considered his scholastic record sufficient to justify the assumption that he could have finished the
medical course and would have passed the medical board examinations in due time, and that he
could have possibly earned a modest income as a medical practitioner. Also, in People v.
Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and murder victim Allan
Gomez could have easily landed good-paying jobs had they graduated in due time, and that their
jobs would probably pay them high monthly salaries from P 10,000.00 to P 15,000.00 upon their
graduation. Their earning capacities were computed at rates higher than the minimum wage at the
time of their deaths due to their being already senior agriculture students of the University of the
Philippines in Los Baos, the countrys leading educational institution in agriculture.
 3.
Were the amounts of damages excessive?

The Pereas plead for the reduction of the moral and exemplary damages awarded to the Zarates in
the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the ground that such amounts
were excessive.

The plea is unwarranted.

The moral damages of P 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates deep
mental anguish over their sons unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it would help the Zarates
obtain the means, diversions or amusements that would alleviate their suffering for the loss of their
child. At any rate, reducing the amount as excessive might prove to be an injustice, given the
passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.

Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only
to render effective the desired example for the public good. As a common carrier, the Pereas
needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to
prevent a similarly senseless accident from happening again. Only by an award of exemplary
damages in that amount would suffice to instill in them and others similarly situated like them the
ever-present need for greater and constant vigilance in the conduct of a business imbued with public
interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on
November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio

FIRST DIVISION

G.R. No. 173870 April 25, 2012

OSCAR DEL CARMEN, JR., Petitioner,

vs.
GERONIMO BACOY, Guardian and representing the children, namely: MARY MARJORIE B.
MONSALUD, ERIC B. MONSALUD, METZIE ANN B. MONSALUD, KAREEN B. MONSALUD,
LEONARDO B. MONSALUD, JR., and CRISTINA B. MONSALUD, Respondents.

DECISION

DEL CASTILLO, J.:

In this Petition for Review on Certiorari,1 the registered owner of a motor vehicle challenges the
Decision2 dated July 11, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 67764 which held him
liable for damages to the heirs of the victims who were run over by the said vehicle.

Factual Antecedents

At dawn on New Years Day of 1993, Emilia Bacoy Monsalud (Emilia), along with her spouse
Leonardo Monsalud, Sr. and their daughter Glenda Monsalud, were on their way home from a
Christmas party they attended in Poblacion, Sominot, Zamboanga Del Sur. Upon reaching Purok
Paglaom in Sominot, they were run over by a Fuso passenger jeep bearing plate number UV-PEK-
600 that was being driven by Allan Maglasang (Allan). The jeep was registered in the name of
petitioner Oscar del Carmen, Jr. (Oscar Jr.) and used as a public utility vehicle plying the Molave,
Zamboanga del Sur to Sominot, Zamboanga del Sur and vice versa route.

Because of the unfortunate incident, Criminal Case No. 93-103473 for Reckless Imprudence
Resulting in Multiple Homicide was filed against Allan before the Regional Trial Court of Molave,
Zamboanga del Sur, Branch 23. In a Decision dated March 13, 1997, said court declared Allan guilty
beyond reasonable doubt of the crime charged.4

During the pendency of said criminal case, Emilias father, Geronimo Bacoy (Geronimo), in behalf of
the six minor children5 of the Monsaluds, filed Civil Case No. 96-20219,6 an independent civil action
for damages based onculpa aquiliana. Aside from Allan, also impleaded therein were his alleged
employers, namely, the spouses Oscar del Carmen, Sr. (Oscar Sr.) and Norma del Carmen
(Spouses del Carmen) and the registered owner of the jeep, their son Oscar Jr. Geronimo prayed for
the reimbursement of funeral and burial expenses, as well as the award of attorneys fees, moral and
exemplary damages resulting from the death of the three victims, and loss of net income earnings of
Emilia who was employed as a public school teacher at the time of her death. 7

Defendants refused to assume civil liability for the victims deaths. Oscar Sr. averred that the
Monsaluds have no cause of action against them because he and his wife do not own the jeep and
that they were never the employers of Allan.8 For his part, Oscar Jr. claimed to be a victim himself.
He alleged that Allan and his friends9stole his jeep while it was parked beside his drivers rented
house to take it for a joyride. Both he and a vehicle mechanic testified that the subject jeep can
easily be started by mere pushing sans the ignition key. The vehicles engine shall then run but
without any headlights on.10 And implying that this was the manner by which the vehicle was illegally
taken, Oscar Jr. submitted as part of his documentary evidence the statements 11 of Jemar Alarcon
(Jemar) and Benjamin Andujar (Benjamin). The two, who were with Allan in the jeep at the time of
the accident, declared before the investigating officer that during said time, the vehicles headlights
were off. Because of this allegation, Oscar Jr. even filed before the same trial court a carnapping
case against Allan and his companions docketed as Criminal Case No. 93-10380. 12 The case was,
however, dismissed for insufficiency of evidence.13

Oscar Jr. clarified that Allan was his jeep conductor and that it was the latters brother, Rodrigo
Maglasang (Rodrigo), who was employed as the driver.14 In any event, Allans employment as
conductor was already severed before the mishap occurred on January 1, 1993 since he served as
such conductor only from the first week of December until December 14, 1992. 15 In support of this,
Oscar Jr. presented as witnesses Faustino Sismundo (Faustino) and Cresencio "Junior" Baobao
(Cresencio). Faustino, a resident of Molave, testified that when he boarded the jeep heading to
Sominot on December 31, 1992, it was Cresencio who was the conductor. He also believed that
Crecencio started to work as such at around December 15 or 16, 1992. 16 Cresencio, for his part,
testified that he worked as Oscar Jr.s conductor from December 15, 1992 to January 1, 1993 and
that Rodrigo was his driver.17 He stated that upon learning that the jeep figured in an accident, he
never bothered to verify the news. Instead, he went to Midsalip to work there as a conductor for his
brothers vehicle, thereby terminating his employment with Oscar Jr.18

Oscar Jr. likewise testified that it was routinary that after a days trip, the jeep would be parked
beside Rodrigos rented house19 for the next early-morning operation.

Geronimo, on the other hand, averred that Allan was still Oscar Jr.s employee subsequent to
December 14, 1992. To prove this, he presented as witnesses Saturnino Jumawan (Saturnino) and
Jose Navarro (Jose). Saturnino testified that he would pay his fare to Allan every time he would
board the jeep in going to Molave and that the last time he rode the subject vehicle was on
December 23, 1992. He also claimed that immediately before January 1, 1993, Rodrigo and Allan
used to park the jeep at the yard of his house.20 Jose likewise attested that Allan was still the jeep
conductor during the said period as he had ridden the jeep many times in mid-December of 1992. 21

Ruling of the Regional Trial Court

In its Decision22 dated April 17, 2000, the RTC exculpated the spouses del Carmen from civil liability
for insufficiency of evidence. However, their son Oscar Jr. was held civilly liable in a subsidiary
capacity. The RTC anchored its ruling primarily on the principle of res ipsa loquitur, i.e., that a
presumption of negligence on the part of a defendant may be inferred if the thing that caused an
injury is shown to be under his management and that in the ordinary course of things, the accident
would not have happened had there been an exercise of care. Said court ratiocinated that Oscar Jr.,
as the registered owner of the jeep, managed and controlled the same through his driver Rodrigo, in
whose house the jeep was usually parked. Since both Oscar Jr. and Rodrigo were well aware that
the jeep could easily be started by a mere push even without the ignition key, they should have
taken the necessary precaution to prevent the vehicle from being used by unauthorized persons like
Allan. The RTC thus concluded that such lack of proper precaution, due care and foresight constitute
negligence making the registered owner of the vehicle civilly liable for the damage caused by the
same.

The RTC disposed of the case as follows:

Wherefore, judgment is hereby entered in favor of the plaintiffs and against the defendants Allan
Maglasang and Oscar del Carmen, Jr. ordering

1. Defendant ALLAN MAGLASANG to pay the plaintiffs, and in case of insolvency, for
defendant OSCAR DEL CARMEN, JR., to pay the plaintiffs, the following sums:

a. P73,112.00 for their funeral and burial expenses;

b. P1,000,000.00 moral damages for the death of the late Emilia Monsalud;

c. P250,000.00 moral damages for the death of the late Leonardo Monsalud, Sr.;

d. P250,000.00 moral damages for the death of the late Glenda Monsalud;
 e. P40, 000.00, for exemplary damages;

f. P20,000.00 attorneys fees; and

g. The cost of this proceedings.

2. The dismissal of the complaint as against the spouses OSCAR DEL CARMEN SR. and
NORMA DEL CARMEN.

SO ORDERED.23

Oscar Jr. moved for reconsideration24 contending that the provision on vicarious liability of the
employer under Article 2180 of the Civil Code25 requires the existence of employer-employee
relationship and that the employee was acting within the scope of his employment when the tort
occurred. He stressed that even assuming that Allan was his employee, he was hired not as a driver
but as a conductor. Hence, Allan acted beyond the scope of his employment when he drove the
jeep.

Oscar Jr. also stressed that the fact that the jeep was running without its headlights on at the time of
the accident indubitably shows that the same was stolen. He further alleged that the jeep could not
have been taken by only one person. As Rodrigo declared in Criminal Case No. 93-10380
(carnapping case), based on his experience, the jeep cannot be pushed by only one person but by
at least five people in order for it to start. This was due to the vehicles mass and the deep canal
which separates the parking area from the curved road that was obstructed by a house. 26

Setting aside its earlier decision, the lower court in its Order27 dated June 21, 2000 granted the
Motion for Reconsideration and absolved Oscar Jr. from civil liability. It cited Article 103 of the
Revised Penal Code which provides that for an employer to be subsidiarily liable for the criminal acts
of his employee, the latter should have committed the same in the discharge of his duties. The court
agreed with Oscar Jr. that this condition is wanting in Allans case as he was not acting in the
discharge of his duties as a conductor when he drove the jeep.

The court also declared the doctrine of res ipsa loquitur inapplicable since the property owner cannot
be made responsible for the damages caused by his property by reason of the criminal acts of
another. It then adjudged that only Allan should bear the consequences of his criminal acts. Thus:

WHEREFORE, premises considered, the MOTION FOR

RECONSIDERATION is granted, and defendant OSCAR DEL CARMEN JR. is hereby absolved
from all civil liability arising from the felonious acts of convicted accused ALLAN MAGLASANG.

IT IS SO ORDERED.28

Geronimo appealed.

Ruling of the Court of Appeals

In its July 11, 2006 Decision,29 the CA granted the appeal.

In resolving the case, the CA first determined the preliminary issue of whether there was an
employer-employee relationship between Oscar Jr. and Allan at the time of the accident. It ruled in
the affirmative and gave more credence to the testimonies of Geronimos witnesses than to those of
Oscar Jr.s witnesses, Faustino and Cresencio. The CA ratiocinated that unlike the witness
presented by Geronimo, Faustino never resided in Poblacion and thus has limited knowledge of the
place. His testimony was also unreliable considering that he only rode the subject jeep twice 30 during
the last two weeks of December 1992. As regards Cresencios testimony, the appellate court found it
puzzling why he appeared to have acted uninterested upon learning that the jeep was the subject of
an accident when it was his bread and butter. Said court likewise considered questionable Oscar
Jr.s asseveration that Cresencio replaced Allan as conductor when Cresencio testified that he
replaced a certain Sumagang Jr.31

With regard to the main issue, the CA adjudged Oscar Jr. liable to the heirs of the victims based on
the principle that the registered owner of a vehicle is directly and primarily responsible for the injuries
or death of third parties caused by the operation of such vehicle. It disbelieved Oscar Jr.s defense
that the jeep was stolen not only because the carnapping case filed against Allan and his
companions was dismissed but also because, given the circumstances, Oscar Jr. is deemed to have
given Allan the implied permission to use the subject vehicle. To support its conclusion, the CA cited
the following circumstances: siblings Rodrigo and Allan were both employees assigned to the said
jeep; after a days work, said vehicle would be parked just beside Rodrigos house where Allan also
lived; the jeep could easily be started even without the use of an ignition key; the said parking area
was not fenced or secured to prevent the unauthorized use of the vehicle which can be started even
without the ignition key.

The dispositive portion of the CA Decision reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The assailed Order dated 21
June 2000 of the Regional Trial Court (Branch 23), Molave, Zamboanga del Sur, in Civil Case No.
96-20,219 is SET ASIDE and a new one is hereby entered. OSCAR DEL CARMEN, Jr. and ALLAN
MAGLASANG are held primarily liable, jointly and severally, to pay plaintiffs-appellants:

1. Civil indemnity for the death of Emilia Bacoy Monsalud, Leonardo Monsalud Sr., and
Glenda Monsalud in the amount of Fifty thousand pesos (P50,000.00) each or for the total
amount of One hundred fifty thousand pesos (P150,000.00);

2. Temperate damages in the amount of Twenty-five Thousand Pesos (P25,000.00) each for
the death of Emilia Monsalud, Leonardo Monsalud Sr., and Glenda Monsalud (collectively
the Monsaluds) or for the total amount of Seventy-five thousand pesos (P75,000.00);

3. Moral damages in the amount of Fifty Thousand Pesos (P50,000.00) each for the death of
the Monsaluds or for a total amount of One Hundred Fifty Thousand Pesos (P150,000.00);

4. Exemplary damages of Forty Thousand Pesos (P40,000.00).

No pronouncement as to costs.

SO ORDERED. 32

Issues
As a result of the adverse judgment, Oscar Jr. filed this Petition for Review on Certiorari alleging that
the CA erred in:

1. x x x basing its conclusions and findings on speculations, surmises and conjectures;

misapprehension of facts which are in conflict with the findings of the trial court;

2. x x x declaring a question of substance not in accord with law and with the applicable
decisions of the Supreme Court;

3. x x x departing from the regular course of the judicial proceedings in the disposition of the
appeal and [in going] beyond the issues of the case.33

Oscar Jr. points out that the CA failed to consider the RTCs ruling in its June 21, 2000 Order which
was in accord with Article 2180 of the Civil Code, i.e., that the tort committed by an employee should
have been done within the scope of his assigned tasks for an employer to be held liable under
culpa aquiliana. However, the CA never touched upon this matter even if it was glaring that Allans
driving the subject vehicle was not within the scope of his previous employment as conductor.
Moreover, Oscar Jr. insists that his jeep was stolen and stresses that the liability of a registered
owner of a vehicle as to third persons, as well as the doctrine of res ipsa loquitur, should not apply to
him. He asserts that although Allan and his companions were not found to have committed the crime
of carnapping beyond reasonable doubt, it was nevertheless established that the jeep was illicitly
taken by them from a well secured area. This is considering that the vehicle was running without its
headlights on at the time of the accident, a proof that it was started without the ignition key.

Our Ruling

Petitioners own evidence casts doubt on his claim that his jeep was stolen by Allan and his alleged
cohorts. Negligence is presumed under the doctrine of res ipsa loquitur.

Oscar Jr.s core defense to release him from responsibility for the death of the Monsaluds is that his
jeep was stolen. He highlights that the unauthorized taking of the jeep from the parking area was
indeed carried out by the clandestine and concerted efforts of Allan and his five companions,
notwithstanding the obstacles surrounding the parking area and the weight of the jeep.

Notably, the carnapping case filed against Allan and his group was already dismissed by the RTC for
insufficiency of evidence. But even in this civil case and as correctly concluded by the CA, the
evidentiary standard of preponderance of evidence required was likewise not met to support Oscar
Jr.s claim that his jeep was unlawfully taken.

