FACTS:

On March 7, 1997, a truck owned by respondent Leonora Gomez and driven by Antenojenes Perez was hit by a bus owned by petitioner Elvira Lim and driven by petitioner Mariano Mendoza. As a result, the truck sustained extensive damage and the driver and helpers on board the truck were injured.

An Information for reckless imprudence resulting in damage to property and multiple physical injuries was filed against Mendoza, but he eluded arrest. Respondents then filed a separate complaint for damages against Mendoza and Lim, seeking actual damages, compensation for lost income, moral damages, exemplary damages, attorney's fees, and costs of the suit.

The investigating officer found that the bus intruded into the lane occupied by the truck, causing the collision. Mendoza attempted to escape but was apprehended later on. The respondents incurred medical expenses for the injured individuals and repair expenses for the damaged truck.

Respondents argued that although Lim was the registered owner of the bus, the actual owner was SPO1 Cirilo Enriquez, who had the bus attached to Mayamy Transportation Company (Mayamy Transport) under the "kabit system." Respondents impleaded both Lim and Enriquez.

The RTC found Mendoza liable for negligence and Lim vicariously liable as the registered owner. The RTC ordered petitioners to pay respondents the costs of repair for the damaged truck, unrealized income during the repair period, moral damages, exemplary damages, attorney's fees, and costs of the suit.

Petitioners appealed to the CA, which modified the judgment by deleting the award for unrealized income but maintained the awards for repair costs, moral damages, exemplary damages, attorney's fees, and costs of the suit.

Petitioners filed a petition for certiorari before the Supreme Court, raising issues regarding the award of moral damages, exemplary damages, and attorney's fees.

ISSUES:

1. Whether Mendoza's negligence was duly proven.

2. Who may be held liable for the damages - Mendoza or his employer?

3. Whether the registered owner of a motor vehicle can be held directly liable for damages caused by the negligence of its driver.

4. Whether the defenses available under Article 2180 of the Civil Code are still applicable to the registered owner of a motor vehicle.

5. Whether the claimants have satisfactorily proven that they have suffered damages.

6. Whether the damages sustained by the claimants are the proximate result of a wrongful act or omission.

7. Whether the claimants have established the factual basis of the damages and its causal tie with the acts of the defendants.

8. Whether the claimants have proven that their claim falls under the cases listed in Articles 2219 and 2220 of the Civil Code.

9. Whether the claimants have proven their entitlement to moral damages.

10. Whether the claimants are entitled to exemplary damages.

11. Whether the award of attorney's fees is proper in this case.

12. Whether the award of costs of suit is proper in this case.

13. Whether the award of interest is proper in this case.

14. Whether or not the application for search warrant is defective for failure to personally examine the complainant and the witnesses under oath.

15. Whether or not the seizure of the items in question is illegal due to the defective search warrant.

RULING:

1. Mendoza's negligence was duly proven. He violated traffic laws by encroaching on the opposite lane, which was the proximate cause of the collision and resulting harm.

2. Mendoza's employer may be held liable under the doctrine of vicarious liability or imputed negligence. The registered owner of the vehicle is deemed the employer of the negligent driver and is thus vicariously liable for damages. The existence of an employer-employee relationship between the registered owner and the driver is irrelevant in determining liability. The registered owner is held primarily and directly responsible for any accident, injury, or death caused by the operation of the vehicle in the streets and highways.

3. Yes, the registered owner of a motor vehicle can be held directly liable for damages caused by the negligence of its driver. The purpose of motor vehicle registration is to identify the owner so that responsibility for damages or injuries can be fixed on a definite individual. The motor vehicle registration law modified Article 2180 of the Civil Code, removing the defenses available to the registered owner. The justification for holding the registered owner directly liable is that it ensures that the violator of the law or rules of safety does not escape liability due to lack of means to discover them.

4. No, the defenses available under Article 2180 of the Civil Code are no longer applicable to the registered owner of a motor vehicle. With the enactment of the motor vehicle registration law, the defenses of acting beyond the scope of assigned task or exercising the due diligence of a good father of a family are no longer available. The registered owner is vicariously liable for damages caused by the negligence of its driver.

5. The claimants failed to prove that they have suffered damages such as besmirched reputation or physical, mental, or psychological suffering.

6. The damages sustained by the claimants were not shown to be the proximate result of a wrongful act or omission.

7. The claimants failed to establish the factual basis of the damages and its causal tie with the acts of the defendants.

