Frias v. San Diego-Sison

BOBIE ROSE FRIAS v. FLORA SAN DIEGO-SISON 

2007 / Austria-Martinez

On 7 Dec 1990, Bobie Rose Frias and Dr. Flora San-Diego Sison entered into a MOA over Frias’ property

• MOA consideration is 3M
• Sison has 6 months from the date of contract’s execution to notify Frias of her intention to purchase the property with the improvements at 6.4M
• Prior to this 6 month period, Frias may still offer the property to other persons, provided that 3M shall be paid to Sison including interest based on prevailing compounded bank interest + amount of sale in excess of 7M [should the property be sold at a price greater than 7M]
• In case Frias has no other buyer within 6 months from the contract’s execution, no interest shall be charged by Sison on the 3M
• In the event that on the 6^th month, Sison would decide not to purchase the property, Frias has 6 months to pay 3M (amount shall earn compounded bank interest for the last 6 months only)
• 3M treated as a loan and the property considered as the security for the mortgage
• Upon notice of intention to purchase, Sison has 6 months to pay the balance of 3.4M (6.4M less 3M MOA consideration)

Frias received from Sison 3M (2M in cash; 1M post-dated check dated February 28, 1990, instead of 1991, which rendered the check stale). Frias gave Sison the TCT and the Deed of Absolute Sale over the property. Sison decided not to purchase the property, so she notified Frias through a letter dated March 20, 1991 [Frias received it only on June 11, 1991], and Sison reminded Frias of their agreement that the 2M Sison paid should be considered as a loan payable within 6 months. Frias failed to pay this amount.
Sison filed a complaint for sum of money with preliminary attachment. Sison averred that Frias tried to deprive her of the security for the loan by making a false report of the loss of her owner’s copy of TCT, executing an affidavit of loss and by filing a petition[1] for the issuance of a new owner’s duplicate copy. RTC issued a writ of preliminary attachment upon the filing of a 2M bond.

RTC found that Frias was under obligation to pay Sison 2M with compounded interest pursuant to their MOA. RTC ordered Frias to pay Sison: 

• 2M + 32% annual interest beginning December 7, 1991 until fully paid
• 70k representing premiums paid by Sison on the attachment bond with legal interest counted from the date of this decision until fully paid
• 100k moral, corrective, exemplary damages [liable for moral damages because of Frias’ fraudulent scheme]
• 100k attorney’s fees + cost of litigation

CA affirmed RTC with modification—32% reduced to 25%. CA said that there was no basis for Frias to say that the interest should be charged for 6 months only. It said that a loan always bears interest; otherwise, it is not a loan. The interest should commence on June 7, 1991 until fully paid, with compounded bank interest prevailing at the time [June 1991] the 2M was considered as a loan (as certified by the bank). 

ISSUES & HOLDING – Ratio only discusses topic of INTEREST (as per syllabus) 

• WON compounded bank interest should be limited to 6 months as contained in the MOA. NO 
• WON Sison is entitled to moral damages. YES 
• WON the grant of attorney’s fees is proper, even if not mentioned in the body of the decision. NO

CA committed no error in awarding an annual 25% interest on the 2M even beyond the 6-month stipulated period. In this case, the phrase "for the last six months only" should be taken in the context of the entire agreement.

SC notes that the agreement speaks of two (2) periods of 6 months each (see FACTS—words in bold & underline). No interest will be charged for the 1^st 6-month period [while Sison was making up her mind], but only for the 2^nd 6-month period after Sison decided not to buy the property. There is nothing in the MOA that suggests that interest will be charged for 6 months only even if it takes forever for Frias to pay the loan.

The payment of regular interest constitutes the price or cost of the use of money, and until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount. For a debtor to continue in possession of the principal of the loan and to continue to use the same after maturity of the loan without payment of the monetary interest constitutes unjust enrichment on the part of the debtor at the expense of the creditor.

CA DECISION AND RESOLUTION AFFIRMED WITH MODIFICATION—Award of attorney’s fees deleted

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[1] At first, Frias’ petition was granted, but it was eventually set aside, since RTC granted Sison’s petition for relief from judgment (as Sison was in possession of the owner’s duplicate copy).