Two of Allans co-accused in the carnapping case, Jemar and Benjamin, declared before the police
that when Allan invited them to ride with him, he was already driving the jeep:

04. Q- On that night, on or about 11:30 oclock on December 31, 1992, where were you?

A- I went to the disco near [the] Public Market[,] Sominot, Zamboanga del Sur.

05. Q- While you were in disco place, do you know if there was an incident [that] happened?
 A- No sir but when I was in the disco place, at about 3:30 at dawn more or less[,] January 1,
1993, Allan Maglasang arrived driving the jeep and he invited me to ride together with
Benjamin Andujar, Dioscoro Sol, Arniel Rezada and Joven Orot.34

xxxx

04. Q- On that night, on or about 9:00 oclock in the evening more or less on December 31,
1992, where were you?

A- I went to the disco at [the] Public Market[,] Sominot, Zamboanga del Sur.

05. Q- While you were in the disco place, do you know if there was an incident [that]
happened?

A- No, sir, but when I was in the disco place, at about 3:30 at dawn more or less[,] January 1,
1993, Allan Maglasang arrive[d] driving the jeep and he invited me to ride together with
Jemar Alarcon, Dioscoro Sol, Arniel Rizada and Joven Orot. 35

There were six accused in the carnapping case. If Jemar and Benjamin were fetched by Allan who
was driving the jeep, this would mean that only three men pushed the jeep contrary to Rodrigos
testimony in Criminal Case No. 93-10380 that it has to be pushed by at least five people so that it
could start without the ignition key.

On direct examination,36 Oscar Jr. was asked as to what Rodrigo, his driver who had informed him
about the accident on January 1, 1993 at around 7:00 a.m., turned over to him after the incident, viz:

Q: When Rodrigo Maglasang, your driver informed you about the accident, what did he carry
with him if any and turned over to you?

A: The OR (Official Receipt) and the CR (Certificate of Registration) Sir.

Q: How about the key of the vehicle?

A: It was not turned over, Sir.37

Assuming arguendo that Allan stole the jeep by having the same pushed by a group, the ignition key
should then be with Rodrigo as he was entrusted with the jeeps possession. Thus, at the time
Rodrigo faced his employer hours after the incident, it is reasonable to expect that the driver should
have also returned the key to the operator together with the Official Receipt and Certificate of
Registration. Notably, Rodrigo did not do so and instead, the key was allegedly handed over to the
police for reasons unexplained and not available from the records. Interestingly, Oscar Jr. never
presented Rodrigo as his witness. Neither was he able to attest on cross-examination that Allan
really stole the jeep by pushing or that the key was handed over to him by Rodrigo:

Q: On December 31, 1992, you did not know that it was Rodrigo Maglasang who gave the
key to Allan Maglasang. Is that correct?

A: I was not there. So, I do not know but he had an affidavit to show that he turned it over to
the police.
 Q: What I was asking you is that, [o]n the night of December 31, 1992, when it was driven by
Allan Maglasang, you did not know that the key was voluntarily given by Rodrigo Maglasang
to Allan Maglasang?

A: I was not there.

Q: So, you could not testify on that, is that correct?

A: Yes Sir, I was not there.38

Furthermore, Oscar Jr. acknowledged the dismissal of the carnapping case, thus:

Q: Now, there was a case filed against Allan Maglasang and [his] x x x co-accused x x x
[n]amely: Benjamin Andojar, Dioscoro Sol, Joven Orot, [Jemar Azarcon] and [Arniel] Rizada,
for carnapping. Is that correct?

A: Yes Sir.

Q: That case was filed by you because you alleged that on December 31, 1992, your jeep
was carnapped by Allan Maglasang and his co-accused, the said mentioned, is that correct?

A: Yes Sir.

Q: You testified on the case in Aurora, is that correct?

A: Yes, Sir.

Q: And you could well remember that this representation is the counsel of the co-accused of
Allan Maglasang, is that correct?

A: Yes Sir.

Q: And that case for carnapping was dismissed, is that correct?

A: Yes Sir.

Q: Even the case of Allan Maglasang, was also dismissed, is that correct

A: Yes Sir.

Q: Because there was no sufficient evidence to establish that the jeep was carnapped, is that
correct?

A: Yes Sir.39

While Oscar Jr. highlights that the headlights were not on to support his claim that his jeep was
stolen, this circumstance by itself will not prove that it really was stolen. The reason why the
headlights were not on at the time of the accident was not sufficiently established during the trial.
Besides, the fact that the headlights were not on cannot be exclusively attributed to the lack of
ignition key in starting the jeep as there may be other possibilities such as electrical problems,
broken headlights, or that they were simply turned off.

Hence, sans the testimony of witnesses and other relevant evidence to support the defense of
unauthorized taking, we cannot subscribe to Oscar Jr.s claim that his jeep was stolen. The evidence
on record brings forth more questions than clear-cut answers.

Oscar Jr. alleges that the presumption of negligence under the doctrine of res ipsa loquitur (literally,
the thing speaks for itself) should not have been applied because he was vigilant in securing his
vehicle. He claims that the jeep was parked in a well secured area not remote to the watchful senses
of its driver Rodrigo.

Under the doctrine of res ipsa loquitur, "[w]here the thing that caused the injury complained of is
shown to be under the management of the defendant or his servants; and the accident, in the
ordinary course of things, would not happen if those who had management or control used proper
care, it affords reasonable evidence in the absence of a sufficient, reasonable and logical
explanation by defendant that the accident arose from or was caused by the defendants want of
care."40 Res ipsa loquitur is "merely evidentiary, a mode of proof, or a mere procedural convenience,
since it furnishes a substitute for, and relieves a plaintiff of, the burden of producing a specific proof
of negligence."41 It "recognizes that parties may establish prima facie negligence without direct proof,
thus, it allows the principle to substitute for specific proof of negligence. It permits the plaintiff to
present along with proof of the accident, enough of the attending circumstances to invoke the
doctrine, create an inference or presumption of negligence and thereby place on the defendant the
burden of proving that there was no negligence on his part." 42 The doctrine is based partly on "the
theory that the defendant in charge of the instrumentality which causes the injury either knows the
cause of the accident or has the best opportunity of ascertaining it while the plaintiff has no such
knowledge, and is therefore compelled to allege negligence in general terms." 43

The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as follows:

1) the accident is of a kind which does not ordinarily occur unless someone is negligent;

2) the cause of 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 on the
part of the person injured.44

The above requisites are all present in this case. First, no person just walking along the road would
suddenly be sideswiped and run over by an on-rushing vehicle unless the one in charge of the said
vehicle had been negligent. Second, the jeep which caused the injury was under the exclusive
control of Oscar Jr. as its owner. When Oscar Jr. entrusted the ignition key to Rodrigo, he had the
power to instruct him with regard to the specific restrictions of the jeeps use, including who or who
may not drive it. As he is aware that the jeep may run without the ignition key, he also has the
responsibility to park it safely and securely and to instruct his driver Rodrigo to observe the same
precaution. Lastly, there was no showing that the death of the victims was due to any voluntary
action or contribution on their part.
The aforementioned requisites having been met, there now arises a presumption of negligence
against Oscar Jr. which he could have overcome by evidence that he exercised due care and
diligence in preventing strangers from using his jeep. Unfortunately, he failed to do so.

What this Court instead finds worthy of credence is the CAs conclusion that Oscar Jr. gave his
implied permission for Allan to use the jeep. This is in view of Oscar Jr.s failure to provide solid proof
that he ensured that the parking area is well secured and that he had expressly imposed restrictions
as to the use of the jeep when he entrusted the same to his driver Rodrigo. As fittingly inferred by the
CA, the jeep could have been endorsed to Allan by his brother Rodrigo since as already mentioned,
Oscar Jr. did not give Rodrigo any specific and strict instructions on matters regarding its use.
Rodrigo therefore is deemed to have been given the absolute discretion as to the vehicles
operation, including the discretion to allow his brother Allan to use it.

The operator on record of a vehicle is primarily responsible to third persons for the deaths or injuries
consequent to its operation, regardless of whether the employee drove the registered owners
vehicle in connection with his employment.

Without disputing the factual finding of the CA that Allan was still his

employee at the time of the accident, a finding which we see no reason to disturb, Oscar Jr.
contends that Allan drove the jeep in his private capacity and thus, an employers vicarious liability
for the employees fault under Article 2180 of the Civil Code cannot apply to him.

The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank,45 the car of therein
respondent bank caused the death of Conrado Aguilar, Jr. while being driven by its assistant vice
president. Despite Article 2180, we still held the bank liable for damages for the accident as said
provision should defer to the settled doctrine concerning accidents involving registered motor
vehicles, i.e., that the registered owner of any vehicle, even if not used for public service, would
primarily be responsible to the public or to third persons for injuries caused the latter while the
vehicle was being driven on the highways or streets.46 We have already ratiocinated that:

The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or
that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can
be fixed on a definite individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant means of identification. It is to
forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons responsible for
damages or injuries caused on public highways. 47

Absent the circumstance of unauthorized use48 or that the subject vehicle was stolen49 which are
valid defenses available to a registered owner, Oscar Jr. cannot escape liability for quasi-delict
resulting from his jeeps use.1wphi1

All told and considering that the amounts of damages awarded are in accordance with prevailing
jurisprudence, the Court concurs with the findings of the CA and sustains the awards made. In
addition, pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,50 an interest of six percent
(6%) per annum on the amounts awarded shall be imposed, computed from the time the judgment of
the RTC is rendered on April 17, 2000 and twelve percent (12%) per annum on such amount upon
finality of this Decision until the payment thereof.

WHEREFORE, premises considered, the instant petition is DENIED. The Decision dated July 11,
2006 of the Court of Appeals in CA-G.R. CV No. 67764 is hereby AFFIRMED with further
MODIFICATION that an interest of six percent (6%) per annum on the amounts awarded shall be
imposed, computed from the time the judgment of the Regional Trial Court, Branch 23, Molave,
Zamboanga del Sur is rendered on April 17, 2000 and twelve percent (12%) per annum on such
amount upon finality of this Decision until the payment thereof.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 126297 January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.

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

G.R. No. 126467 January 31, 2007

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE
AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.

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

G.R. No. 127590 January 31, 2007

MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Hospitals, having undertaken one of mankinds most important and delicate endeavors, must
assume the grave responsibility of pursuing it with appropriate care. The care and service dispensed
through this high trust, however technical, complex and esoteric its character may be, must meet
standards of responsibility commensurate with the undertaking to preserve and protect the health,
and indeed, the very lives of those placed in the hospitals keeping.1

Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals
Decision2 dated September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming
with modification the Decision3 dated March 17, 1993 of the Regional Trial Court (RTC), Branch 96,
Quezon City in Civil Case No. Q-43322 and nullifying its Order dated September 21, 1993.

The facts, as culled from the records, are:

On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City
Hospital) because of difficulty of bowel movement and bloody anal discharge. After a series of
medical examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering
from "cancer of the sigmoid."

On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the Medical City Hospital, performed an
anterior resection surgery on Natividad. He found that the malignancy in her sigmoid area had
spread on her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained
the consent of Natividads husband, Enrique Agana, to permit Dr. Juan Fuentes, respondent in G.R.
No. 126467, to perform hysterectomy on her.

After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and
closed the incision.

However, the operation appeared to be flawed. In the corresponding Record of Operation dated April
11, 1984, the attending nurses entered these remarks:

"sponge count lacking 2

"announced to surgeon searched (sic) done but to no avail continue for closure."

On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills, including
the doctors fees, amounted to P60,000.00.

After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted
both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of
the surgery. Dr. Ampil then recommended that she consult an oncologist to examine the cancerous
nodes which were not removed during the operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further
treatment. After four months of consultations and laboratory examinations, Natividad was told she
was free of cancer. Hence, she was advised to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks
thereafter, her daughter found a piece of gauze protruding from her vagina. Upon being informed
about it, Dr. Ampil proceeded to her house where he managed to extract by hand a piece of gauze
measuring 1.5 inches in width. He then assured her that the pains would soon vanish.

Dr. Ampils assurance did not come true. Instead, the pains intensified, prompting Natividad to seek
treatment at the Polymedic General Hospital. While confined there, Dr. Ramon Gutierrez detected
the presence of another foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in
width which badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive
organs which forced stool to excrete through the vagina. Another surgical operation was needed to
remedy the damage. Thus, in October 1984, Natividad underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City a
complaint for damages against the Professional Services, Inc. (PSI), owner of the Medical City
Hospital, Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q-43322. They alleged that the
latter are liable for negligence for leaving two pieces of gauze inside Natividads body and
malpractice for concealing their acts of negligence.

Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an
administrative complaint for gross negligence and malpractice against Dr. Ampil and Dr. Fuentes,
docketed as Administrative Case No. 1690. The PRC Board of Medicine heard the case only with
respect to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who was then in the
United States.

On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly
substituted by her above-named children (the Aganas).

On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and
Dr. Fuentes liable for negligence and malpractice, the decretal part of which reads:

WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendants
PROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL and DR. JUAN FUENTES to pay to the
plaintiffs, jointly and severally, except in respect of the award for exemplary damages and the
interest thereon which are the liabilities of defendants Dr. Ampil and Dr. Fuentes only, as follows:

1. As actual damages, the following amounts:

a. The equivalent in Philippine Currency of the total of US$19,900.00 at the rate of

P21.60-US$1.00, as reimbursement of actual expenses incurred in the United States
of America;

b. The sum of P4,800.00 as travel taxes of plaintiffs and their physician daughter;

c. The total sum of P45,802.50, representing the cost of hospitalization at Polymedic

Hospital, medical fees, and cost of the saline solution;

2. As moral damages, the sum of P2,000,000.00;

3. As exemplary damages, the sum of P300,000.00;

4. As attorneys fees, the sum of P250,000.00;

5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of the
complaint until full payment; and

6. Costs of suit.

SO ORDERED.
Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals, docketed
as CA-G.R. CV No. 42062.

Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of its
Decision, which was granted in an Order dated May 11, 1993. Thereafter, the sheriff levied upon
certain properties of Dr. Ampil and sold them for P451,275.00 and delivered the amount to the
Aganas.

Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr.
Fuentes to indefinitely suspend any further execution of the RTC Decision. However, not long
thereafter, the Aganas again filed a motion for an alias writ of execution against the properties of PSI
and Dr. Fuentes. On September 21, 1993, the RTC granted the motion and issued the
corresponding writ, prompting Dr. Fuentes to file with the Court of Appeals a petition for certiorari
and prohibition, with prayer for preliminary injunction, docketed as CA-G.R. SP No. 32198. During its
pendency, the Court of Appeals issued a Resolution5 dated October 29, 1993 granting Dr. Fuentes
prayer for injunctive relief.

On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.

Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision 6 in
Administrative Case No. 1690 dismissing the case against Dr. Fuentes. The Board held that the
prosecution failed to show that Dr. Fuentes was the one who left the two pieces of gauze inside
Natividads body; and that he concealed such fact from Natividad.

On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R. CV
No. 42062 and CA-G.R. SP No. 32198, thus:

WHEREFORE, except for the modification that the case against defendant-appellant Dr. Juan
Fuentes is hereby DISMISSED, and with the pronouncement that defendant-appellant Dr. Miguel
Ampil is liable to reimburse defendant-appellant Professional Services, Inc., whatever amount the
latter will pay or had paid to the plaintiffs-appellees, the decision appealed from is hereby
AFFIRMED and the instant appeal DISMISSED.