8. The claimants did not prove that their claim falls under the cases listed in Articles 2219 and 2220 of the Civil Code.

9. The claimants are not entitled to moral damages as they did not present clear testimony on anguish or mental suffering.

10. The claimants are entitled to exemplary damages since the defendant's misconduct amounted to gross negligence.

11. The Court held that the award of attorney's fees is improper in this case. The RTC Decision failed to discuss the propriety of attorney's fees and merely awarded it in the dispositive portion. According to established jurisprudence, the reason for the award of attorney's fees must be stated in the text of the court's decision. Since the RTC failed to substantiate the award, it should be disallowed on appeal.

12. The Court held that the award of costs of suit is proper in this case. The Rules of Court provide that costs shall be allowed to the prevailing party as a matter of course. In this case, the respondents were the prevailing party, so the award of costs of suit is in order.

13. The Court held that the award of interest is proper in this case. Interest is allowed as a part of damages in actions for breach of contract or tort for the unlawful detention of money already due. The award of actual or compensatory damages, such as truck repairs and medical expenses, can be measured against a reasonably certain standard. Justice requires that the delay in paying for past losses that can be reasonably certain should be compensated through an award of interest.

14. No, the application for search warrant is not defective for failure to personally examine the complainant and the witnesses under oath. The requirement of personally examining the complainant and the witnesses under oath may be substantially complied with through a written deposition, as long as the issuing judge has personally determined the existence of probable cause. In this case, the issuing judge personally examined the complainant and the witnesses through their respective written depositions and made an independent determination of probable cause.

15. No, the seizure of the items in question is not illegal. The search warrant is valid as it was issued upon the finding of probable cause. The items seized during the search are admissible in evidence since they were the fruits of a valid search warrant and were seized in the lawful exercise of police power.

PRINCIPLES:

• Article 2176 of the Civil Code states that whoever, by act or omission, causes damage to another, there being fault or negligence, is obliged to pay for the damage done.

• Article 2180 of the Civil Code holds employers liable for damages caused by their employees and household helpers acting within the scope of their assigned tasks.

• Negligence is defined as the failure to observe for the protection of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly demand, whereby such other person suffers injury.

• Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.

• Vicarious liability or imputed negligence is the principle that a person who has not committed the act or omission which caused damage or injury to another may still be held civilly liable under certain circumstances. In the case of motor vehicle accidents, the registered owner is deemed the employer of the negligent driver and is held primarily and directly responsible.

• The main aim of motor vehicle registration is to identify the owner for the purpose of fixing responsibility for damages or injuries caused by the vehicle.

• Motor vehicle registration ensures that the violator of the law or rules of safety does not escape liability due to lack of means to discover them.

• The defenses available under Article 2180 of the Civil Code are no longer applicable to the registered owner of a motor vehicle due to the enactment of the motor vehicle registration law.

• The registered owner of a motor vehicle can be held directly liable for damages caused by the negligence of its driver.

• The registered owner has a right to be indemnified by the actual employer of the driver under the principle of unjust enrichment.

• To warrant an award of actual or compensatory damages, the claimant must prove that the damage sustained is the natural and probable consequences of the negligent act and must adequately prove the amount of such damage.

• Moral damages are awarded to compensate for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm unjustly caused to a person. Recovery of moral damages is an exception rather than the rule.

• An award of moral damages requires evidence of besmirched reputation or physical, mental, or psychological suffering, a culpable act or omission factually established, proof that the act was the proximate cause of the damages, and a legal basis under Articles 2219 and 2220 of the Civil Code.

• Exemplary damages may be awarded in addition to compensatory damages if the defendant acted with gross negligence, which is the absence of care or diligence amounting to a reckless disregard of safety.

• The award of attorney's fees is the exception rather than the general rule. It is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of attorney's fees.

• Costs shall be allowed to the prevailing party as a matter of course, unless otherwise provided in the rules or the court adjudges otherwise for special reasons.

• Interest as part of damages may be adjudicated in the discretion of the court in crimes and quasi-delicts. Interest is allowed as a matter of right for failure to pay liquidated claims when due. For unliquidated claims, interest cannot be recovered except when the demand can be established with reasonable certainty.

• The requirement of personally examining the complainant and the witnesses under oath may be substantially complied with through a written deposition, as long as the issuing judge has personally determined the existence of probable cause.

• A search warrant is valid if it is issued upon the finding of probable cause, and the items seized during the search are considered admissible in evidence if they were the fruits of a valid search warrant and were seized in the lawful exercise of police power.