### Facts:
The case revolves around a property dispute involving a gasoline station owned by petitioner John Kam Biak Y. Chan Jr., and the respondent, Iglesia ni Cristo, Inc. The gasoline station required additional sewerage and septic tanks, prompting Chan to engage the services of Dioscoro “Ely” Yoro, a retired general and alleged construction contractor. The parties executed a Memorandum of Agreement (MOA) on February 28, 1995. Initial excavation led to tunneling under the respondent’s chapel property, causing damage and leading Iglesia ni Cristo to file a complaint against Chan and his engineer Teofilo Oller in the Regional Trial Court (RTC) of La Union on April 18, 1995. Chan filed a third-party complaint against Yoro, resulting in Yoro being added as a party-defendant in an amended complaint.
In its decision, the RTC found that the diggings were intended to find hidden treasure rather than septic tank construction and held Chan and Yoro solidarily liable to Iglesia ni Cristo. Chan’s appeal to the Court of Appeals led to certain modifications but did not overturn the RTC’s findings of liability based on tort law.
### Issues:
1. **Whether the Memorandum of Agreement absolves Chan of liability for damages caused to the respondent.**
2. **Whether the lower courts erred in adjudging Chan and Yoro as joint tortfeasors.**
3. **Whether the reductions in damage awards by the Court of Appeals were appropriate.**
### Court’s Decision:
#### Memorandum of Agreement and Liability:
The Court ruled that the MOA between Chan and Yoro does not absolve Chan of liability. While Chan argued that the provision in the MOA places damage liability solely on Yoro, the Court held that the tortious act of surreptitiously digging under respondent’s property constitutes grounds for solidary liability under quasi-delict principles.
#### Joint Tortfeasors:
Both Chan and Yoro were found to have collaboratively engaged in the act of excavation with the shared intent of finding hidden treasure, making them joint tortfeasors. The Court noted that tortious acts could result in solidary liability, even if contractual arrangements suggest otherwise.
#### Damage Awards:
The Supreme Court revisited the awards and slightly modified the amount of exemplary damages awarded. While the Court of Appeals reduced the initial awards significantly, the Supreme Court found the reduction of exemplary damages to P50,000.00 insufficient given the gross negligence involved, and thus increased them to P100,000.00.
### Doctrine:
1. **Solidary Liability in Quasi-Delict**: Article 2176 of the Civil Code establishes that when tortious acts cause damage without pre-existing contractual relations, it invokes quasi-delict, requiring joint tortfeasors to be solidarily liable.
2. **Gross Negligence as Basis for Exemplary Damages**: Exemplary damages can be awarded in quasi-delict if the act involves gross negligence; a condition met by the conscious, reckless disregard exhibited by Chan and Yoro.
### Class Notes:
– **Quasi-Delict Requisites**:
1. Act or omission causing damage.
2. Resulting damage.
3. Fault or negligence.
4. No pre-existing contractual relationship between the parties.
– **Article 2176, New Civil Code; Article 2194, Article 2229, Article 2231**:
– Establishes liability in tort.
– Defines solidary liability and conditions for exemplary damages.
### Historical Background:
This case took place against a backdrop of property disputes in the Philippines, often involving misuse of agreements and tort principles where one party’s intentions diverged from lawful contractual execution. It also reflects continuing efforts by courts to balance contractual freedom with accountability for tortious acts, highlighting the judiciary’s approach in reinforcing lawful conduct and deterrence against negligent or malicious actions.
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