Concomitant with the above, the petition for certiorari and prohibition filed by herein defendant-
appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is hereby GRANTED and the challenged order
of the respondent judge dated September 21, 1993, as well as the alias writ of execution issued
pursuant thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the petitioner in
connection with the writ of preliminary injunction issued by this Court on November 29, 1993 is
hereby cancelled.

Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.

SO ORDERED.

Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution 7 dated December
19, 1996.

Hence, the instant consolidated petitions.

In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred in holding that: (1) it is
estopped from raising the defense that Dr. Ampil is not its employee; (2) it is solidarily liable with Dr.
Ampil; and (3) it is not entitled to its counterclaim against the Aganas. PSI contends that Dr. Ampil is
not its employee, but a mere consultant or independent contractor. As such, he alone should answer
for his negligence.

In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in finding that Dr. Fuentes
is not guilty of negligence or medical malpractice, invoking the doctrine of res ipsa loquitur. They
contend that the pieces of gauze are prima facie proofs that the operating surgeons have been
negligent.

Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him liable for
negligence and malpractice sans evidence that he left the two pieces of gauze in Natividads vagina.
He pointed to other probable causes, such as: (1) it was Dr. Fuentes who used gauzes in performing
the hysterectomy; (2) the attending nurses failure to properly count the gauzes used during surgery;
and (3) the medical intervention of the American doctors who examined Natividad in the United
States of America.

For our resolution are these three vital issues: first, whether the Court of Appeals erred in holding Dr.
Ampil liable for negligence and malpractice; second, whether the Court of Appeals erred in absolving
Dr. Fuentes of any liability; and third, whether PSI may be held solidarily liable for the negligence of
Dr. Ampil.

I - G.R. No. 127590

Whether the Court of Appeals Erred in Holding Dr. Ampil

Liable for Negligence and Malpractice.

Dr. Ampil, in an attempt to absolve himself, gears the Courts attention to other possible causes of
Natividads detriment. He argues that the Court should not discount either of the following
possibilities: first, Dr. Fuentes left the gauzes in Natividads body after performing hysterectomy;
second, the attending nurses erred in counting the gauzes; and third, the American doctors were the
ones who placed the gauzes in Natividads body.

Dr. Ampils arguments are purely conjectural and without basis. Records show that he did not
present any evidence to prove that the American doctors were the ones who put or left the gauzes in
Natividads body. Neither did he submit evidence to rebut the correctness of the record of operation,
particularly the number of gauzes used. As to the alleged negligence of Dr. Fuentes, we are mindful
that Dr. Ampil examined his (Dr. Fuentes) work and found it in order.

The glaring truth is that all the major circumstances, taken together, as specified by the Court of
Appeals, directly point to Dr. Ampil as the negligent party, thus:

First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding of
the patient during the surgical operation.

Second, immediately after the operation, the nurses who assisted in the surgery noted in
their report that the sponge count (was) lacking 2; that such anomaly was announced to
surgeon and that a search was done but to no avail prompting Dr. Ampil to continue for
closure x x x.
 Third, after the operation, two (2) gauzes were extracted from the same spot of the body of
Mrs. Agana where the surgery was performed.

An operation requiring the placing of sponges in the incision is not complete until the sponges are
properly removed, and it is settled that the leaving of sponges or other foreign substances in the
wound after the incision has been closed is at least prima facie negligence by the operating
surgeon.8 To put it simply, such act is considered so inconsistent with due care as to raise an
inference of negligence. There are even legions of authorities to the effect that such act is
negligence per se.9

Of course, the Court is not blind to the reality that there are times when danger to a patients life
precludes a surgeon from further searching missing sponges or foreign objects left in the body. But
this does not leave him free from any obligation. Even if it has been shown that a surgeon was
required by the urgent necessities of the case to leave a sponge in his patients abdomen, because
of the dangers attendant upon delay, still, it is his legal duty to so inform his patient within a
reasonable time thereafter by advising her of what he had been compelled to do. This is in order that
she might seek relief from the effects of the foreign object left in her body as her condition might
permit. The ruling in Smith v. Zeagler10 is explicit, thus:

The removal of all sponges used is part of a surgical operation, and when a physician or surgeon
fails to remove a sponge he has placed in his patients body that should be removed as part of the
operation, he thereby leaves his operation uncompleted and creates a new condition which imposes
upon him the legal duty of calling the new condition to his patients attention, and endeavoring with
the means he has at hand to minimize and avoid untoward results likely to ensue therefrom.

Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even
misled her that the pain she was experiencing was the ordinary consequence of her operation. Had
he been more candid, Natividad could have taken the immediate and appropriate medical remedy to
remove the gauzes from her body. To our mind, what was initially an act of negligence by Dr. Ampil
has ripened into a deliberate wrongful act of deceiving his patient.

This is a clear case of medical malpractice or more appropriately, medical negligence. To

successfully pursue this kind of case, a patient must only prove that a health care provider either
failed to do something which a reasonably prudent health care provider would have done, or that he
did something that a reasonably prudent provider would not have done; and that failure or action
caused injury to the patient.11 Simply put, the elements are duty, breach, injury and proximate
causation. Dr, Ampil, as the lead surgeon, had the duty to remove all foreign objects, such as
gauzes, from Natividads body before closure 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 American doctors and another surgery. That Dr. Ampils
negligence is the proximate cause12 of Natividads injury could be traced from his act of closing the
incision despite the information given by the attending nurses that two pieces of gauze were still
missing. That they were later on extracted from Natividads vagina established the causal link
between Dr. Ampils negligence and the injury. And what further aggravated such injury was his
deliberate concealment of the missing gauzes from the knowledge of Natividad and her family.

II - G.R. No. 126467

Whether the Court of Appeals Erred in Absolving

Dr. Fuentes of any Liability

The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the ground
that it is contrary to the doctrine of res ipsa loquitur. According to them, the fact that the two pieces of
gauze were left inside Natividads body is a prima facie evidence of Dr. Fuentes negligence.

We are not convinced.

Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the
occurrence of an injury, taken with the surrounding circumstances, may permit an inference or raise
a presumption of negligence, or make out a plaintiffs prima facie case, and present a question of
fact for defendant to meet with an explanation.13 Stated differently, where the thing which caused the
injury, without the fault of the injured, is under the exclusive control of the defendant and the injury is
such that it should not have occurred if he, having such control used proper care, it affords
reasonable evidence, in the absence of explanation that the injury arose from the defendants want
of care, and the burden of proof is shifted to him to establish that he has observed due care and
diligence.14

From the foregoing statements of the rule, the requisites for the applicability of the doctrine of res
ipsa loquitur are: (1) the occurrence of an injury; (2) the thing which caused the injury was under the
control and management of the defendant; (3) the occurrence was such that in the ordinary course
of things, would not have happened if those who had control or management used proper care; and
(4) the absence of explanation by the defendant. Of the foregoing requisites, the most instrumental
is the "control and management of the thing which caused the injury." 15

We find the element of "control and management of the thing which caused the injury" to be wanting.
Hence, the doctrine of res ipsa loquitur will not lie.

It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad. He
requested the assistance of Dr. Fuentes only to perform hysterectomy when he (Dr. Ampil) found
that the malignancy in her sigmoid area had spread to her left ovary. Dr. Fuentes performed the
surgery and thereafter reported and showed his work to Dr. Ampil. The latter examined it and finding
everything to be in order, allowed Dr. Fuentes to leave the operating room. Dr. Ampil then resumed
operating on Natividad. He was about to finish the procedure when the attending nurses informed
him that two pieces of gauze were missing. A "diligent search" was conducted, but the misplaced
gauzes were not found. Dr. Ampil then directed that the incision be closed. During this entire period,
Dr. Fuentes was no longer in the operating room and had, in fact, left the hospital.

Under the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of the
surgery room and all personnel connected with the operation. Their duty is to obey his orders. 16 As
stated before, Dr. Ampil was the lead surgeon. In other words, he was the "Captain of the Ship." That
he discharged such role is evident from his following conduct: (1) calling Dr. Fuentes to perform a
hysterectomy; (2) examining the work of Dr. Fuentes and finding it in order; (3) granting Dr. Fuentes
permission to leave; and (4) ordering the closure of the incision. To our mind, it was this act of
ordering the closure of the incision notwithstanding that two pieces of gauze remained unaccounted
for, that caused injury to Natividads body. Clearly, the control and management of the thing which
caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.

In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se create or
constitute an independent or separate ground of liability, being a mere evidentiary rule. 17 In other
words, mere invocation and application of the doctrine does not dispense with the requirement of
proof of negligence. Here, the negligence was proven to have been committed by Dr. Ampil and not
by Dr. Fuentes.
III - G.R. No. 126297

Whether PSI Is Liable for the Negligence of Dr. Ampil

The third issue necessitates a glimpse at the historical development of hospitals and the resulting
theories concerning their liability for the negligence of physicians.

Until the mid-nineteenth century, hospitals were generally charitable institutions, providing medical
services to the lowest classes of society, without regard for a patients ability to pay.18 Those who
could afford medical treatment were usually treated at home by their doctors. 19 However, the days of
house calls and philanthropic health care are over. The modern health care industry continues to
distance itself from its charitable past and has experienced a significant conversion from a not-for-
profit health care to for-profit hospital businesses. Consequently, significant changes in health law
have accompanied the business-related changes in the hospital industry. One important legal
change is an increase in hospital liability for medical malpractice. Many courts now allow claims for
hospital vicarious liability under the theories of respondeat superior, apparent authority, ostensible
authority, or agency by estoppel. 20

In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil Code,
which reads:

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.

A derivative of this provision is Article 2180, the rule governing vicarious liability under the doctrine of
respondeat superior, thus:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or
omissions, but also for those of persons for whom one is responsible.

x x x x x x

The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks even though the former are not engaged in any business or
industry.

x x x x x x

The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage.

A prominent civilist commented that professionals engaged by an employer, such as physicians,

dentists, and pharmacists, are not "employees" under this article because the manner in which they
perform their work is not within the control of the latter (employer). In other words, professionals are
considered personally liable for the fault or negligence they commit in the discharge of their duties,
and their employer cannot be held liable for such fault or negligence. In the context of the present
case, "a hospital cannot be held liable for the fault or negligence of a physician or surgeon in the
treatment or operation of patients."21

The foregoing view is grounded on the traditional notion that the professional status and the very
nature of the physicians calling preclude him from being classed as an agent or employee of a
hospital, whenever he acts in a professional capacity.22 It has been said that medical practice strictly
involves highly developed and specialized knowledge,23 such that physicians are generally free to
exercise their own skill and judgment in rendering medical services sans interference. 24 Hence, when
a doctor practices medicine in a hospital setting, the hospital and its employees are deemed to
subserve him in his ministrations to the patient and his actions are of his own responsibility.25

The case of Schloendorff v. Society of New York Hospital26 was then considered an authority for this
view. The "Schloendorff doctrine" regards a physician, even if employed by a hospital, as an
independent contractor because of the skill he exercises and the lack of control exerted over his
work. Under this doctrine, hospitals are exempt from the application of the respondeat superior
principle for fault or negligence committed by physicians in the discharge of their profession.

However, the efficacy of the foregoing doctrine has weakened with the significant developments in
medical care. Courts came to realize that modern hospitals are increasingly taking active role in
supplying and regulating medical care to patients. No longer were a hospitals functions limited to
furnishing room, food, facilities for treatment and operation, and attendants for its patients. Thus, in
Bing v. Thunig,27 the New York Court of Appeals deviated from the Schloendorff doctrine, noting that
modern hospitals actually do far more than provide facilities for treatment. Rather, they regularly
employ, on a salaried basis, a large staff of physicians, interns, nurses, administrative and manual
workers. They charge patients for medical care and treatment, even collecting for such services
through legal action, if necessary. The court then concluded that there is no reason to exempt
hospitals from the universal rule of respondeat superior.

In our shores, the nature of the relationship between the hospital and the physicians is rendered
inconsequential in view of our categorical pronouncement in Ramos v. Court of Appeals 28 that for
purposes of apportioning responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their attending and visiting physicians. This Court
held:

"We now discuss the responsibility of the hospital in this particular incident. The unique practice
(among private hospitals) of filling up specialist staff with attending and visiting "consultants," who
are allegedly not hospital employees, presents problems in apportioning responsibility for negligence
in medical malpractice cases. However, the difficulty is more apparent than real.

In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the
conduct of their work within the hospital premises. Doctors who apply for consultant slots, visiting or
attending, are required to submit proof of completion of residency, their educational qualifications,
generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in
most cases, and references. These requirements are carefully scrutinized by members of the
hospital administration or by a review committee set up by the hospital who either accept or reject
the application. x x x.

After a physician is accepted, either as a visiting or attending consultant, he is normally required to

attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks and responsibilities, for the
privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients
into the hospital. In addition to these, the physicians performance as a specialist is generally
evaluated by a peer review committee on the basis of mortality and morbidity statistics, and
feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or a
consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer
review committee, is normally politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and visiting
consultant staff. While consultants are not, technically employees, x x x, the control exercised, the
hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-
employee relationship, with the exception of the payment of wages. In assessing whether such a
relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing,
we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-
employee relationship in effect exists between hospitals and their attending and visiting physicians. "

But the Ramos pronouncement is not our only basis in sustaining PSIs liability. Its liability is also
anchored upon the agency principle of apparent authority or agency by estoppel and the doctrine of
corporate negligence which have gained acceptance in the determination of a hospitals liability for
negligent acts of health professionals. The present case serves as a perfect platform to test the
applicability of these doctrines, thus, enriching our jurisprudence.

Apparent authority, or what is sometimes referred to as the "holding

out" theory, or doctrine of ostensible agency or agency by estoppel,29 has its origin from the law of
agency. It imposes liability, not as the result of the reality of a contractual relationship, but rather
because of the actions of a principal or an employer in somehow misleading the public into believing
that the relationship or the authority exists.30 The concept is essentially one of estoppel and has been
explained in this manner:

"The principal is bound by the acts of his agent with the apparent authority which he knowingly
permits the agent to assume, or which he holds the agent out to the public as possessing. The
question in every case is whether the principal has by his voluntary act placed the agent in such a
situation that a person of ordinary prudence, conversant with business usages and the nature of the
particular business, is justified in presuming that such agent has authority to perform the particular
act in question.31

The applicability of apparent authority in the field of hospital liability was upheld long time ago in
Irving v. Doctor Hospital of Lake Worth, Inc.32 There, it was explicitly stated that "there does not
appear to be any rational basis for excluding the concept of apparent authority from the field of
hospital liability." Thus, in cases where it can be shown that a hospital, by its actions, has held out a
particular physician as its agent and/or employee and that a patient has accepted treatment from
that physician in the reasonable belief that it is being rendered in behalf of the hospital, then the
hospital will be liable for the physicians negligence.

Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of the
Civil Code reads:

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

In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and
specializations of the physicians associated or accredited by it, including those of Dr. Ampil and Dr.
Fuentes. We 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, PSIs act is tantamount to
holding out to the public that Medical City Hospital, through its accredited physicians, offers quality
health care services. By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their
qualifications, the hospital created the impression that they were its agents, authorized to perform
medical or surgical services for its patients. As expected, these patients, Natividad being one of
them, accepted the services on the reasonable belief that such were being rendered by the hospital
or its employees, agents, or servants. The trial court correctly pointed out:

x x x regardless of the education and status in life of the patient, he ought not be burdened with the
defense of absence of employer-employee relationship between the hospital and the independent
physician whose name and competence are certainly certified to the general public by the hospitals
act of listing him and his specialty in its lobby directory, as in the case herein. The high costs of
todays medical and health care should at least exact on the hospital greater, if not broader, legal
responsibility for the conduct of treatment and surgery within its facility by its accredited physician or
surgeon, regardless of whether he is independent or employed."33

The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are capable
of acting only through other individuals, such as physicians. If these accredited physicians do their
job well, the hospital succeeds in its mission of offering quality medical services and thus profits
financially. Logically, where negligence mars the quality of its services, the hospital should not be
allowed to escape liability for the acts of its ostensible agents.

