Chan, Jr. vs. Iglesia Ni Cristo, Inc.

A party who cooperates with another in committing a tortious act is a joint tortfeasor and is solidarily liable for the resulting damage, and an internal agreement allocating responsibility for damages between the tortfeasors cannot exonerate either from liability to the injured third party where no pre-existing contractual relation exists between the tortfeasors and the injured party.

Petitioner John Kam Biak Y. Chan, Jr. owned the Aringay Shell Gasoline Station in Sta. Rita East, Aringay, La Union, the southern boundary of which adjoined a chapel belonging to respondent Iglesia Ni Cristo, Inc. Petitioner engaged the services of Dioscoro "Ely" Yoro, a retired AFP general and local construction contractor, to undertake excavation work on the gasoline station property, ostensibly for the construction of sewerage and septic tanks for the station's washrooms. The relationship between petitioner and Yoro was governed by a Memorandum of Agreement executed on 28 February 1995, which, beyond authorizing the digging, contained provisions for the division of any "valuable objects" found during the excavation.

Petitioner John Kam Biak Y. Chan, Jr. owned the Aringay Shell Gasoline Station, located in Sta. Rita East, Aringay, La Union, bounded on the south by a chapel of respondent Iglesia Ni Cristo, Inc. The gasoline station supposedly needed additional sewerage and septic tanks for its washrooms, prompting petitioner to procure the services of Dioscoro "Ely" Yoro, a retired AFP general who was allegedly a construction contractor in the locality.

On 28 February 1995, petitioner and Yoro executed a Memorandum of Agreement (MOA) authorizing Yoro to undertake digging on petitioner's property. The MOA provided that petitioner would have complete control over the number of personnel entering the property, that the digging would be allowed for three weeks commencing March 28, 1995, and that any damage within or outside petitioner's property incurred during the digging would be borne by Yoro. Notably, the MOA contained provisions for the division of "valuable objects" found during the excavation: if found within petitioner's property, sixty percent would go to petitioner and forty percent to Yoro; if found outside the property line, thirty-five percent would go to petitioner and sixty-five percent to Yoro. The MOA also reserved to petitioner the option to stop the digging in case of government or military interference.

Digging commenced thereafter. After some time, members of the respondent informed petitioner that the excavation had traversed and penetrated a portion of land belonging to respondent. A tunnel had been dug directly under the chapel's foundation, causing damage and prejudice to respondent. Both the trial court and the Court of Appeals found, in unison, that the diggings were not intended for the construction of sewerage and septic tanks but were made to construct tunnels to find hidden treasure, and that petitioner and Yoro were partners in this endeavor. Petitioner had two of his employees — his security guard and his engineer Teofilo Oller — actually observe the diggings, precluding any claim that he did not know the excavation had crossed into respondent's property.

On 18 April 1995, respondent filed a complaint before the RTC, La Union, Branch 31, against petitioner and Oller. Petitioner and Oller filed an answer with a third-party complaint impleading Yoro. Respondent later filed an amended and supplemental complaint naming Yoro as a party-defendant. After four years of trial, the court found the diggings were for hidden treasure and held petitioner and Yoro solidarily liable to respondent on a 35%-65% basis, awarding ₱633,595.50 in actual damages, ₱500,000.00 in moral damages, ₱10,000,000.00 in exemplary damages, ₱50,000.00 in attorney's fees, and ₱20,000.00 in litigation expenses, while absolving Oller. The Court of Appeals affirmed with modifications, deleting moral damages, reducing exemplary damages to ₱50,000.00, and reducing attorney's fees and litigation expenses to ₱30,000.00.

• Effect of the MOA: Petitioner argued that the MOA executed between him and Yoro is the law between them and must be given weight by the courts, and since nothing in the MOA goes against the law, morals, good customs, and public policy, it must govern to absolve him from any liability.
• Paragraph 4 of the MOA: Petitioner relied heavily on Paragraph 4 of the MOA, which states that any damage within or outside the property of the first party incurred during the digging shall be borne by the second party (Yoro), arguing this provision should exonerate him from all liability to respondent.
• Third-Party Complaint as Cross-Claim: Petitioner contended that the Court of Appeals erred in not appreciating the third-party complaint as a cross-claim against Yoro, which should have shifted liability entirely to Yoro.

• Real Intention of the MOA: Respondent asserted that the MOA should not absolve petitioner from any liability, as the written contract clearly shows the intention of the parties was to search for hidden treasure, with the alleged digging for a septic tank serving as a cover-up of their real intention.
• Joint Liability for Trespass: Respondent argued that the aim of petitioner and Yoro to intrude and surreptitiously hunt for hidden treasure in respondent's premises should make both parties liable.

• Liability Under the MOA: Whether the Memorandum of Agreement entered into by petitioner and Yoro has the effect of making the latter solely responsible for damages to respondent.

• Liability Under the MOA: No. The MOA does not exonerate petitioner because the basis of solidary liability is quasi-delict under Article 2176 of the Civil Code, not the MOA; petitioner and Yoro are joint tortfeasors solidarily liable to respondent.