Lawyers Cooperative v. Tabora

LAWYERS COOPERATIVE PUBLISHING COMPANY v. PERFECTO A. TABORA

1965 / BAUTISTA ANGELO

FACTS

Perfecto Tabora bought from the Lawyers Cooperative Publishing Company a complete set of AmJur, plus a set of AmJur, General Index.

CONTRACT "Title to and ownership of the books shall remain with the seller until the purchase price shall have been fully paid. Loss or damage to the books after delivery to the buyer shall be borne by the buyer."

Tabora made a partial payment of P300.00, leaving a balance of P1,382.40. The books were delivered and receipted for by Tabora. On the same day, a fire broke out, burning down Tabora’s law office and library. Tabora immediately reported it to LCBC. The company replied and as a token of goodwill it sent to Tabora free of charge 4 Philippine Reports volumes.

As Tabora failed to pay the monthly installments agreed upon, LCBC filed an action to recover of the balance.

TABORA’S CONTENTIONS

• Contract: title to and the ownership of the books shall remain with the seller until the purchase price shall have been fully paid, so LCBC should bear the loss
• Even assuming that the ownership was transferred to Tabora, he should not answer for the loss: force majeure (no evidence that Tabora contributed in any way)

ISSUE & HOLDING

Who bears the loss? Tabora

RATIO

GENERAL RULE The loss of the object of the contract of sale is borne by the owner or in case of force majeure the one under obligation to deliver the object is exempt from liability

• THIS IS NOT APPLICABLE HERE Contract provides that loss or damage after delivery shall be borne by the buyer

FORCE MAJEURE DEFENSE FAILS

The rule only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event.

• NOT PRESENT IN THIS CASE

The obligation is pecuniary in nature, and the obligor bound himself to assume the loss after the delivery.

Quisaba v. Sta. Ines-Melale Veneer and Plywood

JOVITO QUISABA v. STA. INES-MELALE VENEER & PLYWOOD [SIMVP]

1974 / Castro

FACTS

Quisaba was an internal auditor of SIMVP for 18 years. On January 1973, SIMVP VP Robert Hyde instructed him to purchase logs for the company's plant, but Quisaba, he refused to do so, saying that such task is inconsistent with his position. The next day, Hyde informed Quisaba of his temporary relief as internal auditor so that he could carry out the instructions given. Hyde warned him that failure to comply would be considered a ground for his dismissal.

Quisaba filed a complaint for moral damages, exemplary damages, termination pay and attorney's fees against SIMVP and its VP Robert Hyde. Quisaba was NOT asking for backwages nor reinstatement. Quisaba alleged that due to SIMVP’s acts, he suffered mental anguish, serious anxiety, besmirched reputation, wounded feelings, moral shock and social humiliation.

SIMVP moved to dismiss the complaint on the ground of lack of jurisdiction of the CFI, asserting that the proper forum is the NLRC. Quisaba opposed this, and he informed the court that an NLRC representative said that NLRC has no jurisdiction over claims or suits for damages arising out of employee-employer relationship. Nonetheless, CFI granted the motion to dismiss on the ground that the complaint involves an employee-employer relation.

ISSUE & HOLDING

Who has jurisdiction over the case? CFI has jurisdiction. This is a CIVIL dispute, not a labor dispute.

RATIO

This case is concerned with a civil (not a labor) dispute, as it has to do with an alleged violation of Quisaba's rights as a member of society, and it does not involve an existing employee-employer relation within the meaning of PD 21, Sec. 2(1).

Civil law consists of that mass of precepts that determine or regulate the relations that exist between members of a society for the protection of private interests.

NLRC jurisdiction is defined by PD 21, Sec. 2.

• All matters involving employee-employer relations including all disputes and grievances which may otherwise lead to strikes and lockouts under RA 875
• All strikes overtaken by Proc. 1081
• All pending cases in the Bureau of Labor Relations.

Although the acts complained of seemingly appear to constitute "matters involving employee-employer relations," Quisaba’s complaint is grounded on the manner of his dismissal and the consequent effects of such dismissal, not on his dismissal per se, as he does not ask for reinstatement or backwages.