We now proceed to the doctrine of corporate negligence or corporate responsibility.

One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that PSI
as owner, operator and manager of Medical City Hospital, "did not perform the necessary
supervision nor exercise diligent efforts in the supervision of Drs. Ampil and Fuentes and its nursing
staff, resident doctors, and medical interns who assisted Drs. Ampil and Fuentes in the performance
of their duties as surgeons."34 Premised on the doctrine of corporate negligence, the trial court held
that PSI is directly liable for such breach of duty.

We agree with the trial court.

Recent years have seen the doctrine of corporate negligence as the judicial answer to the problem
of allocating hospitals liability for the negligent acts of health practitioners, absent facts to support
the application of respondeat superior or apparent authority. Its formulation proceeds from the
judiciarys acknowledgment that in these modern times, the duty of providing quality medical service
is no longer the sole prerogative and responsibility of the physician. The modern hospitals have
changed structure. Hospitals now tend to organize a highly professional medical staff whose
competence and performance need to be monitored by the hospitals commensurate with their
inherent responsibility to provide quality medical care.35

The doctrine has its genesis in Darling v. Charleston Community Hospital.36 There, the Supreme
Court of Illinois held that "the jury could have found a hospital negligent, inter alia, in failing to have a
sufficient number of trained nurses attending the patient; failing to require a consultation with or
examination by members of the hospital staff; and failing to review the treatment rendered to the
patient." On the basis of Darling, other jurisdictions held that a hospitals corporate negligence
extends to permitting a physician known to be incompetent to practice at the hospital. 37 With the
passage of time, more duties were expected from hospitals, among them: (1) the use of reasonable
care in the maintenance of safe and adequate facilities and equipment; (2) the selection and
retention of competent physicians; (3) the overseeing or supervision of all persons who practice
medicine within its walls; and (4) the formulation, adoption and enforcement of adequate rules and
policies that ensure quality care for its patients.38 Thus, in Tucson Medical Center, Inc. v. Misevich,39 it
was held that a hospital, following the doctrine of corporate responsibility, has the duty to see that it
meets the standards of responsibilities for the care of patients. Such duty includes the proper
supervision of the members of its medical staff. And in Bost v. Riley,40 the court concluded that a
patient who enters a hospital does so with the reasonable expectation that it will attempt to cure him.
The hospital accordingly has the duty to make a reasonable effort to monitor and oversee the
treatment prescribed and administered by the physicians practicing in its premises.

In the present case, it was duly established that PSI operates the Medical City Hospital for the
purpose and under the concept of providing comprehensive medical services to the public.
Accordingly, it has the duty to exercise reasonable care to protect from harm all patients admitted
into its facility for medical treatment. Unfortunately, PSI failed to perform such duty. The findings of
the trial court are convincing, thus:

x x x PSIs liability is traceable to its failure to conduct an investigation of the matter reported in the
nota bene of the count nurse. Such failure established PSIs part in the dark conspiracy of silence
and concealment about the gauzes. Ethical considerations, if not also legal, dictated the holding of
an immediate inquiry into the events, if not for the benefit of the patient to whom the duty is primarily
owed, then in the interest of arriving at the truth. The Court cannot accept that the medical and the
healing professions, through their members like defendant surgeons, and their institutions like PSIs
hospital facility, can callously turn their backs on and disregard even a mere probability of mistake or
negligence by refusing or failing to investigate a report of such seriousness as the one in Natividads
case.

It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of the
Medical City Hospitals staff, composed of resident doctors, nurses, and interns. As such, it is
reasonable to conclude that PSI, as the operator of the hospital, has actual or constructive
knowledge of the procedures carried out, particularly the report of the attending nurses that the two
pieces of gauze were missing. In Fridena v. Evans,41 it was held that a corporation is bound by the
knowledge acquired by or notice given to its agents or officers within the scope of their authority and
in reference to a matter to which their authority extends. This means that the knowledge of any of
the staff of Medical City Hospital constitutes knowledge of PSI. Now, the failure of PSI, despite the
attending nurses report, to investigate and inform Natividad regarding the missing gauzes amounts
to callous negligence. Not only did PSI breach its duties to oversee or supervise all persons who
practice medicine within its walls, it also failed to take an active step in fixing the negligence
committed. This renders PSI, not only vicariously liable for the negligence of Dr. Ampil under Article
2180 of the Civil Code, but also directly liable for its own negligence under Article 2176. In Fridena,
the Supreme Court of Arizona held:

x x x In recent years, however, the duty of care owed to the patient by the hospital has expanded.
The emerging trend is to hold the hospital responsible where the hospital has failed to monitor and
review medical services being provided within its walls. See Kahn Hospital Malpractice Prevention,
27 De Paul . Rev. 23 (1977).

Among the cases indicative of the emerging trend is Purcell v. Zimbelman, 18 Ariz. App. 75,500 P.
2d 335 (1972). In Purcell, the hospital argued that it could not be held liable for the malpractice of a
medical practitioner because he was an independent contractor within the hospital. The Court of
Appeals pointed out that the hospital had created a professional staff whose competence and
performance was to be monitored and reviewed by the governing body of the hospital, and the court
held that a hospital would be negligent where it had knowledge or reason to believe that a doctor
using the facilities was employing a method of treatment or care which fell below the recognized
standard of care.

Subsequent to the Purcell decision, the Arizona Court of Appeals held that a hospital has certain
inherent responsibilities regarding the quality of medical care furnished to patients within its walls
and it must meet the standards of responsibility commensurate with this undertaking. Beeck v.
Tucson General Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court has confirmed the
rulings of the Court of Appeals that a hospital has the duty of supervising the competence of the
doctors on its staff. x x x.

x x x x x x

In the amended complaint, the plaintiffs did plead that the operation was performed at the hospital
with its knowledge, aid, and assistance, and that the negligence of the defendants was the
proximate cause of the patients injuries. We find that such general allegations of negligence, along
with the evidence produced at the trial of this case, are sufficient to support the hospitals liability
based on the theory of negligent supervision."

Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be
emphasized that PSI, apart from a general denial of its responsibility, failed to adduce evidence
showing that it exercised the diligence of a good father of a family in the accreditation and
supervision of the latter. In neglecting to offer such proof, PSI failed to discharge its burden under
the last paragraph of Article 2180 cited earlier, and, therefore, must be adjudged solidarily liable with
Dr. Ampil. Moreover, as we have discussed, PSI is also directly liable to the Aganas.

One final word. Once a physician undertakes the treatment and care of a patient, the law imposes
on him certain obligations. In order to escape liability, he must possess that reasonable degree of
learning, skill and experience required by his profession. At the same time, he must apply
reasonable care and diligence in the exercise of his skill and the application of his knowledge, and
exert his best judgment.

WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of
Appeals in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.

Costs against petitioners PSI and Dr. Miguel Ampil.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 194320 February 1, 2012

MALAYAN INSURANCE CO., INC., Petitioner,

vs.
RODELIO ALBERTO and ENRICO ALBERTO REYES, Respondents.
 DECISION

VELASCO, JR., J.:

The Case

Before Us is a Petition for Review on Certiorari under Rule 45, seeking to reverse and set aside the
July 28, 2010 Decision1 of the Court of Appeals (CA) and its October 29, 2010 Resolution2 denying
the motion for reconsideration filed by petitioner Malayan Insurance Co., Inc. (Malayan Insurance).
The July 28, 2010 CA Decision reversed and set aside the Decision3 dated February 2, 2009 of the
Regional Trial Court, Branch 51 in Manila.

The Facts

At around 5 oclock in the morning of December 17, 1995, an accident occurred at the corner of
EDSA and Ayala Avenue, Makati City, involving four (4) vehicles, to wit: (1) a Nissan Bus operated
by Aladdin Transit with plate number NYS 381; (2) an Isuzu Tanker with plate number PLR 684; (3) a
Fuzo Cargo Truck with plate number PDL 297; and (4) a Mitsubishi Galant with plate number TLM
732.4

Based on the Police Report issued by the on-the-spot investigator, Senior Police Officer 1 Alfredo M.
Dungga (SPO1 Dungga), the Isuzu Tanker was in front of the Mitsubishi Galant with the Nissan Bus
on their right side shortly before the vehicular incident. All three (3) vehicles were at a halt along
EDSA facing the south direction when the Fuzo Cargo Truck simultaneously bumped the rear portion
of the Mitsubishi Galant and the rear left portion of the Nissan Bus. Due to the strong impact, these
two vehicles were shoved forward and the front left portion of the Mitsubishi Galant rammed into the
rear right portion of the Isuzu Tanker.5

Previously, particularly on December 15, 1994, Malayan Insurance issued Car Insurance Policy No.
PV-025-00220 in favor of First Malayan Leasing and Finance Corporation (the assured), insuring the
aforementioned Mitsubishi Galant against third party liability, own damage and theft, among others.
Having insured the vehicle against such risks, Malayan Insurance claimed in its Complaint dated
October 18, 1999 that it paid the damages sustained by the assured amounting to PhP 700,000. 6

Maintaining that it has been subrogated to the rights and interests of the assured by operation of law
upon its payment to the latter, Malayan Insurance sent several demand letters to respondents
Rodelio Alberto (Alberto) and Enrico Alberto Reyes (Reyes), the registered owner and the driver,
respectively, of the Fuzo Cargo Truck, requiring them to pay the amount it had paid to the assured.
When respondents refused to settle their liability, Malayan Insurance was constrained to file a
complaint for damages for gross negligence against respondents.7

In their Answer, respondents asserted that they cannot be held liable for the vehicular accident,
since its proximate cause was the reckless driving of the Nissan Bus driver. They alleged that the
speeding bus, coming from the service road of EDSA, maneuvered its way towards the middle lane
without due regard to Reyes right of way. When the Nissan Bus abruptly stopped, Reyes stepped
hard on the brakes but the braking action could not cope with the inertia and failed to gain sufficient
traction. As a consequence, the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant, which, in
turn, hit the rear end of the vehicle in front of it. The Nissan Bus, on the other hand, sideswiped the
Fuzo Cargo Truck, causing damage to the latter in the amount of PhP 20,000. Respondents also
controverted the results of the Police Report, asserting that it was based solely on the biased
narration of the Nissan Bus driver.8

After the termination of the pre-trial proceedings, trial ensued. Malayan Insurance presented the
testimony of its lone witness, a motor car claim adjuster, who attested that he processed the
insurance claim of the assured and verified the documents submitted to him. Respondents, on the
other hand, failed to present any evidence.

In its Decision dated February 2, 2009, the trial court, in Civil Case No. 99-95885, ruled in favor of
Malayan Insurance and declared respondents liable for damages. The dispositive portion reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff against defendants jointly and
severally to pay plaintiff the following:

1. The amount of P700,000.00 with legal interest from the time of the filing of the complaint;

2. Attorneys fees of P10,000.00 and;

3. Cost of suit.

SO ORDERED.9

Dissatisfied, respondents filed an appeal with the CA, docketed as CA-G.R. CV No. 93112. In its
Decision dated July 28, 2010, the CA reversed and set aside the Decision of the trial court and ruled
in favor of respondents, disposing:

WHEREFORE, the foregoing considered, the instant appeal is hereby GRANTED and the assailed
Decision dated 2 February 2009 REVERSED and SET ASIDE. The Complaint dated 18 October
1999 is hereby DISMISSED for lack of merit. No costs.

SO ORDERED.10

The CA held that the evidence on record has failed to establish not only negligence on the part of
respondents, but also compliance with the other requisites and the consequent right of Malayan
Insurance to subrogation.11 It noted that the police report, which has been made part of the records
of the trial court, was not properly identified by the police officer who conducted the on-the-spot
investigation of the subject collision. It, thus, held that an appellate court, as a reviewing body,
cannot rightly appreciate firsthand the genuineness of an unverified and unidentified document,
much less accord it evidentiary value.12

Subsequently, Malayan Insurance filed its Motion for Reconsideration, arguing that a police report is
a prima facie evidence of the facts stated in it. And inasmuch as they never questioned the
presentation of the report in evidence, respondents are deemed to have waived their right to
question its authenticity and due execution.13

In its Resolution dated October 29, 2010, the CA denied the motion for reconsideration. Hence,
Malayan Insurance filed the instant petition.

The Issues
In its Memorandum14 dated June 27, 2011, Malayan Insurance raises the following issues for Our
consideration:

WHETHER THE CA ERRED IN REFUSING ADMISSIBILITY OF THE POLICE REPORT

SINCE THE POLICE INVESTIGATOR WHO PREPARED THE SAME DID NOT ACTUALLY
TESTIFY IN COURT THEREON.

II

WHETHER THE SUBROGATION OF MALAYAN INSURANCE IS IMPAIRED AND/OR

DEFICIENT.

On the other hand, respondents submit the following issues in its Memorandum15 dated July 7, 2011:

WHETHER THE CA IS CORRECT IN DISMISSING THE COMPLAINT FOR FAILURE OF

MALAYAN INSURANCE TO OVERCOME THE BURDEN OF PROOF REQUIRED TO
ESTABLISH THE NEGLIGENCE OF RESPONDENTS.

II

WHETHER THE PIECES OF EVIDENCE PRESENTED BY MALAYAN INSURANCE ARE

SUFFICIENT TO CLAIM FOR THE AMOUNT OF DAMAGES.

III

WHETHER THE SUBROGATION OF MALAYAN INSURANCE HAS PASSED COMPLIANCE

AND REQUISITES AS PROVIDED UNDER PERTINENT LAWS.

Essentially, the issues boil down to the following: (1) the admissibility of the police report; (2) the
sufficiency of the evidence to support a claim for gross negligence; and (3) the validity of subrogation
in the instant case.

Our Ruling

The petition has merit.

Admissibility of the Police Report

Malayan Insurance contends that, even without the presentation of the police investigator who
prepared the police report, said report is still admissible in evidence, especially since respondents
failed to make a timely objection to its presentation in evidence. 16 Respondents counter that since
the police report was never confirmed by the investigating police officer, it cannot be considered as
part of the evidence on record.17
Indeed, under the rules of evidence, a witness can testify only to those facts which the witness
knows of his or her personal knowledge, that is, which are derived from the witness own
perception.18 Concomitantly, a witness may not testify on matters which he or she merely learned
from others either because said witness was told or read or heard those matters. 19 Such testimony is
considered hearsay and may not be received as proof of the truth of what the witness has learned.
This is known as the hearsay rule.20

As discussed in D.M. Consunji, Inc. v. CA,21 "Hearsay is not limited to oral testimony or statements;
the general rule that excludes hearsay as evidence applies to written, as well as oral statements."

There are several exceptions to the hearsay rule under the Rules of Court, among which are entries
in official records.22 Section 44, Rule 130 provides:

Entries in official records made in the performance of his duty by a public officer of the Philippines, or
by a person in the performance of a duty specially enjoined by law are prima facie evidence of the
facts therein stated.

In Alvarez v. PICOP Resources,23 this Court reiterated the requisites for the admissibility in evidence,
as an exception to the hearsay rule of entries in official records, thus: (a) that the entry was made by
a public officer or by another person specially enjoined by law to do so; (b) that it was made by the
public officer in the performance of his or her duties, or by such other person in the performance of a
duty specially enjoined by law; and (c) that the public officer or other person had sufficient
knowledge of the facts by him or her stated, which must have been acquired by the public officer or
other person personally or through official information.

