Ma-ao Sugar Central Co., Inc. vs. Court of Appeals

An employer is liable for quasi-delict under Article 2176 of the Civil Code when an accident causing death or injury to an employee arises from a defect in equipment under the employer's management that would not ordinarily occur with proper care, and the defense of due diligence in the selection and supervision of employees fails where the employer merely requires reports of defects but does not act on them; SSS pension benefits, being derived from the employee's own contributions to a common fund, are not deductible from damages recoverable under the Civil Code.

Ma-ao Sugar Central Co., Inc. operated a cargo train system within its milling district, the maintenance of which — including the rails and fish plates that kept them aligned — was its responsibility. Julio Famoso was an employee of the sugar central at the time of his death. His widow, Herminia Famoso, and their nine minor children depended on him for support. Famoso was also a member of the Social Security System, having regularly contributed premiums, by reason of which his heirs became entitled to a monthly pension upon his death.

On March 22, 1980, Julio Famoso was riding with a co-employee in the caboose or "carbonera" of Plymouth No. 12, a cargo train of Ma-ao Sugar Central, when the locomotive suddenly derailed. Famoso and his companion jumped off to escape injury, but the train fell on its side, its wheels catching Famoso's legs and pinning him down. He was declared dead on the spot.

Investigation of the accident revealed that the derailment was caused by protruding rails which had come loose because they were not connected and fixed in place by fish plates. Fish plates are strips of iron eight to twelve inches long and three and a half inches thick, attached to the rails by four bolts — two on each side — to keep the rails aligned. Although they could be removed only with special equipment, the fish plates that should have kept the rails aligned could not be found at the scene of the accident. According to Jose Treyes, the petitioner's own witness who was in charge of the control and supervision of its train operations, cases of derailment in the milling district were frequent, with some derailments reported as often as every hour.

The petitioner maintained that it exercised due diligence in the selection and supervision of its employees, contending that brakemen and conductors were required to report any defect in the condition of the railways and to fill out prescribed forms for that purpose. It also argued that the locomotive had passed the same rails earlier without accident, suggesting the rails were properly aligned on the first trip. The petitioner further claimed that Famoso was contributorily negligent because he was not at his assigned station when the train was derailed, but was instead riding in the caboose.

After the claims for death and other benefits were denied by the petitioner, Herminia Famoso filed suit in the Regional Trial Court of Bago City. Judge Marietta Hobilla-Alinio ruled in her favor, awarding P73,000.00 in total damages but deducting 25% for the decedent's contributory negligence and P41,367.60 representing the SSS pension the widow and her children would receive for five years, yielding a net award of P16,382.40. Both parties appealed: the widow objecting to the deductions, and the petitioner contesting any liability at all. The Court of Appeals sustained the trial court's finding of liability but disallowed both deductions, increasing the total award to P76,000.00. The petitioner then elevated the matter to the Supreme Court.

• Due Diligence Defense: Petitioner argued that it was not negligent and therefore not liable at all, invoking Article 2176 of the Civil Code and contending it had exercised due diligence in the selection and supervision of its employees.
• Reporting System: Petitioner maintained that brakemen and conductors were required to report any defect in the condition of the railways and to fill out prescribed forms, thereby discharging its duty of vigilance.
• Prior Safe Passage: Petitioner argued that the locomotive had passed the same rails earlier without accident, suggesting the rails were properly aligned on the first trip and that the fish plates may have loosened during that passage.
• Contributory Negligence: Petitioner contended that Famoso was contributorily negligent because he was not at his assigned station when the train was derailed, but was instead riding in the caboose.
• Deductibility of SSS Pension: Citing Floresca vs. Philex Mining Corporation and Article 173 of the Labor Code, petitioner argued that the Court of Appeals erred in disallowing the deduction of P41,367.60 representing the SSS pension to be received by the private respondent for five years, since amounts received by heirs from the Employees Compensation Commission, whose funds are administered by the SSS, should be exclusive of other amounts claimable under the Civil Code.

• Illegality of Deductions: Respondent appealed from the trial court's decision, claiming that the deductions for contributory negligence and SSS pension were illegal.

• Negligence of Employer: Whether the petitioner was negligent notwithstanding its defense of due diligence under Article 2176 of the Civil Code.
• Contributory Negligence: Whether the decedent was guilty of contributory negligence by riding in the caboose instead of staying at his assigned station.
• Deductibility of SSS Pension: Whether the SSS pension to be received by the heirs should be deducted from the total damages awarded under the Civil Code.

• Negligence of Employer: Yes. The petitioner was negligent, the absence of fish plates being itself proof of negligence under the doctrine of res ipsa loquitur, and its defense of due diligence having failed because it merely required reports of defects without acting on them.
• Contributory Negligence: No. The decedent was not guilty of contributory negligence, as riding in the caboose was not shown to be a dangerous act performed in disregard of warnings or signs of impending danger.
• Deductibility of SSS Pension: No. The SSS pension, derived from the employee's own contributions to a common fund, is distinct from compensation under the Workmen's Compensation Act and is not deductible from damages recoverable under the Civil Code.

• Negligence of Employer: The maintenance of the rails, including the prevention of derailments, was the petitioner's responsibility, and this responsibility was not discharged. The petitioner's own witness testified that derailments in the milling district were frequent, sometimes reported every hour, yet the petitioner did not take more prudent steps to prevent accidents. The defense of due diligence in the selection and supervision of employees was unavailing: merely ordering brakemen and conductors to fill out prescribed forms reporting derailments — reports that were not acted upon, as shown by the hourly derailments — was not the kind of supervision envisioned by the Civil Code. The fact that fish plates were not found at the scene was significant because they could be removed only with special tools, suggesting they were never there or had been removed long before. The absence of fish plates was by itself proof of negligence. The doctrine of res ipsa loquitur applied: the thing which caused the injury was under the management of the defendant, and the accident was of a kind that does not ordinarily happen if proper care is used, affording reasonable evidence in the absence of explanation that the accident arose from want of care.