The "right" of SIMVP to dismiss Quisaba should not be confused with the manner in which the right was exercised and the effects flowing therefrom. If the dismissal was done anti-socially or oppressively, then SIMVP violated the following:

• NCC 1701 – prohibits acts of oppression by either capital or labor against the other
• NCC 21 – makes a person liable for damages if he willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy

Moral damages may be recovered in acts and actions referred to in NCC 21. [NCC 2219 (10)]

ORDER SET ASIDE; CASE REMANDED FOR FURTHER PROCEEDINGS

Que v. IAC

MAGTANGGOL QUE v. IAC and ANTONIO NICOLAS

1989 / Cruz

Human Relations Torts > Acts Contra Bonus Mores

In 1975, Antonio Nicolas ordered from Magtanggol Que canvass strollers, and Nicolas issued to Que 5 post-dated checks with a total face value of P7,600.00. Nicolas ordered a "stop payment" because of defects in the articles sold which Que had not corrected, so Que was unable to encash the checks.

Que filed a complaint for estafa against Nicolas. The charge was dismissed for lack of merit, as the investigating fiscal held that it was an accounting matter, which did not necessarily involve deceit on Nicolas’ part of Nicolas.

In 1976, Nicolas filed his own complaint for damages against Que for malicious prosecution. Que averred that Nicolas had maliciously filed the complaint in Bulacan although he was a resident of Caloocan City, and Nicolas was indebted to him in any case, and that it was he [Que] who suffered damages due to the unwarranted suit.

Judge Puno held in favor of Nicolas, finding that Que acted maliciously in filing the estafa charge and in alleging that Nicolas issued the dishonored checks with deceit. Que’s MfR was denied. A 2^nd MfR was filed, and Que averred the mere dismissal of the charge in the fiscal's office was not a ground for damages nor did it constitute an actionable wrong. The trial court reversed the original decision, so Que won.

Nicolas contended that the amended decision was null and void for several technical reasons. IAC reinstated the original decision of Judge Puno—so Nicolas won.

QUE NOT GUILTY OF MALICIOUS PROSECUTION

To constitute malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person that it was initiated deliberately by the defendant knowing that his charges were false and groundless. The mere act of submitting a case to the authorities for prosecution does not make one liable for malicious prosecution.

One cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause. The presence of probable cause signifies as a legal consequence the absence of malice. If the charge, although false, was made with an honest belief in its truth and justice, and there were reasonable grounds on which such a belief could be founded, the accusation could not be held to have been false in the legal sense. [Buchanan v. Esteban]

Proof and motive that the prosecution or institution of the action was prompted by a sinister design to vex and humiliate a person and to cast dishonor and disgrace must be clearly and preponderantly established to entitle the victims to damages and other rights granted by law. Otherwise, there would always be a civil action for damages after the prosecution's failure to prove its cause. The adverse result of an action does not per se make the act wrongful and subject the actor to the payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not be charged on those who may exercise it erroneously.

Considering that the checks could not be encashed and the supposedly defective goods had not been returned, Que had reason to believe that Nicolas intended to deceive him. Que was not motivated by ill feeling but only by an anxiety to protect his rights. Even if the fiscal found that no deceit was involved and that Que’s claim was unfounded, the mistaken charge was not malicious.

The mere dismissal of the criminal complaint by the fiscal's office did not create a cause of action. What was inquired into was WON there was a prima facie showing of estafa. Nowhere in the fiscal's investigation report is there any statement imputing malice to Que.

SC finds Que’s claim of harassment more plausible. However, inasmuch as good faith is presumed, absent sufficient rebuttable evidence, neither of them is guilty of malice. SC denied both parties their respective claims for damages. Each of them must bear the financial consequences of one’s own acts, including the litigation expenses.

IAC DECISION SET ASIDE; AMENDED DECISION OF TRIAL COURT REINSTATED

Valenzuela v. CA

ARTURO VALENZUELA and HOSPITALITA VALENZUELA v. CA, BIENVENIDO ARAGON, ROBERT PARNELL, CARLOS CATOLICO and THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY

1990 / Gutierrez, Jr.