Notably, the presentation of the police report itself is admissible as an exception to the hearsay rule
even if the police investigator who prepared it was not presented in court, as long as the above
requisites could be adequately proved.24

Here, there is no dispute that SPO1 Dungga, the on-the-spot investigator, prepared the report, and
he did so in the performance of his duty. However, what is not clear is whether SPO1 Dungga had
sufficient personal knowledge of the facts contained in his report. Thus, the third requisite is lacking.

Respondents failed to make a timely objection to the police reports presentation in evidence; thus,
they are deemed to have waived their right to do so. 25 As a result, the police report is still admissible
in evidence.

Sufficiency of Evidence

Malayan Insurance contends that since Reyes, the driver of the Fuzo Cargo truck, bumped the rear
of the Mitsubishi Galant, he is presumed to be negligent unless proved otherwise. It further contends
that respondents failed to present any evidence to overturn the presumption of
negligence.26 Contrarily, respondents claim that since Malayan Insurance did not present any witness
who shall affirm any negligent act of Reyes in driving the Fuzo Cargo truck before and after the
incident, there is no evidence which would show negligence on the part of respondents. 27

We agree with Malayan Insurance. Even if We consider the inadmissibility of the police report in
evidence, still, respondents cannot evade liability by virtue of the res ipsa loquitur doctrine. The D.M.
Consunji, Inc. case is quite elucidating:
Petitioners contention, however, loses relevance in the face of the application of res ipsa loquitur by
the CA. The effect of the doctrine is to warrant a presumption or inference that the mere fall of the
elevator was a result of the person having charge of the instrumentality was negligent. As a rule of
evidence, the doctrine of res ipsa loquitur is peculiar to the law of negligence which recognizes that
prima facie negligence may be established without direct proof and furnishes a substitute for specific
proof of negligence.

The concept of res ipsa loquitur has been explained in this wise:

While negligence is not ordinarily inferred or presumed, and while the mere happening of an
accident or injury will not generally give rise to an inference or presumption that it was due to
negligence on defendants part, under the doctrine of res ipsa loquitur, which means, literally, the
thing or transaction speaks for itself, or in one jurisdiction, that the thing or instrumentality speaks for
itself, the facts or circumstances accompanying an injury may be such as to raise a presumption, or
at least permit an inference of negligence on the part of the defendant, or some other person who is
charged with negligence.

x x x where it is shown that the thing or instrumentality which caused the injury complained of was
under the control or management of the defendant, and that the occurrence resulting in the injury
was such as in the ordinary course of things would not happen if those who had its control or
management used proper care, there is sufficient evidence, or, as sometimes stated, reasonable
evidence, in the absence of explanation by the defendant, that the injury arose from or was caused
by the defendants want of care.

One of the theoretical bases for the doctrine is its necessity, i.e., that necessary evidence is absent
or not available.

The res ipsa loquitur doctrine is based in part upon the theory that the defendant in charge of the
instrumentality which causes the injury either knows the cause of the accident or has the best
opportunity of ascertaining it and that the plaintiff has no such knowledge, and therefore is
compelled to allege negligence in general terms and to rely upon the proof of the happening of the
accident in order to establish negligence. The inference which the doctrine permits is grounded upon
the fact that the chief evidence of the true cause, whether culpable or innocent, is practically
accessible to the defendant but inaccessible to the injured person.

It has been said that the doctrine of res ipsa loquitur furnishes a bridge by which a plaintiff, without
knowledge of the cause, reaches over to defendant who knows or should know the cause, for any
explanation of care exercised by the defendant in respect of the matter of which the plaintiff
complains. The res ipsa loquitur doctrine, another court has said, is a rule of necessity, in that it
proceeds on the theory that under the peculiar circumstances in which the doctrine is applicable, it is
within the power of the defendant to show that there was no negligence on his part, and direct proof
of defendants negligence is beyond plaintiffs power. Accordingly, some courts add to the three
prerequisites for the application of the res ipsa loquitur doctrine the further requirement that for the
res ipsa loquitur doctrine to apply, it must appear that the injured party had no knowledge or means
of knowledge as to the cause of the accident, or that the party to be charged with negligence has
superior knowledge or opportunity for explanation of the accident.

The CA held that all the requisites of res ipsa loquitur are present in the case at bar:
There is no dispute that appellees husband fell down from the 14th floor of a building to the
basement while he was working with appellants construction project, resulting to his death. The
construction site is within the exclusive control and management of appellant. It has a safety
engineer, a project superintendent, a carpenter leadman and others who are in complete control of
the situation therein. The circumstances of any accident that would occur therein are peculiarly
within the knowledge of the appellant or its employees. On the other hand, the appellee is not in a
position to know what caused the accident. Res ipsa loquitur is a rule of necessity and it applies
where evidence is absent or not readily available, provided the following requisites are present: (1)
the accident 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
charged with negligence; and (3) the injury suffered must not have been due to any voluntary action
or contribution on the part of the person injured. x x x.

No worker is going to fall from the 14th floor of a building to the basement while performing work in a
construction site unless someone is negligent[;] thus, the first requisite for the application of the rule
of res ipsa loquitur is present. As explained earlier, the construction site with all its paraphernalia and
human resources that likely caused the injury is under the exclusive control and management of
appellant[;] thus[,] the second requisite is also present. No contributory negligence was attributed to
the appellees deceased husband[;] thus[,] the last requisite is also present. All the requisites for the
application of the rule of res ipsa loquitur are present, thus a reasonable presumption or inference of
appellants negligence arises. x x x.

Petitioner does not dispute the existence of the requisites for the application of res ipsa loquitur, but
argues that the presumption or inference that it was negligent did not arise since it "proved that it
exercised due care to avoid the accident which befell respondents husband."

Petitioner apparently misapprehends the procedural effect of the doctrine. As stated earlier, the
defendants negligence is presumed or inferred when the plaintiff establishes the requisites for the
application of res ipsa loquitur. Once the plaintiff makes out a prima facie case of all the elements,
the burden then shifts to defendant to explain. The presumption or inference may be rebutted or
overcome by other evidence and, under appropriate circumstances a disputable presumption, such
as that of due care or innocence, may outweigh the inference. It is not for the defendant to explain or
prove its defense to prevent the presumption or inference from arising. Evidence by the defendant of
say, due care, comes into play only after the circumstances for the application of the doctrine has
been established.28

In the case at bar, aside from the statement in the police report, none of the parties disputes the fact
that the Fuzo Cargo Truck hit the rear end of the Mitsubishi Galant, which, in turn, hit the rear end of
the vehicle in front of it. Respondents, however, point to the reckless driving of the Nissan Bus driver
as the proximate cause of the collision, which allegation is totally unsupported by any evidence on
record. And assuming that this allegation is, indeed, true, it is astonishing that respondents never
even bothered to file a cross-claim against the owner or driver of the Nissan Bus.

What is at once evident from the instant case, however, is the presence of all the requisites for the
application of the rule of res ipsa loquitur. To reiterate, res ipsa loquitur is a rule of necessity which
applies where evidence is absent or not readily available. As explained in D.M. Consunji, Inc., it is
partly based upon the theory that the defendant in charge of the instrumentality which causes the
injury either knows the cause of the accident or has the best opportunity of ascertaining it and that
the plaintiff has no such knowledge, and, therefore, is compelled to allege negligence in general
terms and to rely upon the proof of the happening of the accident in order to establish negligence.

As mentioned above, the requisites for the application of the res ipsa loquitur rule are the following:
(1) the accident 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
charged with negligence; and (3) the injury suffered must not have been due to any voluntary action
or contribution on the part of the person injured.29

In the instant case, the Fuzo Cargo Truck would not have had hit the rear end of the Mitsubishi
Galant unless someone is negligent. Also, the Fuzo Cargo Truck was under the exclusive control of
its driver, Reyes. Even if respondents avert liability by putting the blame on the Nissan Bus driver,
still, this allegation was self-serving and totally unfounded. Finally, no contributory negligence was
attributed to the driver of the Mitsubishi Galant. Consequently, all the requisites for the application of
the doctrine of res ipsa loquitur are present, thereby creating a reasonable presumption of
negligence on the part of respondents.

It is worth mentioning that just like any other disputable presumptions or inferences, the presumption
of negligence may be rebutted or overcome by other evidence to the contrary. It is unfortunate,
however, that respondents failed to present any evidence before the trial court. Thus, the
presumption of negligence remains. Consequently, the CA erred in dismissing the complaint for
Malayan Insurances adverted failure to prove negligence on the part of respondents.

Validity of Subrogation

Malayan Insurance contends that there was a valid subrogation in the instant case, as evidenced by
the claim check voucher30 and the Release of Claim and Subrogation Receipt 31 presented by it
before the trial court. Respondents, however, claim that the documents presented by Malayan
Insurance do not indicate certain important details that would show proper subrogation.

As noted by Malayan Insurance, respondents had all the opportunity, but failed to object to the
presentation of its evidence. Thus, and as We have mentioned earlier, respondents are deemed to
have waived their right to make an objection. As this Court held in Asian Construction and
Development Corporation v. COMFAC Corporation:

The rule is that failure to object to the offered evidence renders it admissible, and the court
cannot, on its own, disregard such evidence. We note that ASIAKONSTRUCTs counsel of
record before the trial court, Atty. Bernard Dy, who actively participated in the initial stages of the
case stopped attending the hearings when COMFAC was about to end its presentation. Thus,
ASIAKONSTRUCT could not object to COMFACs offer of evidence nor present evidence in its
defense; ASIAKONSTRUCT was deemed by the trial court to have waived its chance to do so.

Note also that when a party desires the court to reject the evidence offered, it must so state
in the form of a timely objection and it cannot raise the objection to the evidence for the first
time on appeal. Because of a partys failure to timely object, the evidence becomes part of the
evidence in the case. Thereafter, all the parties are considered bound by any outcome arising
from the offer of evidence properly presented.32 (Emphasis supplied.)
Bearing in mind that the claim check voucher and the Release of Claim and Subrogation Receipt
presented by Malayan Insurance are already part of the evidence on record, and since it is not
disputed that the insurance company, indeed, paid PhP 700,000 to the assured, then there is a valid
subrogation in the case at bar. As explained in Keppel Cebu Shipyard, Inc. v. Pioneer Insurance and
Surety Corporation:

Subrogation is the substitution of one person by another with reference to a lawful claim or right, so
that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including
its remedies or securities. The principle covers a situation wherein an insurer has paid a loss under
an insurance policy is entitled to all the rights and remedies belonging to the insured against a third
party with respect to any loss covered by the policy. It contemplates full substitution such that it
places the party subrogated in the shoes of the creditor, and he may use all means that the creditor
could employ to enforce payment. 1wphi1

We have held that payment by the insurer to the insured operates as an equitable assignment to the
insurer of all the remedies that the insured may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out
of, any privity of contract. It accrues simply upon payment by the insurance company of the
insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and to
accomplish justice; and is the mode that equity adopts to compel the ultimate payment of a debt by
one who, in justice, equity, and good conscience, ought to pay.33

Considering the above ruling, it is only but proper that Malayan Insurance be subrogated to the
rights of the assured.

WHEREFORE, the petition is hereby GRANTED. The CAs July 28, 2010 Decision and October 29,
2010 Resolution in CA-G.R. CV No. 93112 are hereby REVERSED and SET ASIDE. The Decision
dated February 2, 2009 issued by the trial court in Civil Case No. 99-95885 is hereby REINSTATED.

No pronouncement as to cost.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 160889 April 27, 2007

DR. MILAGROS L. CANTRE, Petitioner,

vs.
SPS. JOHN DAVID Z. GO and NORA S. GO, Respondents.
 DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated October 3, 2002 and Resolution2 dated November
19, 2003 of the Court of Appeals in CA-G.R. CV No. 58184, which affirmed with modification the
Decision3 dated March 3, 1997 of the Regional Trial Court of Quezon City, Branch 98, in Civil Case
No. Q-93-16562.

The facts, culled from the records, are as follows:

Petitioner Dr. Milagros L. Cantre is a specialist in Obstetrics and Gynecology at the Dr. Jesus
Delgado Memorial Hospital. She was the attending physician of respondent Nora S. Go, who was
admitted at the said hospital on April 19, 1992.

At 1:30 a.m. of April 20, 1992, Nora gave birth to her fourth child, a baby boy. However, at around
3:30 a.m., Nora suffered profuse bleeding inside her womb due to some parts of the placenta which
were not completely expelled from her womb after delivery. Consequently, Nora suffered
hypovolemic shock, resulting in a drop in her blood pressure to "40" over "0." Petitioner and the
assisting resident physician performed various medical procedures to stop the bleeding and to
restore Noras blood pressure. Her blood pressure was frequently monitored with the use of a
sphygmomanometer. While petitioner was massaging Noras uterus for it to contract and stop
bleeding, she ordered a droplight to warm Nora and her baby.4 Nora remained unconscious until she
recovered.

While in the recovery room, her husband, respondent John David Z. Go noticed a fresh gaping
wound two and a half (2 ) by three and a half (3 ) inches in the inner portion of her left arm, close
to the armpit.5 He asked the nurses what caused the injury. He was informed it was a burn.
Forthwith, on April 22, 1992, John David filed a request for investigation. 6 In response, Dr. Rainerio
S. Abad, the medical director of the hospital, called petitioner and the assisting resident physician to
explain what happened. Petitioner said the blood pressure cuff caused the injury.

On May 7, 1992, John David brought Nora to the National Bureau of Investigation for a physical
examination, which was conducted by medico-legal officer Dr. Floresto Arizala, Jr.7 The medico-legal
officer later testified that Noras injury appeared to be a burn and that a droplight when placed near
the skin for about 10 minutes could cause such burn.8 He dismissed the likelihood that the wound
was caused by a blood pressure cuff as the scar was not around the arm, but just on one side of the
arm.9

On May 22, 1992, Noras injury was referred to a plastic surgeon at the Dr. Jesus Delgado Memorial
Hospital for skin grafting.10 Her wound was covered with skin sourced from her abdomen, which
consequently bore a scar as well. About a year after, on April 30, 1993, scar revision had to be
performed at the same hospital.11 The surgical operation left a healed linear scar in Noras left arm
about three inches in length, the thickest portion rising about one-fourth (1/4) of an inch from the
surface of the skin. The costs of the skin grafting and the scar revision were shouldered by the
hospital.12

Unfortunately, Noras arm would never be the same. Aside from the unsightly mark, the pain in her
1a\^/phi1.net

left arm remains. When sleeping, she has to cradle her wounded arm. Her movements now are also
restricted. Her children cannot play with the left side of her body as they might accidentally bump the
injured arm, which aches at the slightest touch.
Thus, on June 21, 1993, respondent spouses filed a complaint13 for damages against petitioner, Dr.
Abad, and the hospital. Finding in favor of respondent spouses, the trial court decreed:

In view of the foregoing consideration, judgment is hereby rendered in favor of the plaintiffs and
against the defendants, directing the latters, (sic) jointly and severally

(a) to pay the sum of Five Hundred Thousand Pesos (P500,000.00) in moral damages;

(b) to pay the sum of One Hundred Fifty Thousand Pesos (P150,000.00) exemplary
damages;

(c) to pay the sum of Eighty Thousand Pesos (P80,000.00) nominal damages;

(d) to pay Fifty Thousand Pesos (P50,000.00) for and as attorneys fees; and

(e) to pay Six Thousand Pesos (P6,000.00) litigation expenses.