• Liability Under the MOA: The Court found no compelling reason to disturb the conclusion of the Court of Appeals that the basis of solidarity between petitioner and Yoro is not the MOA but the fact that they became joint tortfeasors. Under Article 2176 of the Civil Code, whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done, and such fault or negligence, where there is no pre-existing contractual relation between the parties, constitutes a quasi-delict. All requisites were present: the excavation was the tortious act; it caused damage to respondent because it was done surreptitiously within its premises and may have affected the chapel's foundation; the excavation was caused by fault; and there was no pre-existing contractual relation between petitioner and Yoro on one hand and respondent on the other. Pursuant to Article 2194 of the Civil Code, the responsibility of two or more persons liable for a quasi-delict is solidary. Petitioner's reliance on Paragraph 4 of the MOA could not shield him, because as a general rule, joint tortfeasors include all persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid, or abet the commission of a tort. Petitioner and Yoro cooperated in committing the tort, as evidenced by the MOA's provisions for dividing treasure found within or outside petitioner's property line. The MOA, rather than exculpating petitioner, was the very instrument that confirmed his liability. Moreover, petitioner could not claim ignorance that the excavation traversed respondent's property, as he had two employees — his security guard and his engineer Oller — observing the diggings. The Court further found that the exemplary damages awarded by the Court of Appeals (₱50,000.00) were inadequate given the gross negligence involved, and increased the award to ₱100,000.00. Gross negligence was defined as such entire want of care as to raise a presumption that the person at fault is conscious of the probable consequences of carelessness and is indifferent to the danger of injury to others. Surreptitiously digging under respondent's chapel, thereby endangering the lives of worshippers and the structure itself, unquestionably amounted to gross negligence. The modification operated against Yoro as well, despite his failure to appeal, because the rights and liabilities of the defendants were so interwoven and inseparable, and their liabilities being solidary, the exception to the rule that a non-appealing party cannot seek affirmative relief applied.

• Quasi-Delict (Article 2176, Civil Code) — A quasi-delict arises when a person by act or omission causes damage to another, there being fault or negligence, and no pre-existing contractual relation exists between the parties. The requisites are: (a) an act or omission; (b) damage caused to another; (c) fault or negligence; and (d) no pre-existing contractual relation. All requisites were present in this case, as the surreptitious excavation caused damage to respondent's property through fault, with no contractual relation between the excavators and respondent.

• Solidary Liability of Joint Tortfeasors (Article 2194, Civil Code) — The responsibility of two or more persons liable for a quasi-delict is solidary. Joint tortfeasors include all persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid, or abet the commission of a tort, or who approve of it after it is done if done for their benefit. Petitioner and Yoro cooperated in the tortious excavation, making them solidarily liable.

• Exemplary Damages in Quasi-Delicts (Articles 2229 and 2231, Civil Code) — Exemplary or corrective damages are imposed by way of example or correction for the public good. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence, defined as such entire want of care as to raise a presumption that the person at fault is conscious of the probable consequences of carelessness and is indifferent to the danger of injury to person or property of others. The surreptitious excavation under respondent's chapel constituted gross negligence, justifying an award of ₱100,000.00 in exemplary damages.

• Effect of Modification Against Non-Appealing Solidary Co-Defendant — While a party who did not appeal cannot seek relief beyond what the judgment provides, when the rights and liabilities of defendants are so interwoven and inseparable, and their liabilities are solidary, a modification of the appealed judgment in favor of the appellant operates as a modification against the non-appealing co-defendant as well.

• "The basis of their solidarity is not the Memorandum of Agreement but the fact that they have become joint tortfeasors. There is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity." — This passage, quoted by the Supreme Court from the Court of Appeals' decision, articulates the ratio decidendi that the source of solidary liability in this case is quasi-delict, not contract.

• "Thus, the MOA, instead of exculpating petitioner from liability, is the very noose that insures that he be so declared as liable." — This statement captures the Court's reasoning that the MOA's treasure-dividing provisions proved the parties' joint participation in the tortious act, thereby defeating petitioner's defense.

• "Surreptitiously digging under the respondent's chapel which may weaken the foundation thereof, thereby endangering the lives and limbs of the people in worship, unquestionably amounts to gross negligence." — This passage defines the factual basis for the award of exemplary damages and illustrates the Court's application of the gross negligence standard under Article 2231.

• Worcester vs. Ocampo, 22 Phil. 42 (1912) — Cited for the definition of joint tortfeasors as all persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid, or abet the commission of a tort, or who approve of it after it is done if done for their benefit. The Court applied this definition to hold petitioner and Yoro jointly liable.
• Amadeo vs. Rio y Olabarrieta, Inc., 95 Phil. 33 — Cited for the definition of gross negligence as such entire want of care as to raise a presumption that the person at fault is conscious of the probable consequences of carelessness and is indifferent to the danger of injury to person or property of others.
• Buot vs. Court of Appeals, G.R. No. 119679, 18 May 2001, 357 SCRA 846 — Cited for the exception to the rule that a non-appealing party cannot seek affirmative relief, where the rights and liabilities of defendants are interwoven and inseparable and their liabilities are solidary.
• Consolidated Bank and Trust Corporation vs. Court of Appeals, G.R. No. 84588, 29 May 1991, 197 SCRA 663 — Cited alongside Buot for the same proposition regarding modification of judgment against a non-appealing solidary co-defendant.

• Article 2176, Civil Code — Defines quasi-delict: whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done, provided there is no pre-existing contractual relation between the parties. Applied to hold petitioner and Yoro liable for the damage caused by the surreptitious excavation.
• Article 2194, Civil Code — Provides that the responsibility of two or more persons liable for a quasi-delict is solidary. Applied to establish the solidary liability of petitioner and Yoro as joint tortfeasors.
• Article 2229, Civil Code — Defines exemplary or corrective damages as those imposed by way of example or correction for the public good. Applied to justify the award of exemplary damages.
• Article 2231, Civil Code — Provides that in quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. Applied to increase exemplary damages to ₱100,000.00 given the gross negligence of the surreptitious excavation under respondent's chapel.

Justices Reynato S. Puno (Chairman), Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr., and Dante O. Tinga concurred.