FACTS

Arturo Valenzuela [Valenzuela] is a general agent of Philippine American General Insurance Company [Philamgen] since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen all kinds of non-life insurance, and in consideration of services rendered was entitled to receive the full agent's commission of 32.5% from Philamgen. From 1973 to 1975, Valenzuela solicited marine insurance from Delta Motors. However, Valenzuela did not receive his full commission.

In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela on a 50-50 basis, but he refused. In 1978, Philamgen and its President [Aragon] insisted on the sharing of the commission with Valenzuela, but he firmly reiterated his objection to the proposals. Because of the refusal of Valenzuela, Philamgen and its officers took drastic action. They reversed the commission due him by not crediting in his account the commission earned from the Delta Motors insurance, placed agency transactions on a cash and carry basis, threatened the cancellation of policies issued by his agency, and started to leak out news that Valenzuela has a substantial account with Philamgen. This resulted in the decline of his business as insurance agent. Philamgen terminated the General Agency Agreement of Valenzuela in December 1978.

                Valenzuela filed a complaint against Philamgen, and the RTC ruled in his favor, as his termination was found to be unjustified. However, the CA ruled in favor of Philamgen, as CA ordered Valenzuela to pay Philamgen the amount corresponding to the unpaid and uncollected premiums.

ISSUE & HOLDING

WON Valenzuela should be held liable for unpaid and uncollected premiums. NO.

RATIO

Under Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding.

Philippine Phoenix Surety and Insurance v. Woodworks (1979)

• The non-payment of premium does not merely suspend but puts an end to an insurance contract since the time of the payment is peculiarly of the essence of the contract.
• An insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of indemnity. (Citing Insurance Law and Practice by John Alan Appleman)
• The foregoing findings are buttressed by Section 776 of the Insurance Code (PD 612), which now provides that no contract of insurance by an insurance company is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary

Arce v. The Capital Insurance and Surety

• Unless premium is paid, an insurance contract does not take effect.
• Delgado (Capital Insurance & Surety Co., Inc. v. Delgado) was decided in the light of the Insurance Act before Sec. 72 was amended by the underscored portion. Prior to the Amendment, an insurance contract was effective even if the premium had not been paid so that an insurer was obligated to pay indemnity in case of loss and correlatively he had also the right to sue for payment of the premium. But the amendment to Sec. 72 has radically changed the legal regime in that unless the premium is paid there is no insurance.

Since the premiums have not been paid, the policies issued have lapsed. The insurance coverage did not go into effect or did not continue and the obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no more liability under the lapsed and inexistent policies to demand, much less sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing. In this instance, with the lapsing of the policies through the nonpayment of premiums by the insured there were no more insurance contracts to speak of.

RTC DECISION REINSTATED

Velasco v. Apostol

LAURA VELASCO and GRETA ACOSTA v. JUDGE SERGIO APOSTOL and MAHARLIKA INSURANCE

1989 / Regalado

FACTS

On 27 Nov 1973, around 230 PM, Laura Velasco and Greta Acosta were riding in Velasco’s Mercury car when an N/S taxicab driven by Dominador Santos [registered in the name of Alice Artuz, c/o Norberto Santos] crossed the center island towards their direction, and collided with their car at the left front part. The taxicab tried to return to its original lane, but was unable to climb the island. It backtracked, hitting again Velasco’s car in the left near portion, causing the latter's back portion to turn toward the center hitting a jeepney on its right, which was travelling along their side.

                Velasco and Acosta sued the taxicab driver and its registered owners, claiming actual, moral and exemplary damages plus attorney's fees. Maharlika Insurance was impleaded as a defendant in an amended complaint, with an allegation that the N/S taxicab was insured against third party liability for 20k with Maharlika at the time of the accident.

Maharlika claimed that there was no cause of action against it because at the time of the accident, the alleged insurance policy was not in force due to non-payment of the premium. It further averred that even if the taxicab had been insured, the complaint would still be premature since the policy provides that the insurer would be liable only when the insured becomes legally liable.

RTC ruled in favor of Velasco and Acosta, finding that the proximate cause of the accident was the taxicab driver’s negligence. However, Maharlika was exonerated on the ground that the policy was not in force for failure to pay the initial premium and for their concealment of a material fact. The payment was accepted by Maharlika without any knowledge that the risk insured against had already occurred since such fact was concealed by the insured and was not revealed to Maharlika.