SO ORDERED.14

Petitioner, Dr. Abad, and the hospital all appealed to the Court of Appeals, which affirmed with
modification the trial court decision, thus:

WHEREFORE, in view of all the foregoing, and finding no reversible error in the appealed Decision
dated March 3, 1997 of Branch 98 of the Regional Trial Court of Quezon City in Civil Case No. Q-93-
16562, the same is hereby AFFIRMED, with the following MODIFICATIONS:

1. Ordering defendant-appellant Dra. Milagros [L.] Cantre only to pay plaintiffs-appellees

John David Go and Nora S. Go the sum of P200,000.00 as moral damages;

2. Deleting the award [of] exemplary damages, attorneys fees and expenses of litigation; 1awphi1.nt

3. Dismissing the complaint with respect to defendants-appellants Dr. Rainerio S. Abad and
Delgado Clinic, Inc.;

4. Dismissing the counterclaims of defendants-appellants for lack of merit; and

5. Ordering defendant-appellant Dra. Milagros [L.] Cantre only to pay the costs.

SO ORDERED.15

Petitioners motion for reconsideration was denied by the Court of Appeals. Hence, the instant
petition assigning the following as errors and issues:

I.

WHETHER OR NOT, THE LOWER COURT, AND THE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF THEIR DISCRETION WHEN, NOTWITHSTANDING THAT BOTH PARTIES HAVE
RESTED THEIR RESPECTIVE CASES, THE LOWER COURT ADMITTED THE ADDITIONAL
EXHIBITS FURTHER OFFERED BY RESPONDENTS NOT TESTIFIED TO BY ANY WITNESS AND
THIS DECISION OF THE LOWER COURT WAS UPHELD BY THE COURT OF APPEALS
LIKEWISE COMMITTING GRAVE ABUSE OF DISCRETION;

II.

WHETHER OR NOT THE LOWER COURT COMMITTED GRAVE ABUSE OF ITS DISCRETION
WHEN, CONTRARY TO PREPONDERANCE OF EVIDENCE PRESENTED BY THE PETITIONER,
IT RULED THAT THE PETITIONER HAS NOT AMPLY SHOWED THAT THE DROPLIGHT DID NOT
TOUCH THE BODY OF MRS. NORA GO, AND THIS DECISION OF THE LOWER COURT WAS
UPHELD BY THE COURT OF APPEALS LIKEWISE COMMITTING GRAVE ABUSE OF
DISCRETION;

III.

WHETHER OR NOT THE LOWER COURT COMMITTED GRAVE ABUSE OF ITS DISCRETION
WHEN, CONTRARY TO PREPONDERANCE OF EVIDENCE PRESENTED BY THE PETITIONER,
IT RULED THAT PETITIONER DRA. CANTRE WAS NOT ABLE TO AMPLY EXPLAIN HOW THE
INJURY (BLISTERS) IN THE LEFT INNER ARM OF RESPONDENT MRS. GO CAME ABOUT;

IV.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF ITS

DISCRETION WHEN IT MADE A RULING ON THE RESPONDENTS INJURY QUOTING THE
TESTIMONY OF SOMEONE WHO WAS NOT PRESENT AND HAS NOT SEEN THE ORIGINAL,
FRESH INJURY OF RESPONDENT MRS. NORA GO;

V.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ABUSING ITS DISCRETION RULED
THAT PETITIONER DRA. CANTRE SHOULD HAVE INTENDED TO INFLICT THE INJURY TO
SAVE THE LIFE OF RESPONDENT MRS. GO;

VI.

WHETHER OR NOT THE LOWER COURT AND THE COURT [OF] APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION WHEN, CONTRARY TO THE DETAILED PROCEDURES DONE
BY PETITIONER, BOTH RULED THAT THE RESPONDENT WAS LEFT TO THE CARE OF THE
NURSING STAFF;

VII.

WHETHER OR NOT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION WHEN,
CONTRARY TO THE MEDICAL PURPOSES OF COSMETIC SURGERY, IT RULED THAT THE
COSMETIC SURGERY MADE THE SCARS EVEN MORE UGLY AND DECLARED THE
COSMETIC SURGERY A FAILURE;

VIII.

WHETHER OR NOT THE LOWER COURT GRAVELY ABUSE OF (SIC) DISCRETION WHEN,
CONTRARY TO RESPONDENTS CONTRARY TESTIMONIES AND THE ABSENCE OF ANY
TESTIMONY, IT RULED THAT THEY ARE ENTITLED TO DAMAGES AND WHICH WAS UPHELD,
ALTHOUGH MODIFIED, BY THE COURT OF APPEALS LIKEWISE ABUSING ITS DISCRETION. 16

Petitioner contends that additional documentary exhibits not testified to by any witness are
inadmissible in evidence because they deprived her of her constitutional right to confront the
witnesses against her. Petitioner insists the droplight could not have touched Noras body. She
maintains the injury was due to the constant taking of Noras blood pressure. Petitioner also
insinuates the Court of Appeals was misled by the testimony of the medico-legal officer who never
saw the original injury before plastic surgery was performed. Finally, petitioner stresses that plastic
surgery was not intended to restore respondents injury to its original state but rather to prevent
further complication.

Respondents, however, counter that the genuineness and due execution of the additional
documentary exhibits were duly admitted by petitioners counsel. Respondents point out that
petitioners blood pressure cuff theory is highly improbable, being unprecedented in medical history
and that the injury was definitely caused by the droplight. At any rate, they argue, even if the injury
was brought about by the blood pressure cuff, petitioner was still negligent in her duties as Noras
attending physician.

Simply put, the threshold issues for resolution are: (1) Are the questioned additional exhibits
admissible in evidence? (2) Is petitioner liable for the injury suffered by respondent Nora Go?
Thereafter, the inquiry is whether the appellate court committed grave abuse of discretion in its
assailed issuances.

As to the first issue, we agree with the Court of Appeals that said exhibits are admissible in
evidence. We note that the questioned exhibits consist mostly of Noras medical records, which were
produced by the hospital during trial pursuant to a subpoena duces tecum. Petitioners counsel
admitted the existence of the same when they were formally offered for admission by the trial court.
In any case, given the particular circumstances of this case, a ruling on the negligence of petitioner
may be made based on the res ipsa loquitur doctrine even in the absence of such additional exhibits.

Petitioners contention that the medico-legal officer who conducted Noras physical examination
never saw her original injury before plastic surgery was performed is without basis and contradicted
by the records. Records show that the medico-legal officer conducted the physical examination on
May 7, 1992, while the skin grafting and the scar revision were performed on Nora on May 22, 1992
and April 30, 1993, respectively.

Coming now to the substantive matter, is petitioner liable for the injury suffered by respondent Nora
Go?

The Hippocratic Oath mandates physicians to give primordial consideration to the well-being of their
patients. If a doctor fails to live up to this precept, he is accountable for his acts. This
notwithstanding, courts face a unique restraint in adjudicating medical negligence cases because
physicians are not guarantors of care and, they never set out to intentionally cause injury to their
patients. However, intent is immaterial in negligence cases because where negligence exists and is
proven, it automatically gives the injured a right to reparation for the damage caused. 17

In cases involving medical negligence, the doctrine of res ipsa loquitur allows the mere existence of
an injury to justify a presumption of negligence on the part of the person who controls the instrument
causing the injury, provided that the following requisites concur:
 1. The accident is of a kind which ordinarily does not occur in the absence of someones
negligence;

2. It is caused by an instrumentality within the exclusive control of the defendant or

defendants; and

3. The possibility of contributing conduct which would make the plaintiff responsible is
eliminated.18

As to the first requirement, the gaping wound on Noras arm is certainly not an ordinary occurrence
in the act of delivering a baby, far removed as the arm is from the organs involved in the process of
giving birth. Such injury could not have happened unless negligence had set in somewhere.

Second, whether the injury was caused by the droplight or by the blood pressure cuff is of no
moment. Both instruments are deemed within the exclusive control of the physician in charge under
the "captain of the ship" doctrine. This doctrine holds the surgeon in charge of an operation liable for
the negligence of his assistants during the time when those assistants are under the surgeons
control.19 In this particular case, it can be logically inferred that petitioner, the senior consultant in
charge during the delivery of Noras baby, exercised control over the assistants assigned to both the
use of the droplight and the taking of Noras blood pressure. Hence, the use of the droplight and the
blood pressure cuff is also within petitioners exclusive control.

Third, the gaping wound on Noras left arm, by its very nature and considering her condition, could
only be caused by something external to her and outside her control as she was unconscious while
in hypovolemic shock. Hence, Nora could not, by any stretch of the imagination, have contributed to
her own injury.

Petitioners defense that Noras wound was caused not by the droplight but by the constant taking of
her blood pressure, even if the latter was necessary given her condition, does not absolve her from
liability. As testified to by the medico-legal officer, Dr. Arizala, Jr., the medical practice is to deflate the
blood pressure cuff immediately after each use. Otherwise, the inflated band can cause injury to the
patient similar to what could have happened in this case. Thus, if Noras wound was caused by the
blood pressure cuff, then the taking of Noras blood pressure must have been done so negligently as
to have inflicted a gaping wound on her arm,20 for which petitioner cannot escape liability under the
"captain of the ship" doctrine.

Further, petitioners argument that the failed plastic surgery was not intended as a cosmetic
procedure, but rather as a measure to prevent complication does not help her case. It does not
negate negligence on her part.

Based on the foregoing, the presumption that petitioner was negligent in the exercise of her
profession stands unrebutted. In this connection, the Civil Code provides:

ART. 2176. Whoever by act or omission causes damage to another, there being fault or negligence,
is obliged to pay for the damage done.

ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered if they are the proximate
result of the defendants wrongful act or omission.
Clearly, under the law, petitioner is obliged to pay Nora for moral damages suffered by the latter as a
proximate result of petitioners negligence.

We note, however, that petitioner has served well as Noras obstetrician for her past three successful
deliveries. This is the first time petitioner is being held liable for damages due to negligence in the
practice of her profession. The fact that petitioner promptly took care of Noras wound before
infection and other complications set in is also indicative of petitioners good intentions. We also take
note of the fact that Nora was suffering from a critical condition when the injury happened, such that
saving her life became petitioners elemental concern. Nonetheless, it should be stressed that all
these could not justify negligence on the part of petitioner.

Hence, considering the specific circumstances in the instant case, we find no grave abuse of
discretion in the assailed decision and resolution of the Court of Appeals. Further, we rule that the
Court of Appeals award of Two Hundred Thousand Pesos (P200,000) as moral damages in favor of
respondents and against petitioner is just and equitable. 21

WHEREFORE, the petition is DENIED. The Decision dated October 3, 2002 and Resolution dated
November 19, 2003 of the Court of Appeals in CA-G.R. CV No. 58184 are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 126297 February 2, 2010

PROFESSIONAL SERVICES, INC., Petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, Respondents.

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

G.R. No. 126467

NATIVIDAD [substituted by her children Marcelino Agana III, Enrique Agana, Jr., Emma
Agana-Andaya, Jesus Agana and Raymund Agana] and ENRIQUE AGANA, Petitioners,
vs.
THE COURT OF APPEALS and JUAN FUENTES, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 127590

MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.

RESOLUTION

CORONA, J.:

With prior leave of court,1 petitioner Professional Services, Inc. (PSI) filed a second motion for
reconsideration2urging referral thereof to the Court en banc and seeking modification of the decision
dated January 31, 2007 and resolution dated February 11, 2008 which affirmed its vicarious and
direct liability for damages to respondents Enrique Agana and the heirs of Natividad Agana
(Aganas).

Manila Medical Services, Inc. (MMSI),3 Asian Hospital, Inc. (AHI),4 and Private Hospital Association
of the Philippines (PHAP)5 all sought to intervene in these cases invoking the common ground that,
unless modified, the assailed decision and resolution will jeopardize the financial viability of private
hospitals and jack up the cost of health care.

The Special First Division of the Court granted the motions for intervention of MMSI, AHI and PHAP
(hereafter intervenors),6 and referred en consulta to the Court en banc the motion for prior leave of
court and the second motion for reconsideration of PSI.7

Due to paramount public interest, the Court en banc accepted the referral8 and heard the parties on
oral arguments on one particular issue: whether a hospital may be held liable for the negligence of
physicians-consultants allowed to practice in its premises. 9

To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr.
Fuentes), was impleaded by Enrique Agana and Natividad Agana (later substituted by her heirs), in a
complaint10 for damages filed in the Regional Trial Court (RTC) of Quezon City, Branch 96, for the
injuries suffered by Natividad when Dr. Ampil and Dr. Fuentes neglected to remove from her body
two gauzes11 which were used in the surgery they performed on her on April 11, 1984 at the Medical
City General Hospital. PSI was impleaded as owner, operator and manager of the hospital.

In a decision12 dated March 17, 1993, the RTC held PSI solidarily liable with Dr. Ampil and Dr.
Fuentes for damages.13 On appeal, the Court of Appeals (CA), absolved Dr. Fuentes but affirmed the
liability of Dr. Ampil and PSI, subject to the right of PSI to claim reimbursement from Dr. Ampil. 14
1avvphi1

On petition for review, this Court, in its January 31, 2007 decision, affirmed the CA decision. 15 PSI
filed a motion for reconsideration16 but the Court denied it in a resolution dated February 11, 2008. 17

The Court premised the direct liability of PSI to the Aganas on the following facts and law:

First, there existed between PSI and Dr. Ampil an employer-employee relationship as contemplated
in the December 29, 1999 decision in Ramos v. Court of Appeals18 that "for purposes of allocating
responsibility in medical negligence cases, an employer-employee relationship exists between
hospitals and their consultants."19Although the Court in Ramos later issued a Resolution dated April
11, 200220 reversing its earlier finding on the existence of an employment relationship between
hospital and doctor, a similar reversal was not warranted in the present case because the defense
raised by PSI consisted of a mere general denial of control or responsibility over the actions of Dr.
Ampil.21

Second, by accrediting Dr. Ampil and advertising his qualifications, PSI created the public impression
that he was its agent.22 Enrique testified that it was on account of Dr. Ampil's accreditation with PSI
that he conferred with said doctor about his wife's (Natividad's) condition. 23 After his meeting with Dr.
Ampil, Enrique asked Natividad to personally consult Dr. Ampil. 24 In effect, when Enrigue and
Natividad engaged the services of Dr. Ampil, at the back of their minds was that the latter was a staff
member of a prestigious hospital. Thus, under the doctrine of apparent authority applied in Nogales,
et al. v. Capitol Medical Center, et al.,25 PSI was liable for the negligence of Dr. Ampil.

Finally, as owner and operator of Medical City General Hospital, PSI was bound by its duty to
provide comprehensive medical services to Natividad Agana, to exercise reasonable care to protect
her from harm,26 to oversee or supervise all persons who practiced medicine within its walls, and to
take active steps in fixing any form of negligence committed within its premises. 27 PSI committed a
serious breach of its corporate duty when it failed to conduct an immediate investigation into the
reported missing gauzes.28

PSI is now asking this Court to reconsider the foregoing rulings for these reasons:

The declaration in the 31 January 2007 Decision vis-a-vis the 11 February 2009 Resolution that the
ruling in Ramos vs. Court of Appeals (G.R. No. 134354, December 29, 1999) that "an employer-
employee relations exists between hospital and their consultants" stays should be set aside for being
inconsistent with or contrary to the import of the resolution granting the hospital's motion for
reconsideration in Ramos vs. Court of Appeals (G.R. No. 134354, April 11, 2002), which is applicable
to PSI since the Aganas failed to prove an employer-employee relationship between PSI and Dr.
Ampil and PSI proved that it has no control over Dr. Ampil. In fact, the trial court has found that there
is no employer-employee relationship in this case and that the doctor's are independent contractors.

