Case Summary (G.R. No. L-36840)
Key Dates and Applicable Law
Decision date: May 22, 1973.
Applicable constitution: 1973 Philippine Constitution (the constitution in force at the time of decision).
Relevant statutory and doctrinal authorities cited in the decision: Article 1159, Civil Code (obligations arising from contracts have the force of law and must be complied with in good faith); reference to Republic Act No. 5440 (procedural reference concerning mode of appeal and review); contractual provisions (Paragraphs 4 and 5) forming the basis of the parties’ stipulation.
Procedural posture and certification to the Supreme Court
The parties submitted the case on a stipulation of facts, so only questions of law remained. A special division of the Court of Appeals, by a four-to-one vote, certified the case to the Supreme Court on the ground that only pure questions of law were involved. The record shows that petitioner’s notice of appeal was expressly to the Supreme Court “on pure questions of law” and the record on appeal prayed certification and forwarding to the Supreme Court. The trial court approved this mode on July 3, 1971 rather than requiring a petition for review directly with the Supreme Court as prescribed by R.A. 5440. A clerical error caused the record to be forwarded to the Court of Appeals instead of directly to the Supreme Court; notwithstanding these irregularities, the Supreme Court accepted certification and docketed the appeal.
Stipulated facts
Under a subsisting “Guard Service Contract,” defendant undertook to safeguard and protect petitioner’s business premises from theft, pilferage, robbery, vandalism, and other unlawful acts. On April 5, 1970 at about 1:00 A.M., a security guard employed by defendant, without authority or consent of either party, drove a customer’s car out of petitioner’s compound, abandoned his post, and while driving lost control of the vehicle, which then fell into a ditch on J.P. Laurel Street, Davao City. The customer, Joseph Luy, filed a blotter report for qualified theft. As a result of the guard’s wrongful act, the customer’s car sustained P7,079.10 in physical damage; petitioner also incurred P1,410.00 in rental costs for a replacement vehicle while the damaged car was repaired (47 days), yielding stipulated total actual damages to petitioner of P8,489.10. The parties agreed that the sole issue for adjudication was the proper interpretation of the contract provision fixing the extent of defendant’s liability for acts of its employees.
Contractual provisions in dispute (Paragraphs 4 and 5)
Paragraph 4 (as quoted by the parties): Defendant “through the negligence of its guards, after an investigation has been conducted by the Party of the First Part [plaintiff] wherein the Party of the Second Part [defendant] has been duly represented, shall assume full responsibilities for any loss or damages that may occur to any property of the Party of the First Part for which it is accountable, during the watch hours of the Party of the Second Part, provided the same is reported to the Party of the Second Part within twenty-four (24) hours of the occurrence, except where such loss or damage is due to force majeure, provided however that after the proper investigation to be made thereof that the guard on post is found negligent and that the amount of the loss shall not exceed ONE THOUSAND (P1,000.00) PESOS per guard post.”
Paragraph 5 (as quoted): Defendant “assumes the responsibility for the proper performance by the guards employed, of their duties and (shall) be solely responsible for the acts done during their watch hours, the Party of the First Part being specifically released from any and all liabilities to the former’s employee or to the third parties arising from the acts or omissions done by the guards during their tour of duty.”
Trial court’s ruling and rationale
The Court of First Instance interpreted the contract to impose on defendant only the liability set forth in Paragraph 4 and therefore limited recovery to P1,000.00 plus costs. The trial court reasoned that plaintiff, if it had understood its liability to fall under Paragraph 5, should have informed its customer (Luy) that defendant was primarily liable and should have compelled the customer to sue defendant or else the plaintiff should have filed third-party or crossclaims in litigation initiated by the customer.