The accident occurred on 27 Nov 1973 while the initial premium was paid only on 11 Dec 1973. Velasco and Acosta maintain that in spite of this late payment, the policy is binding because there was an implied agreement to grant a credit extension so as to make the policy effective. To them, the subsequent acceptance of the premium and delivery of the policy estops Maharlika from asserting that the policy is ineffective.

ISSUE & HOLDING

WON Maharlika Insurance is liable. NOT LIABLE. RTC JUDGMENT AFFIRMED.

RATIO

It should be noted that this controversy arose under the aegis of the old insurance law, Act No. 2427, as amended. The former insurance law, which applies to this case, provided that:

An insurer is entitled to the payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid.

The insurance policy in question would be valid and binding notwithstanding the non-payment of the premium if there was a clear agreement to grant to the insured credit extension. Such agreement may be express or implied.

SC finds no cogent proof of any such implied agreement. Had there really been a credit extension, the insured would not have had any apprehension or hesitation to inform Maharlika at the time of or before the payment of the premium that an accident for which the insurer may be held liable had already happened. Under such circumstances, notice alone is necessary and the insured need not pay the premium because whatever premium may have been due may already be deducted upon the satisfaction of the loss under the policy. Velasco and Acosta failed to point out any other circumstances showing that prepayment of premium was not intended to be insisted upon. They have thus failed to discharge the burden of proving their allegation of the existence of the purported credit extension agreement.

                SC noted that in the present law, Section 77 of the Insurance Code of 1978 has deleted the clause "unless there is clear agreement to grant the insured credit extension of the premium due" which was involved in this controversy.

The fact withheld could not have influenced Maharlika in entering into the supposed contract or in estimating the character of the risk or in fixing the rate premium, because no such contract existed at the time of the accident. There was nothing to rescind at that point in time. What should be apparent from such actuations of the taxicab owner/s is the presence of bad faith on their part, a reprehensible disregard of the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith. 

UCPB General Insurance v. Masagana Telamart (2001)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

2001 / Davide, Jr.

FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]

CA disagreed with UCPB’s stand that Masagana’s tender of payment of the premiums on 13 July 1992 did not result in the renewal of the policies, having been made beyond the effective date of renewal as provided under Policy Condition No. 26:

Renewal Clause. -- Unless the company at least 45 days in advance of the end of the policy period mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal.

The following facts have been established:

1.  For years, UCPB had been issuing fire policies to th Masagana, and these policies were annually renewed.

2.  UCPB had been granting Masagana a 60-90-day credit term within which to pay the premiums on the renewed policies.

3.  There was no valid notice of non-renewal of the policies, as there is no proof that the notice sent by ordinary mail was received by Masagana, and the copy allegedly sent to Zuellig was ever transmitted to Masagana.

4.  The premiums for the policies were paid by Masagana within the 60- 90-day credit term and were duly accepted and received by UCPB’s cashier.

ISSUE & HOLDING

WON IC 77 must be strictly applied to UCPB’s advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums. NO. MASAGANA WINS THIS TIME. 1999 DECISION SET ASIDE; CA DECISION AFFIRMED

RATIO

SEC. 77.  An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.  Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

This was formerly Act 2427, Section 72:

SEC. 72.  An insurer is entitled to payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due.  No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid. (Underscoring supplied)

IC 77 does not restate the portion of IC 72 expressly permitting an agreement to extend the period to pay the premium.  However, there are exceptions to IC 77.

1. In case of a life or industrial life policy whenever the grace period provision applies [Sec. 77]
2. Any acknowledgment of the receipt of premium is conclusive evidence of payment [Sec. 78]
3. If the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss [Makati Tuscany Condominium v. CA]
4. The insurer may grant credit extension for the payment of the premium [Makati Tuscany Condominium] 
5. Estoppel

IC 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy. [Makati Tuscany Condominium v. CA]

ON EXCEPTION #4. If the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.