II

Respondents Aganas engaged Dr. Miguel Ampil as their doctor and did not primarily and specifically
look to the Medical City Hospital (PSI) for medical care and support; otherwise stated, respondents
Aganas did not select Medical City Hospital (PSI) to provide medical care because of any apparent
authority of Dr. Miguel Ampil as its agent since the latter was chosen primarily and specifically based
on his qualifications and being friend and neighbor.

III

PSI cannot be liable under doctrine of corporate negligence since the proximate cause of Mrs.
Agana's injury was the negligence of Dr. Ampil, which is an element of the principle of corporate
negligence.29

In their respective memoranda, intervenors raise parallel arguments that the Court's ruling on the
existence of an employer-employee relationship between private hospitals and consultants will force
a drastic and complex alteration in the long-established and currently prevailing relationships among
patient, physician and hospital, with burdensome operational and financial consequences and
adverse effects on all three parties.30

The Aganas comment that the arguments of PSI need no longer be entertained for they have all
been traversed in the assailed decision and resolution.31

After gathering its thoughts on the issues, this Court holds that PSI is liable to the Aganas, not under
the principle of respondeat superior for lack of evidence of an employment relationship with Dr. Ampil
but under the principle of ostensible agency for the negligence of Dr. Ampil and, pro hac vice, under
the principle of corporate negligence for its failure to perform its duties as a hospital.

While in theory a hospital as a juridical entity cannot practice medicine, 32 in reality it utilizes doctors,
surgeons and medical practitioners in the conduct of its business of facilitating medical and surgical
treatment.33 Within that reality, three legal relationships crisscross: (1) between the hospital and the
doctor practicing within its premises; (2) between the hospital and the patient being treated or
examined within its premises and (3) between the patient and the doctor. The exact nature of each
relationship determines the basis and extent of the liability of the hospital for the negligence of the
doctor.

Where an employment relationship exists, the hospital may be held vicariously liable under Article
217634 in relation to Article 218035 of the Civil Code or the principle of respondeat superior. Even
when no employment relationship exists but it is shown that the hospital holds out to the patient that
the doctor is its agent, the hospital may still be vicariously liable under Article 2176 in relation to
Article 143136 and Article 186937 of the Civil Code or the principle of apparent authority.38 Moreover,
regardless of its relationship with the doctor, the hospital may be held directly liable to the patient for
its own negligence or failure to follow established standard of conduct to which it should conform as
a corporation.39

This Court still employs the "control test" to determine the existence of an employer-employee
relationship between hospital and doctor. In Calamba Medical Center, Inc. v. National Labor
Relations Commission, et al.40 it held:

Under the "control test", an employment relationship exists between a physician and a hospital if the
hospital controls both the means and the details of the process by which the physician is to
accomplish his task.

xxx xxx xxx

As priorly stated, private respondents maintained specific work-schedules, as determined by

petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight hours
each week and which were strictly to be observed under pain of administrative sanctions.

That petitioner exercised control over respondents gains light from the undisputed fact that
in the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and
orderlies. Without the approval or consent of petitioner or its medical director, no operations
can be undertaken in those areas. For control test to apply, it is not essential for the employer
to actually supervise the performance of duties of the employee, it being enough that it has
the right to wield the power. (emphasis supplied)

Even in its December 29, 1999 decision41 and April 11, 2002 resolution42 in Ramos, the Court found
the control test decisive.

In the present case, it appears to have escaped the Court's attention that both the RTC and the CA
found no employment relationship between PSI and Dr. Ampil, and that the Aganas did not
question such finding. In its March 17, 1993 decision, the RTC found "that defendant doctors were
not employees of PSI in its hospital, they being merely consultants without any employer-employee
relationship and in the capacity of independent contractors." 43 The Aganas never questioned such
finding.

PSI, Dr. Ampil and Dr. Fuentes appealed44 from the RTC decision but only on the issues of
negligence, agency and corporate liability. In its September 6, 1996 decision, the CA mistakenly
referred to PSI and Dr. Ampil as employer-employee, but it was clear in its discussion on the matter
that it viewed their relationship as one of mere apparent agency.45

The Aganas appealed from the CA decision, but only to question the exoneration of Dr.
Fuentes.46 PSI also appealed from the CA decision, and it was then that the issue of employment,
though long settled, was unwittingly resurrected.

In fine, as there was no dispute over the RTC finding that PSI and Dr. Ampil had no employer-
employee relationship, such finding became final and conclusive even to this Court. 47 There was no
reason for PSI to have raised it as an issue in its petition. Thus, whatever discussion on the matter
that may have ensued was purely academic.

Nonetheless, to allay the anxiety of the intervenors, the Court holds that, in this particular instance,
the concurrent finding of the RTC and the CA that PSI was not the employer of Dr. Ampil is correct.
Control as a determinative factor in testing the employer-employee relationship between doctor and
hospital under which the hospital could be held vicariously liable to a patient in medical negligence
cases is a requisite fact to be established by preponderance of evidence. Here, there was
insufficient evidence that PSI exercised the power of control or wielded such power over the means
and the details of the specific process by which Dr. Ampil applied his skills in the treatment of
Natividad. Consequently, PSI cannot be held vicariously liable for the negligence of Dr. Ampil under
the principle of respondeat superior.

There is, however, ample evidence that the hospital (PSI) held out to the patient (Natividad) 48 that the
doctor (Dr. Ampil) was its agent. Present are the two factors that determine apparent authority: first,
the hospital's implied manifestation to the patient which led the latter to conclude that the doctor was
the hospital's agent; and second, the patients reliance upon the conduct of the hospital and the
doctor, consistent with ordinary care and prudence.49

Enrique testified that on April 2, 1984, he consulted Dr. Ampil regarding the condition of his wife; that
after the meeting and as advised by Dr. Ampil, he "asked [his] wife to go to Medical City to be
examined by [Dr. Ampil]"; and that the next day, April 3, he told his daughter to take her mother to Dr.
Ampil.50 This timeline indicates that it was Enrique who actually made the decision on whom
Natividad should consult and where, and that the latter merely acceded to it. It explains the
testimony of Natividad that she consulted Dr. Ampil at the instigation of her daughter.51
Moreover, when asked what impelled him to choose Dr. Ampil, Enrique testified:

Atty. Agcaoili

On that particular occasion, April 2, 1984, what was your reason for choosing Dr. Ampil to contact
with in connection with your wife's illness?

A. First, before that, I have known him to be a specialist on that part of the body as a surgeon,
second, I have known him to be a staff member of the Medical City which is a prominent and
known hospital. And third, because he is a neighbor, I expect more than the usual medical service to
be given to us, than his ordinary patients.52 (emphasis supplied)

Clearly, the decision made by Enrique for Natividad to consult Dr. Ampil was significantly influenced
by the impression that Dr. Ampil was a staff member of Medical City General Hospital, and that said
hospital was well known and prominent. Enrique looked upon Dr. Ampil not as independent of but as
integrally related to Medical City.

PSI's acts tended to confirm and reinforce, rather than negate, Enrique's view. It is of record that PSI
required a "consent for hospital care"53 to be signed preparatory to the surgery of Natividad. The form
reads:

Permission is hereby given to the medical, nursing and laboratory staff of the Medical City General
Hospital to perform such diagnostic procedures and to administer such medications and
treatments as may be deemed necessary or advisable by the physicians of this hospital for
and during the confinement of xxx. (emphasis supplied)

By such statement, PSI virtually reinforced the public impression that Dr. Ampil was a physician of its
hospital, rather than one independently practicing in it; that the medications and treatments he
prescribed were necessary and desirable; and that the hospital staff was prepared to carry them
out.1avvphi1

PSI pointed out in its memorandum that Dr. Ampil's hospital affiliation was not the exclusive basis of
the Aganas decision to have Natividad treated in Medical City General Hospital, meaning that, had
Dr. Ampil been affiliated with another hospital, he would still have been chosen by the Aganas as
Natividad's surgeon.54

The Court cannot speculate on what could have been behind the Aganas decision but would rather
adhere strictly to the fact that, under the circumstances at that time, Enrique decided to consult Dr.
Ampil for he believed him to be a staff member of a prominent and known hospital. After his meeting
with Dr. Ampil, Enrique advised his wife Natividad to go to the Medical City General Hospital to be
examined by said doctor, and the hospital acted in a way that fortified Enrique's belief.

This Court must therefore maintain the ruling that PSI is vicariously liable for the negligence of Dr.
Ampil as its ostensible agent.

Moving on to the next issue, the Court notes that PSI made the following admission in its Motion for
Reconsideration:
51. Clearly, not being an agent or employee of petitioner PSI, PSI [sic] is not liable for Dr. Ampil's
acts during the operation. Considering further that Dr. Ampil was personally engaged as a doctor by
Mrs. Agana, it is incumbent upon Dr. Ampil, as "Captain of the Ship", and as the Agana's doctor to
advise her on what to do with her situation vis-a-vis the two missing gauzes. In addition to noting
the missing gauzes, regular check-ups were made and no signs of complications were
exhibited during her stay at the hospital, which could have alerted petitioner PSI's hospital to
render and provide post-operation services to and tread on Dr. Ampil's role as the doctor of
Mrs. Agana. The absence of negligence of PSI from the patient's admission up to her
discharge is borne by the finding of facts in this case. Likewise evident therefrom is the
absence of any complaint from Mrs. Agana after her discharge from the hospital which had
she brought to the hospital's attention, could have alerted petitioner PSI to act accordingly
and bring the matter to Dr. Ampil's attention. But this was not the case. Ms. Agana
complained ONLY to Drs. Ampil and Fuentes, not the hospital. How then could PSI possibly
do something to fix the negligence committed by Dr. Ampil when it was not informed about it
at all.55 (emphasis supplied)

PSI reiterated its admission when it stated that had Natividad Agana "informed the hospital of her
discomfort and pain, the hospital would have been obliged to act on it."56

The significance of the foregoing statements is critical.

First, they constitute judicial admission by PSI that while it had no power to control the means or
method by which Dr. Ampil conducted the surgery on Natividad Agana, it had the power to review
or cause the review of what may have irregularly transpired within its walls strictly for the purpose
of determining whether some form of negligence may have attended any procedure done inside its
premises, with the ultimate end of protecting its patients.

Second, it is a judicial admission that, by virtue of the nature of its business as well as its
prominence57 in the hospital industry, it assumed a duty to "tread on" the "captain of the ship" role of
any doctor rendering services within its premises for the purpose of ensuring the safety of the
patients availing themselves of its services and facilities.

Third, by such admission, PSI defined the standards of its corporate conduct under the
circumstances of this case, specifically: (a) that it had a corporate duty to Natividad even after her
operation to ensure her safety as a patient; (b) that its corporate duty was not limited to having its
nursing staff note or record the two missing gauzes and (c) that its corporate duty extended to
determining Dr. Ampil's role in it, bringing the matter to his attention, and correcting his negligence.

And finally, by such admission, PSI barred itself from arguing in its second motion for reconsideration
that the concept of corporate responsibility was not yet in existence at the time Natividad underwent
treatment;58 and that if it had any corporate responsibility, the same was limited to reporting the
missing gauzes and did not include "taking an active step in fixing the negligence committed." 59 An
admission made in the pleading cannot be controverted by the party making such admission and is
conclusive as to him, and all proofs submitted by him contrary thereto or inconsistent therewith
should be ignored, whether or not objection is interposed by a party.60

Given the standard of conduct that PSI defined for itself, the next relevant inquiry is whether the
hospital measured up to it.
PSI excuses itself from fulfilling its corporate duty on the ground that Dr. Ampil assumed the personal
responsibility of informing Natividad about the two missing gauzes. 61 Dr. Ricardo Jocson, who was
part of the group of doctors that attended to Natividad, testified that toward the end of the surgery,
their group talked about the missing gauzes but Dr. Ampil assured them that he would personally
notify the patient about it.62Furthermore, PSI claimed that there was no reason for it to act on the
report on the two missing gauzes because Natividad Agana showed no signs of complications. She
did not even inform the hospital about her discomfort. 63

The excuses proffered by PSI are totally unacceptable.

To begin with, PSI could not simply wave off the problem and nonchalantly delegate to Dr. Ampil the
duty to review what transpired during the operation. The purpose of such review would have been to
pinpoint when, how and by whom two surgical gauzes were mislaid so that necessary remedial
measures could be taken to avert any jeopardy to Natividads recovery. Certainly, PSI could not have
expected that purpose to be achieved by merely hoping that the person likely to have mislaid the
gauzes might be able to retrace his own steps. By its own standard of corporate conduct, PSI's duty
to initiate the review was non-delegable.

While Dr. Ampil may have had the primary responsibility of notifying Natividad about the missing
gauzes, PSI imposed upon itself the separate and independent responsibility of initiating the inquiry
into the missing gauzes. The purpose of the first would have been to apprise Natividad of what
transpired during her surgery, while the purpose of the second would have been to pinpoint any
lapse in procedure that led to the gauze count discrepancy, so as to prevent a recurrence thereof
and to determine corrective measures that would ensure the safety of Natividad. That Dr. Ampil
negligently failed to notify Natividad did not release PSI from its self-imposed separate responsibility.

Corollary to its non-delegable undertaking to review potential incidents of negligence committed

within its premises, PSI had the duty to take notice of medical records prepared by its own staff and
submitted to its custody, especially when these bear earmarks of a surgery gone awry. Thus, the
record taken during the operation of Natividad which reported a gauze count discrepancy should
have given PSI sufficient reason to initiate a review. It should not have waited for Natividad to
complain.

As it happened, PSI took no heed of the record of operation and consequently did not initiate a
review of what transpired during Natividads operation. Rather, it shirked its responsibility and
passed it on to others to Dr. Ampil whom it expected to inform Natividad, and to Natividad herself
to complain before it took any meaningful step. By its inaction, therefore, PSI failed its own standard
of hospital care. It committed corporate negligence.

It should be borne in mind that the corporate negligence ascribed to PSI is different from the medical
negligence attributed to Dr. Ampil. The duties of the hospital are distinct from those of the doctor-
consultant practicing within its premises in relation to the patient; hence, the failure of PSI to fulfill its
duties as a hospital corporation gave rise to a direct liability to the Aganas distinct from that of Dr.
Ampil.

All this notwithstanding, we make it clear that PSIs hospital liability based on ostensible agency and
corporate negligence applies only to this case, pro hac vice. It is not intended to set a precedent and
should not serve as a basis to hold hospitals liable for every form of negligence of their doctors-
consultants under any and all circumstances. The ruling is unique to this case, for the liability of PSI
arose from an implied agency with Dr. Ampil and an admitted corporate duty to Natividad. 64

Other circumstances peculiar to this case warrant this ruling, 65 not the least of which being that the
agony wrought upon the Aganas has gone on for 26 long years, with Natividad coming to the end of
her days racked in pain and agony. Such wretchedness could have been avoided had PSI simply
done what was logical: heed the report of a guaze count discrepancy, initiate a review of what went
wrong and take corrective measures to ensure the safety of Nativad. Rather, for 26 years, PSI
hemmed and hawed at every turn, disowning any such responsibility to its patient. Meanwhile, the
options left to the Aganas have all but dwindled, for the status of Dr. Ampil can no longer be
ascertained.66

Therefore, taking all the equities of this case into consideration, this Court believes P15 million would
be a fair and reasonable liability of PSI, subject to 12% p.a. interest from the finality of this resolution
to full satisfaction.

