Chan v. Iglesia ni Cristo, Inc.
REITERATIONFacts
The Antecedents: Petitioner John Kam Biak Y. Chan, Jr. owned a gasoline station bounded by a chapel of respondent Iglesia Ni Cristo. Petitioner entered into a Memorandum of Agreement (MOA) with Dioscoro "Ely" Yoro, a retired AFP general and alleged construction contractor, for the digging of septic tanks for the gasoline station. The MOA stipulated that Yoro would bear the cost of any damage incurred during the digging and that any valuable objects found would be divided between them. Diggings commenced, and it was later discovered that the excavation traversed and penetrated a portion of the respondent's land, affecting the foundation of the chapel. Procedural History: Respondent filed a complaint against petitioner and his engineer, Teofilo Oller, for damages. Petitioner impleaded Yoro as a third-party defendant. The trial court found that the diggings were not for septic tanks but for tunnels to find hidden treasure, holding petitioner and Yoro solidarily liable to the respondent on a 35%-65% basis, with petitioner liable for 35% of the damages. Petitioner and Yoro appealed. The trial court disallowed Yoro's appeal for failure to pay docket fees. The Court of Appeals affirmed the trial court's decision but modified the awards for moral and exemplary damages and attorney's fees. Petitioner filed a petition for review on certiorari with the Supreme Court. The Petition: Petitioner assailed the Court of Appeals' decision, arguing that the MOA should have exonerated him from liability and that the basis of the obligation should have been the MOA, not tort. He contended that Yoro should be solely responsible for the damages.
Issue(s)
Whether the Memorandum of Agreement (MOA) entered into by the petitioner and Yoro has the effect of making the latter solely responsible for damages to the respondent. Whether the Court of Appeals erred in affirming the Regional Trial Court's decision that the basis of the solidary obligation of the petitioner and Yoro vis-à-vis the plaintiff is based on tort and not on the MOA. Whether the Court of Appeals erred in not giving effect to the MOA which should exonerate the petitioner from all liabilities to the private respondent. Whether the Court of Appeals erred in not appreciating the third-party complaint as a cross-claim of the petitioner against Yoro.
Ruling
The Supreme Court affirmed the Decision of the Court of Appeals dated 25 September 2003 with modification as to the award of exemplary damages, which was increased to ₱100,000.00. Costs were against the petitioner.
Ratio Decidendi
On whether the MOA makes Yoro solely responsible for damages to the respondent: The Court ruled in the negative. The MOA, instead of exculpating the petitioner, actually ensured his liability. The findings of the trial court and the Court of Appeals were in unison that the petitioner and Yoro were partners in the endeavor to find hidden treasure, and the digging was not for septic tanks. The MOA contained provisions on how they would divide the treasure if found, demonstrating their cooperation in the tortious act. Therefore, the MOA, which was intended to cover up their real intention, became the very instrument that established their joint liability as tortfeasors. On whether the basis of the solidary obligation is tort and not the MOA: The Court affirmed the Court of Appeals' conclusion that the basis of their solidarity was not the MOA but the fact that they became joint tortfeasors. The Court cited Article 2176 of the New Civil Code, which defines quasi-delict. The requisites for quasi-delict were present: an act or omission (excavation), causing damage to another (affecting the chapel's foundation), caused by fault or negligence, and the absence of a pre-existing contractual relation between the petitioner and Yoro on one hand, and the respondent on the other. Since the excavation was done surreptitiously within the respondent's premises and caused damage, and there was no prior contract with the respondent, the petitioner and Yoro were jointly liable as joint tortfeasors, and their responsibility was solidary. On whether the MOA should exonerate the petitioner from liabilities: The Court held that the MOA could not exonerate the petitioner. The MOA itself, particularly the provisions on the division of found treasures, demonstrated the petitioner's participation and intent in the quest for hidden treasure, which was the underlying tortious act. The MOA was not a shield but evidence of their partnership in the illicit undertaking. Furthermore, the petitioner could not claim ignorance of the excavation traversing the respondent's property, as he had employees observing the diggings. On whether the third-party complaint should be treated as a cross-claim: This issue was not directly ruled upon by the Supreme Court in its main decision, as the focus was on the liability of the petitioner and Yoro to the respondent. The Court's primary concern was the solidary liability arising from quasi-delict. The procedural aspect of the third-party complaint being treated as a cross-claim was not the central point of contention or the basis for the Supreme Court's final ruling on the substantive issue of liability.
Main Doctrine
A Memorandum of Agreement (MOA) intended to cover up a tortious act, such as surreptitious excavation under a property causing damage, cannot be used to absolve parties from liability arising from quasi-delict. In such cases, parties are considered joint tortfeasors and are solidarily liable for the damages caused.