It would be unjust and inequitable if recovery on the policy would not be permitted against UCPB, which had consistently granted a 60-90-day credit term for the payment of premiums despite its full awareness of IC 77.  Estoppel bars it from taking refuge under said section, since Masagana relied in good faith on such practice.  

UCPB General Insurance v. Masagana Telamart (1999)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

1999 / Pardo

FACTS

In 1991, UCPB issued 5 fire insurance policies covering Masagana Telamart’s various properties for the period from 22 May 1991 to 22 May 1992.

On March 1992 [~2 months before policy expiration], UCPB evaluated the policies and decided not to renew them upon expiration of their terms on 22 May 1992.  UCPB advised Masagana’s broker of its intention not to renew the policies. On April 1992 [~1 month before policy expiration], UCPB gave written notice to Masagana of the non-renewal of the policies. On June 1992 [policy already expired], Masagana’s property covered by 3 UCPB-issued policies was razed by fire.

On 13 July 1992, Masagana presented to UCPB’s cashier 5 manager's checks, representing premium for the renewal of the policies for another year.

It was only on the following day, 14 July 1992, when Masagana filed with UCPB a formal claim for indemnification of the insured property razed by fire. On the same day, UCPB returned the 5 manager's checks, and rejected Masagana’s claim since the policies had expired and were not renewed, and the fire occurred on 13 June 1992 (or before tender of premium payment).

            Masagana filed a civil complaint for recovery of the face value of the policies covering the insured property razed by fire. RTC ruled in favor of Masagana, as it found it to have complied with the obligation to pay the premium; hence, the replacement-renewal policy of these policies are effective and binding for another year [22 May 1992 – 22 May 1993].

            CA affirmed RTC, holding that following previous practice, Masagana was allowed a 60-90 day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested that payment could be made later.

ISSUE & HOLDING

WON the fire insurance policies had expired on 22 May 1992, or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk insured against [fire]. FIRE INSURANCE POLICIES HAD EXPIRED

RATIO

An insurance policy, other than life is not valid and binding until actual payment of the premium.  Any agreement to the contrary is void. The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding before actual payment.

The case of Malayan Insurance v. Cruz-Arnaldo cited by the CA is not applicable. In that case, payment of the premium was made on before the occurrence of the fire.  In the present case, the payment of the premium for renewal of the policies was tendered a month after the fire occurred.  Masagana did not even give UCPB a notice of loss within a reasonable time after occurrence of the fire.

CA DECISION REVERSED 

Philippine Rabbit Bus Lines v. Phil-American Forwarders

PHILIPPINE RABBIT BUS LINES and FELIX PANGALANGAN v. PHIL-AMERICAN FORWARDERS, ARCHIMEDES BALINGIT, and FERNANDO PINEDA

1975 / Aquino / Appeal from CFI order

FACTS

Pineda recklessly drove a freight truck [owned by Phil-American Forwarders] along the national highway at Pampanga, and the truck bumped the PRBL bus driven by Pangalangan. As a result, Pangalangan suffered injuries and the bus was damaged and could not be used for 79 days, thus depriving PRBL of earnings amounting to P8,665.51. Balingit was the manager of Phil-American Forwarders.

PRBL and Pangalangan filed a complaint for damages against Phil-American Forwarders, Balingit, and Pineda. Defendants said Balingit was not Pineda's employer. Balingit moved that the complaint against him be dismissed on the ground that PRBL and Pangalangan had no cause of action against him. CFI dismissed the complaint against Balingit, on the ground that he is not the manager of an establishment as contemplated in NCC 2180.

ISSUE AND HOLDING

WON the terms "employers" and "owners and managers of an establishment or enterprise" embrace the manager of a corporation owning a truck, the reckless operation of which allegedly resulted in the vehicular accident from which the damage arose. NO.

RATIO

Those terms do not include the manager of a corporation. It may be gathered from the context of NCC 2180 that the term "manager" ("director" in the Spanish version) is used in the sense of "employer". Hence, no tortious or quasi-delictual liability can be imposed on Balingit as manager of Phil-American Forwarders, in connection with the vehicular accident in question, because he himself may be regarded as an employee or dependiente of Phil-American Forwarders.