WHEREFORE, the second motion for reconsideration is DENIED and the motions for intervention
are NOTED.

Professional Services, Inc. is ORDERED pro hac vice to pay Natividad (substituted by her children
Marcelino Agana III, Enrique Agana, Jr., Emma Agana-Andaya, Jesus Agana and Raymund Agana)
and Enrique Agana the total amount of P15 million, subject to 12% p.a. interest from the finality of
this resolution to full satisfaction.

No further pleadings by any party shall be entertained in this case.

Let the long-delayed entry of judgment be made in this case upon receipt by all concerned parties of
this resolution.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 126297 February 11, 2008

PROFESSIONAL SERVICES, INC., petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, respondents,

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

G.R. No. 126467 February 11, 2008

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE
AGANA, petitioners,
vs.
THE COURT OF APPEALS and JUAN FUENTES, respondents,

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

G.R. No. 127590 February 11, 2008

MIGUEL AMPIL, petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD AGANA and ENRIQUE AGANA, respondents.

RESOLUTION

SANDOVAL-GUTIERREZ, J.:

As the hospital industry changes, so must the laws and jurisprudence governing hospital liability. The
immunity from medical malpractice traditionally accorded to hospitals has to be eroded if we are to
balance the interest of the patients and hospitals under the present setting.

Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI), petitioner
in G.R. No. 126297, assailing the Courts First Division Decision dated January 31, 2007, finding PSI
and Dr. Miguel Ampil, petitioner in G.R. No. 127590, jointly and severally liable for medical
negligence.

A brief revisit of the antecedent facts is imperative.

On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital (Medical City)
because of difficulty of bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be
suffering from "cancer of the sigmoid." Thus, on April 11, 1984, Dr. Ampil, assisted by the medical
staff1 of Medical City, performed an anterior resection surgery upon her. During the surgery, he found
that the malignancy in her sigmoid area had spread to her left ovary, necessitating the removal of
certain portions of it. Thus, Dr. Ampil obtained the consent of Atty. Enrique Agana, Natividads
husband, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy upon
Natividad.

Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed
the operation and closed the incision. However, the operation appeared to be flawed. In the
corresponding Record of Operation dated April 11, 1984, the attending nurses entered these
remarks:

sponge count lacking 2

announced to surgeon searched done (sic) but to no avail continue for closure.

After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted
both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the natural consequence of
the surgical operation performed upon her. Dr. Ampil recommended that Natividad consult an
oncologist to treat the cancerous nodes which were not removed during the operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further
treatment. After four (4) months of consultations and laboratory examinations, Natividad was told
that she was free of cancer. Hence, she was advised to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two (2) weeks
thereafter, her daughter found a piece of gauze protruding from her vagina. Dr. Ampil was
immediately informed. He proceeded to Natividads house where he managed to extract by hand a
piece of gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that the pains would
soon vanish.

Despite Dr. Ampils assurance, the pains intensified, prompting Natividad to seek treatment at the
Polymedic General Hospital. While confined thereat, Dr. Ramon Gutierrez detected the presence of
a foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches in width. The gauze had
badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ which
forced stool to excrete through the vagina. Another surgical operation was needed to remedy the
situation. Thus, in October 1984, Natividad underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the Regional Trial Court, Branch 96,
Quezon City a complaint for damages against PSI (owner of Medical City), Dr. Ampil and Dr.
Fuentes.

On February 16, 1986, pending the outcome of the above case, Natividad died. She was duly
substituted by her above-named children (the Aganas).

On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding PSI, Dr.
Ampil and Dr. Fuentes jointly and severally liable. On appeal, the Court of Appeals, in its Decision
dated September 6, 1996, affirmed the assailed judgment with modification in the sense that the
complaint against Dr. Fuentes was dismissed.

PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review on certiorari. On
January 31, 2007, the Court, through its First Division, rendered a Decision holding that PSI is jointly
and severally liable with Dr. Ampil for the following reasons: first, there is an employer-employee
relationship between Medical City and Dr. Ampil. The Court relied on Ramos v. Court of
Appeals,2 holding that for the purpose of apportioning responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their attending and visiting
physicians; second, PSIs act of publicly displaying in the lobby of the Medical City the names and
specializations of its accredited physicians, including Dr. Ampil, estopped it from denying the
existence of an employer-employee relationship between them under the doctrine of ostensible
agency or agency by estoppel; and third, PSIs failure to supervise Dr. Ampil and its resident
physicians and nurses and to take an active step in order to remedy their negligence rendered it
directly liable under the doctrine of corporate negligence.

In its motion for reconsideration, PSI contends that the Court erred in finding it liable under Article
2180 of the Civil Code, there being no employer-employee relationship between it and its consultant,
Dr. Ampil. PSI stressed that the Courts Decision in Ramos holding that "an employer-employee
relationship in effect exists between hospitals and their attending and visiting physicians for the
purpose of apportioning responsibility" had been reversed in a subsequent Resolution. 3 Further, PSI
argues that the doctrine of ostensible agency or agency by estoppelcannot apply because
spouses Agana failed to establish one requisite of the doctrine, i.e., that Natividad relied on the
representation of the hospital in engaging the services of Dr. Ampil. And lastly, PSI maintains that
thedoctrine of corporate negligence is misplaced because the proximate cause of Natividads
injury was Dr. Ampils negligence.

The motion lacks merit.

As earlier mentioned, the First Division, in its assailed Decision, ruled that an employer-employee
relationship "in effect" exists between the Medical City and Dr. Ampil. Consequently, both are jointly
and severally liable to the Aganas. This ruling proceeds from the following ratiocination in Ramos:

We now discuss the responsibility of the hospital in this particular incident. The unique
practice (among private hospitals) of filling up specialist staff with attending and visiting
"consultants," who are allegedly not hospital employees, presents problems in apportioning
responsibility for negligence in medical malpractice cases. However, the difficulty is only
more apparent than real.

In the first place, hospitals exercise significant control in the hiring and firing of
consultants and in the conduct of their work within the hospital premises. Doctors who
apply for "consultant" slots, visiting or attending, are required to submit proof of completion of
residency, their educational qualifications; generally, evidence of accreditation by the
appropriate board (diplomate), evidence of fellowship in most cases, and references. These
requirements are carefully scrutinized by members of the hospital administration or by a
review committee set up by the hospital who either accept or reject the application. This is
particularly true with respondent hospital.

After a physician is accepted, either as a visiting or attending consultant, he is

normally required to attend clinico-pathological conferences, conduct bedside rounds
for clerks, interns and residents, moderate grand rounds and patient audits and
perform other tasks and responsibilities, for the privilege of being able to maintain a
clinic in the hospital, and/or for the privilege of admitting patients into the hospital. In
addition to these, the physicians performance as a specialist is generally evaluated by
a peer review committee on the basis of mortality and morbidity statistics, and
feedback from patients, nurses, interns and residents. A consultant remiss in his
duties, or a consultant who regularly falls short of the minimum standards acceptable
to the hospital or its peer review committee, is normally politely terminated.

In other words, private hospitals hire, fire and exercise real control over their attending and
visiting "consultant" staff. While "consultants" are not, technically employees, a point
which respondent hospital asserts in denying all responsibility for the patients
condition, the control exercised, the hiring, and the right to terminate consultants all
fulfill the important hallmarks of an employer-employee relationship, with the
exception of the payment of wages. In assessing whether such a relationship in fact
exists, the control test is determining. Accordingly, on the basis of the foregoing, we
rule that for the purpose of allocating responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their attending
 and visiting physicians. This being the case, the question now arises as to whether or not
respondent hospital is solidarily liable with respondent doctors for petitioners condition.

The basis for holding an employer solidarily responsible for the negligence of its employee is
found in Article 2180 of the Civil Code which considers a person accountable not only for his
own acts but also for those of others based on the formers responsibility under a
relationship of partia ptetas.

Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and its
consultants on the bases of certain factors. One such factor is the "control test" wherein the hospital
exercises control in the hiring and firing of consultants, like Dr. Ampil, and in the conduct of their
work.

Actually, contrary to PSIs contention, the Court did not reverse its ruling in Ramos. What it clarified
was that the De Los Santos Medical Clinic did not exercise control over its consultant, hence, there
is no employer-employee relationship between them. Thus, despite the granting of the said hospitals
motion for reconsideration, the doctrine in Ramos stays, i.e., for the purpose of allocating
responsibility in medical negligence cases, an employer-employee relationship exists between
hospitals and their consultants.

In the instant cases, PSI merely offered a general denial of responsibility, maintaining that
consultants, like Dr. Ampil, are "independent contractors," not employees of the hospital. Even
assuming that Dr. Ampil is not an employee of Medical City, but an independent contractor, still the
said hospital is liable to the Aganas.

In Nograles, et al. v. Capitol Medical Center, et al.,4 through Mr. Justice Antonio T. Carpio, the Court
held:

The question now is whether CMC is automatically exempt from liability considering that Dr.
Estrada is an independent contractor-physician.

In general, a hospital is not liable for the negligence of an independent contractor-physician.

There is, however, an exception to this principle. The hospital may be liable if the physician is
the "ostensible" agent of the hospital. (Jones v. Philpott, 702 F. Supp. 1210 [1988]) This
exception is also known as the "doctrine of apparent authority." (Sometimes referred to as
the apparent or ostensible agency theory. [King v. Mitchell, 31 A.D.3rd 958, 819 N.Y. S.2d 169
(2006)].

xxx

The doctrine of apparent authority essentially involves two factors to determine the liability of
an independent contractor-physician.

The first factor focuses on the hospitals manifestations and is sometimes described as an
inquiry whether the hospital acted in a manner which would lead a reasonable person to
conclude that the individual who was alleged to be negligent was an employee or agent of
the hospital. (Diggs v. Novant Health, Inc., 628 S.E.2d 851 (2006) citing Hylton v.
Koontz, 138 N.C. App. 629 (2000). In this regard, the hospital need not make express
 representations to the patient that the treating physician is an employee of the
hospital; rather a representation may be general and implied. (Id.)

The doctrine of apparent authority is a specie of the doctrine of estoppel. Article 1431 of the
Civil Code provides that "[t]hrough estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against the
person relying thereon." Estoppel rests on this rule: "Whether a party has, by his own
declaration, act, or omission, intentionally and deliberately led another to believe a particular
thing true, and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act or omission, be permitted to falsify it. (De Castro v. Ginete, 137 Phil. 453
[1969], citing Sec. 3, par. A, Rule 131 of the Rules of Court. See also King v. Mitchell, 31
A.D.3rd 958, 819 N.Y.S.2d 169 [2006]).

xxx

The second factor focuses on the patients reliance. It is sometimes characterized as an

inquiry on whether the plaintiff acted in reliance upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence. (Diggs v. Novant Health, Inc.)

PSI argues that the doctrine of apparent authority cannot apply to these cases because spouses
Agana failed to establish proof of their reliance on the representation of Medical City that Dr. Ampil is
its employee.

The argument lacks merit.

Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was that he knew
him to be a staff member of Medical City, a prominent and known hospital.

Q Will you tell us what transpired in your visit to Dr. Ampil?

A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member there, and I
told him about the case of my wife and he asked me to bring my wife over so she could be
examined. Prior to that, I have known Dr. Ampil, first, he was staying in front of our house, he
was a neighbor, second, my daughter was his student in the University of the East School of
Medicine at Ramon Magsaysay; and when my daughter opted to establish a hospital or a
clinic, Dr. Ampil was one of our consultants on how to establish that hospital. And from there,
I have known that he was a specialist when it comes to that illness.

Atty. Agcaoili

On that particular occasion, April 2, 1984, what was your reason for choosing to contact Dr.
Ampil in connection with your wifes illness?

A First, before that, I have known him to be a specialist on that part of the body as a
surgeon; second, I have known him to be a staff member of the Medical City which is a
prominent and known hospital.And third, because he is a neighbor, I expect more than the
usual medical service to be given to us, than his ordinary patients.5
Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name
and those of the other physicians in the public directory at the lobby of the hospital amounts to
holding out to the public that it offers quality medical service through the listed physicians. This
justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It must be stressed
that under the doctrine of apparent authority, the question in every case is whether the
principal has by his voluntary act placed the agent in such a situation that a person of
ordinary prudence, conversant with business usages and the nature of the particular
business, is justified in presuming that such agent has authority to perform the particular act
in question.6 In these cases, the circumstances yield a positive answer to the question.

The challenged Decision also anchors its ruling on the doctrine of corporate responsibility.7 The
duty of providing quality medical service is no longer the sole prerogative and responsibility of the
physician. This is because the modern hospital now tends to organize a highly-professional
medical staff whose competence and performance need also to be monitored by the hospital
commensurate with its inherent responsibility to provide quality medical care. 8 Such responsibility
includes the proper supervision of the members of its medical staff. Accordingly, the hospital
has the duty to make a reasonable effort to monitor and oversee the treatment prescribed
and administered by the physicians practicing in its premises.

Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate investigation on the
reported missing gauzes to the great prejudice and agony of its patient. Dr. Jocson, a member of
PSIs medical staff, who testified on whether the hospital conducted an investigation, was evasive,
thus:

Q We go back to the operative technique, this was signed by Dr. Puruganan, was
this submitted to the hospital?

A Yes, sir, this was submitted to the hospital with the record of the patient.

Q Was the hospital immediately informed about the missing sponges?

A That is the duty of the surgeon, sir.

Q As a witness to an untoward incident in the operating room, was it not your

obligation, Dr., to also report to the hospital because you are under the control and
direction of the hospital?

A The hospital already had the record of the two OS missing, sir.

Q If you place yourself in the position of the hospital, how will you recover.

A You do not answer my question with another question.

Q Did the hospital do anything about the missing gauzes?

A The hospital left it up to the surgeon who was doing the operation, sir.

Q Did the hospital investigate the surgeon who did the operation?
 A I am not in the position to answer that, sir.

Q You never did hear the hospital investigating the doctors involved in this case of
those missing sponges, or did you hear something?

xxxxxx

A I think we already made a report by just saying that two sponges were missing, it
is up to the hospital to make the move.

Atty. Agana

Precisely, I am asking you if the hospital did a move, if the hospital did a move.

A I cannot answer that.

Court

By that answer, would you mean to tell the Court that you were aware if there was
such a move done by the hospital?

A I cannot answer that, your honor, because I did not have any more follow-up of
the case that happened until now.9

The above testimony obviously shows Dr. Jocsons lack of concern for the patients. Such
conduct is reflective of the hospitals manner of supervision. Not only did PSI breach its duty
to oversee or supervise all persons who practice medicine within its walls, it also failed to
take an active step in fixing the negligence committed. This renders PSI, not only vicariously
liable for the negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for
its own negligence under Article 2176.

Moreover, there is merit in the trial courts finding that the failure of PSI to conduct an investigation
"established PSIs part in the dark conspiracy of silence and concealment about the gauzes."
The following testimony of Atty. Agana supports such findings, thus:

Q You said you relied on the promise of Dr. Ampil and despite the promise you were not
able to obtain the said record. Did you go back to the record custodian?

A I did not because I was talking to Dr. Ampil. He promised me.

Q After your talk to Dr. Ampil, you went to the record custodian?

A I went to the record custodian to get the clinical record of my wife, and I was
given a portion of the records consisting of the findings, among them, the entries of
the dates, but not the operating procedure and operative report.10

In sum, we find no merit in the motion for reconsideration.

WHEREFORE, we DENY PSIs motion for reconsideration with finality.

SO ORDERED.