• Contributory Negligence: The mere fact that Famoso was not at his assigned station when the train derailed might have been a violation of company rules but could not have directly contributed to his injury. It was pure speculation to suppose he would not have been injured had he stayed in the front car. Contributory negligence requires an act or omission amounting to want of ordinary care on the part of the person injured, concurring with the defendant's negligence as the proximate cause of the injury. There was no showing that the caboose was a dangerous place or that Famoso recklessly stayed there despite warnings or signs of impending danger.

• Deductibility of SSS Pension: The SSS pension represented the usual benefit received by heirs of a deceased employee who was a member and had regularly contributed premiums. It did not represent death benefits payable under the Workmen's Compensation Act. The SSS certification did not indicate the pension was taken from ECC funds. Article 173 of the Labor Code, as amended, expressly provides that payment of compensation under the Workmen's Compensation provisions shall not bar recovery of benefits under the Social Security Law and other laws whose benefits are administered by the System. Social security benefits are paid to members as a matter of right because they contributed their money to a common fund, whereas workmen's compensation is in the nature of indemnity for injury arising from employment and is a burden on the industry. The two are distinct in nature and purpose, and payment of one does not extinguish the other.

• Res Ipsa Loquitur — Where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care. The Court applied this doctrine to the missing fish plates, the absence of which — given that they could be removed only with special tools — was itself proof of the petitioner's negligence.

• Due Diligence in the Selection and Supervision of Employees (Article 2176, Civil Code) — An employer may exempt itself from liability for quasi-delict by proving it exercised the diligence of a good father of a family in the selection and supervision of its employees. The Court found this defense unavailing because the petitioner merely required employees to file reports of railway defects without acting on them, as evidenced by the frequency of derailments — sometimes every hour — which was not the kind of supervision contemplated by the Civil Code.

• Contributory Negligence — Defined as the act or omission amounting to want of ordinary care on the part of the person injured which, concurring with the defendant's negligence, is the proximate cause of the injury. To hold a person as having contributed to his injuries, it must be shown that he performed an act that brought about his injuries in disregard of warnings or signs of an impending danger to health and body. The Court held that riding in the caboose rather than at the assigned station did not constitute contributory negligence absent any showing that the caboose was dangerous or that warnings had been disregarded.

• Distinct Nature of SSS Benefits and Workmen's Compensation — Social security benefits are paid to members as a matter of right by reason of their membership and contributions to a common fund, irrespective of whether the hazard arose in the course of employment. Workmen's compensation, by contrast, is in the nature of indemnity for injury or death arising from employment and is a burden on the industry. Payment of one does not extinguish or bar recovery of the other.

• "At any rate, the absence of the fish plates – whatever the cause or reason – is by itself alone proof of the negligence of the petitioner. Res ipsa loquitur." — This passage states the ratio decidendi on the negligence issue, applying the res ipsa loquitur doctrine to the missing fish plates as independent proof of the employer's negligence.

• "Obviously, merely ordering the brakemen and conductors to fill out prescribed forms reporting derailments-which reports have not been acted upon as shown by the hourly derailments is-not the kind of supervision envisioned by the Civil Code." — This passage defines the standard for due diligence in the supervision of employees under Article 2176, distinguishing passive reporting from active corrective action.

• "To deny payment of social security benefits because the death or injury or confinement is compensable under the Workmen's Compensation Act would be to deprive the employees members of the System of the statutory benefits bought and paid for by them, since they contributed their money to the general common fund out of which benefits are paid." — This quotation, drawn from Valencia vs. Manila Yacht Club and reiterated in the decision, articulates the fundamental distinction between SSS benefits and workmen's compensation, explaining why the former cannot be deducted from the latter.

• Layugan vs. Intermediate Appellate Court, 167 SCRA 376 — Cited for the formulation of the doctrine of res ipsa loquitur, which the Court applied to find the petitioner negligent.

• Floresca vs. Philex Mining Corporation, 136 SCRA 141 — Cited by the petitioner in support of its argument that SSS pension should be deducted from damages; the Court distinguished and rejected the argument.

• Valencia vs. Manila Yacht Club, 28 SCRA 724 — Cited as still controlling authority for the proposition that SSS benefits are distinct from workmen's compensation and that payment of one does not extinguish the other.

• Benguet Consolidated, Inc. vs. Social Security System, 10 SCRA 616 — Cited for the philosophy distinguishing social security benefits (paid as a matter of right from member contributions) from workmen's compensation (a burden on industry for employment-related injury).

• Rural Transit Employees Association vs. Bachrach Transportation Co., 21 SCRA 1263 — Cited for the distinction between social security benefits as insurance against hazards irrespective of employment origin, and workmen's compensation as indemnity for employment-related injury.

• Article 2176, Civil Code — Governs quasi-delicts and provides the defense of due diligence in the selection and supervision of employees. The Court found the defense unavailing because the petitioner's supervision was lax and ineffective.

• Article 173, Labor Code (as amended) — Provides for the exclusiveness of liability of the State Insurance Fund and expressly states that payment of compensation under the Workmen's Compensation provisions shall not bar recovery of benefits under the Social Security Law and other laws administered by the System. The Court relied on the proviso to hold that SSS pension could not be deducted from Civil Code damages.

• Republic Act No. 1161, as amended (Social Security Law) — Identified as the law governing SSS benefits. The Court held that benefits under this law are paid from member contributions to a common fund and are distinct from workmen's compensation.

Narvasa (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concurred.