CFI AFFIRMED

Amadora v. CA

AMADORA v. CA

G.R. No. L-44745, Apr. 15, 1988

The setting is the Colegio-de San Jose Recoletos, which was NOT a school of arts and trades but an academic institution of learning. A few days before the commencement exercises, student Alfredo Amadora went to school to finish his physics experiment as a prerequisite for graduation. When he was in the auditorium, he was shot to death by his classmate Pablito Daffon.

Pablito was convicted of homicide thru reckless imprudence. Alfredo’s parents filed a civil action for damages under NCC 2180 against the school, its rector, the high school principal, the dean of boys, the physics teacher, together with Pablito and two other students, through their parents. The complaint against the students was dropped.

CONTENTIONS ON CUSTODY

• PETITIONERS: AMADORA UNDER SCHOOL’S CUSTODY. He was in school to show his physics experiment as a graduation prerequisite.
• RESPONDENTS: AMADORA NOT UNDER SCHOOL’S CUSTODY. Semester already ended.

THE GUN ISSUE

Days before the incident, the dean of the boys confiscated from Gumban an unlicensed pistol but later returned it to him without making a report to the principal or taking any further action. PETITIONERS contend that this was the same pistol, as Gumban was one of Daffon’s companions when the latter fired the gun that killed Amadora, and that Amadora would not have been killed if the gun was not returned by the dean of the boys.

RULING OF COURTS

CFI held the remaining defendants liable. CA, however, reversed CFI and all defendants were absolved. CA found that NCC 2180 was not applicable since the school was not a school of arts and trades. It also held that the students were not in the school’s custody at the time of the incident since the semester already ended. In addition, there was no clear identification of the gun, and that the defendant exercised the necessary diligence in preventing injury.

ISSUES & HELD (aka QUICK SUMMARY OF FINDINGS)

1. Does NCC 2180 also cover establishments that are NOT schools of arts and trades? – YES
2. When is the offending student supposed to be in the school’s custody? – As long as he is under the control and influence of the school and within its premises, whether the semester has not yet begun or has already ended. Alfredo still under custody
3. Who is liable for the injury? – None of the respondents is liable for the injury inflicted by Pablito on Alfredo

RULING

1.     The school CANNOT be held directly liable under NCC 2180.

Three cases were cited: Exconde, Mercado, and Palisoc.

What you need to know in Exconde

• Student boarded a jeep, took over its wheel and drove it recklessly that it turned turtle, resulting to the death of two of its passengers.
• This decision, penned by Justice Angelo exculpated the school on the ground that it was not a school of arts and trades.
• Justice Reyes said that the school authorities should be held liable.
• Liability was imposed on teachers in general, and heads of schools of arts and trades in particular. The clause “of establishments of arts and trades” should apply only to heads.

What you need to know in Mercado

• A student cut a classmate with a razor blade during recess time in school.
• Exconde was reiterated in this case (the school was exculpated on the ground that it was not a school of arts and trades).
• The custody requirement was not proved as it “contemplates a situation where the student lives and boards with the teacher, such that the control, direction and influences on the pupil supersede those of the parent.”

What you need to know in Palisoc

• A student was killed by a classmate with fist blows in the laboratory of the school.
• The head of the school and the teacher-in-charge were held liable together with the wrongdoer, even though the latter was not boarding in the school.
• The ponencia, Justice Teehankee, said, “There is nothing in the law that requires that for such liability to attach, the pupil or student who commits the tortious act must live an board in the school,” as erroneously held in Exconde and Mercado.

 The case at hand – Amadora

• The school has been directly impleaded unlike in Exconde and Mercado.
• The school is an academic institution of learning, unlike in Palisoc wherein the school was an arts and trade school.

 Q: Does NCC 2180 also cover establishments that are NOT schools of arts and trades? – YES

GENERAL RULE. Where the school is academic rather than technical or vocational in nature, responsibility for the tort committed by the student will attach to the teacher in charge of the student, following the first part of NCC 2180. In the case of establishments of arts and trades, it is the head that should be answerable as an exception to the general rule.

                Following the canon of reddendo singula singulis, “teachers” should apply to the words “pupils and students” and “heads of establishments of arts and trades” to the word “apprentices.”