Supreme Court’s legal analysis: distinction between Paragraphs 4 and 5
The Supreme Court found the trial court’s construction erroneous. It held that Paragraph 4 — the P1,000 limitation — by its express terms applies only to loss or damage “through the negligence of [defendant’s] guards” affecting property of the plaintiff and is conditioned on a 24-hour report and joint investigation verifying guard negligence. The Court emphasized that the stipulated facts did not involve loss or damage to plaintiff’s own property nor a mere case of negligence at plaintiff’s premises of the type contemplated by Paragraph 4. Instead, the facts established an unlawful, intentional and wrongful act by defendant’s guard: the guard drove a customer’s car out of petitioner’s premises and, while driving on public streets, lost control and caused substantial damage. Paragraph 5, by contrast, is a broad undertaking by defendant to assume responsibility for the proper performance of its guards and to be “solely responsible for the acts done during their watch hours,” and it specifically releases plaintiff from liabilities to third parties arising from acts or omissions of the guards during duty. The Court concluded that Paragraph 5 was the operative contractual provision for the circumstances at
...continue readingCase Syllabus (G.R. No. L-36840)
Citation and Decision
- Reported at 151-A Phil. 527; G.R. No. L-36840; decision dated May 22, 1973.
- Decision penned by Justice Teehan Kee.
- Acting C.J. Makalintal and Justices Zaldivar, Ruiz Castro, Fernando, Barredo, Makasiar, Antonio, and Esguerra concurred.
Parties and Roles
- Plaintiff-Appellant: People's Car, Inc. — an establishment providing servicing/maintenance and custodial care of customers' vehicles.
- Defendant-Appellee: Commando Security Service Agency — a duly licensed security service agency that supplied guards to plaintiff pursuant to a "Guard Service Contract."
- Third party affected: Joseph Luy — plaintiff's customer and owner of the damaged car entrusted to plaintiff for servicing.
Procedural Posture and History
- The case proceeded to judgment in the Davao Court of First Instance, which rendered an adverse judgment limiting plaintiff's recovery to P1,000.00.
- The parties submitted the case for decision on the strength of a stipulation of facts; only questions of law were presented on appeal.
- A special division of the Court of Appeals, by a four-to-one vote in its April 14, 1973 resolution, certified the case to the Supreme Court on the ground that only questions of law were involved.
- The Supreme Court accepted the certification and docketed the appeal; it noted that plaintiff's notice of appeal was expressly to the Supreme Court "on pure questions of law" and had prayed that the records be certified and forwarded to the Supreme Court.
- The trial court had approved forwarding the appeal on July 3, 1971, rather than requiring a petition for review under Republic Act No. 5440.
- An unexplained clerical error resulted in the record being erroneously forwarded to the appellate court instead of directly to the Supreme Court.
Stipulated Facts (Undisputed)
- There existed a subsisting "Guard Service Contract" between the parties; defendant, a licensed security agency, undertook to "safeguard and protect the business premises of (plaintiff) from theft, pilferage, robbery, vandalism and all other unlawful acts of any person or persons prejudicial to the interest of (plaintiff)." (Annex A, complaint)
- On April 5, 1970, at around 1:00 A.M., a security guard employed by defendant and assigned at plaintiff's premises:
- Without authority, consent, approval, knowledge or orders of plaintiff or defendant, brought out of plaintiff's compound a car belonging to plaintiff's customer, Joseph Luy;
- Drove the car to places unknown, abandoned his post inside plaintiff's compound;
- While driving on a city street lost control and caused the car to fall into a ditch along J.P. Laurel St., Davao City;
- A complaint for qualified theft against the driver was blottered with the Davao City Police Department.
- As a direct result:
- The customer's car "suffered extensive damage in the total amount of P7,079.10.";
- Plaintiff incurred a car rental expense "chargeable to defendant" in the amount of P1,410.00 for a substitute vehicle provided to the customer for 47 days (from April 25 to June 10, 1970) while repairs were made;
- Total actual damages stipulated and claimed by plaintiff amounted to P8,489.10.
Contractual Provisions in Issue
- The parties stipulated that the only issue for adjudication was the interpretation of the contract as to the extent of defendant's liability for acts of its employees; plaintiff relied on Paragraph 5 and defendant on Paragraph 4.
- Paragraph 4 (as quoted in the stipulation):
- Imposes liability "through the negligence of its guards" for loss or damage to "any property of the Party of the First Part" during watch hours, after investigation in which the Party of the Second Part is duly represented;
- Requires that the loss be reported to the Party of the Second Part within 24 hours of occurrence;
- Excepts losses due to force majeure;
- Limits the amount of loss to "not exceed ONE THOUSAND (P1,000.00) PESOS per guard post" after proper investigation establishes the guard on post is negligent.
- Paragraph 5 (as quoted in the stipulation):
- State