On the differences between academic and non-academic schools

There is no substantial distinction between the academic and the non-academic schools insofar as torts committed by their students are concerned. The same vigilance is expected from the teacher over the students under his control and supervision, whatever the nature of the school where he is teaching. The teacher should not be able to excuse himself by simply showing that he is teaching in an academic school where, on the other hand, the head would be held liable if the school were non-academic.

                HOWEVER, why is it that for academic schools, the teacher is the one held liable, while for non-academic / arts and trade schools, the head is the one held liable? The answer can be traced to the fact that historically, the head exercised a closer tutelage over his pupils than the head of an academic school because of the apprenticeship system they employed. This distinction no longer holds at present but until NCC 2180 is changed, it should be interpreted according to its clear and original mandate.

2.     At the time the incident occurred, Alfredo was still in the custody of the school authorities.

Q: When is the offending student supposed to be in the school’s custody? – As long as he is under the control and influence of the school and within its premises, whether the semester has not yet begun or has already ended

On the teacher-in-charge and custody

The teacher-in-charge, who is the one designated by a superior to exercise supervision over pupils for a particular subject or section, is the one who must be held liable, in the same way that parents are responsible for the child when he is in their custody. It is not necessary that at the time of the injury, the teacher is physically present to be in a position to prevent it. Custody refers to the influence exerted on the child and the discipline instilled in him because of such influence. For the injuries caused by the student, the teacher and not the parent shall be held responsible if the tort was committed within the premises of the school at any time when its authority could be validly exercised over him.

                The rector, high school principal and the dean of boys CANNOT be held liable because none of them was the teacher-in-charge as defined, and they were only exercising general authority over the student body. Evidence did not disclose who the teacher-in-charge of Pablito was. The mere fact that Alfredo went to school to finish / submit his physics project DID NOT necessarily make the physics teacher the teacher-in-charge.

                In the absence of a teacher-in-charge, it is probably the dean of boys who should be held liable, since there was evidence that he had earlier confiscated an unlicensed gun from a student and returned it to the latter without reporting to authorities. HOWEVER, it has not been showed that said gun was the same that Pablito used to shoot Alfredo; hence, said fact does not necessarily link the dean to the shooting.

On the defense of exercising due diligence of a good father of a family

The school, teacher-in-charge, or the head may exculpate themselves by proving that they exercised the diligence of a good father of a family or bonus paterfamilias. The school can show this in selecting the head or its teachers and the appropriate supervision over them in the custody and instruction of the pupils pursuant to the rules and regulations for the maintenance of discipline among them.

Such defense is also available to the teacher or the head of the school of arts and trades directly held to answer for the tort committed by the student. As long as the defendant can show that he had taken the necessary precautions to prevent the injury complained of, he can exonerate himself from the liability imposed by Article 2180. The teacher will be held liable not only when he is acting in loco parentis for the law does not require that the offending student be of minority age. Unlike the parent, who will be liable only if his child is still a minor, the teacher is held answerable by the law for the act of the student under him regardless of the student's age. The Court is disposed not to expect from the teacher the same measure of responsibility imposed on the parent for their influence over the child is not equal in degree. The parent can expect more obedience from the child because the latter's dependence on him is greater than on the teacher.

                However, assuming that the physics teacher was the teacher-in-charge, there is NO SHOWING that he was negligent in enforcing discipline upon Pablito or that he waived observance or condoned the non-observance of school rules and regulations. Respondents have proved that they had exercised due diligence, through the enforcement of the school regulations, in maintaining that discipline.

OPINIONS

Concurring and dissenting opinion of Justice Melencio-Herrera

• Disagrees with the restricted meaning given to the term teacher as “teacher-in-charge”
• The philosophy of law is that whoever stands in loco parentis will have the same duties and obligations as parents whenever in such a standing. As long as pupils and students remain in their custody, they shall be held liable for the former’s tortious acts.

 Concurring opinion of Justice Gutierrez

• There is a need for a major amendment, if not a complete scrapping, of the paragraph in NCC 2180 that refers to teachers or heads of establishments of arts and trades in relation to pupils and students or apprentices
• No more masters, apprentices in schools of arts and trades
• Teachers are often no longer objects of veneration who are given due to substitute parents